On Apr. 25, 2012, student loan debt in the United States reached $1 trillion ($1,000,000,000,000), with the average student debt topping $25,000 per borrower. How did we get here, and what can we do about it?
Finance author Steven Lee identifies four factors that led to the growth of student debt.
1. A poor job market that drives young people to higher education thinking additional training will be the ticket to a career.
2. College and university tuition raises that have no logic or relation to inflation.
3. States curtailment of funding for public colleges and universities.
4. For-profit schools which give out federally guaranteed student loans to just about anyone. Tuition and fees at four-year programs exploded 300 percent from 1990 to 2011. In the same period health-care costs increased 150 percent.
It is not wise to consider the option defaulting on a student loan, Lee says. Uncle Sam will hit you with all the tools of a well-oiled taxing authority. That means attached wages, no tax refunds and no discharge in bankruptcy for student loans. The Department of Education is a hardnosed collector who will badger and threaten if you default and try to walk. The consequence is you will be excluded from the world of credit on home loans, credit cards and auto loans. When you find a partner and settle down, a lack of basic credit is a real hardship. I advise you to work out a plan to pay what you can on a monthly basis if you can’t pay the actual monthly tab.
Debt can be handled if you break it down into smaller repayment pieces and chew them up one at a time. If you miss a payment or come up a little short, talk to the lender, ;et them know you are intending to make good and they will work with you. The estimate is that two-thirds of college seniors who graduated in 2010 had loans averaging $25,000 according to the Institute for College Access & Success. If you consider that amount of debt over the working life of an individual who is likely to have $1 million or more of earning income, it is a manageable amount.
As to suing your college or university for misleading you on job opportunity Lee says that is a dog who won’t hunt. Higher education should have produced some maturity, appreciation for learning, culture, self-confidence and social habits that will last a lifetime. Nobody guaranteed a smooth employment trajectory. There are specialized skills to be had, but these intangibles are also worth a great deal to your eventual future. No institution can guarantee a secure livelihood for its students but it can bring forth a respect for personal responsibility. Lawsuits based on an indirect promise of employment are probably not destined for success.
