{"id":317977,"date":"2021-08-07T15:34:14","date_gmt":"2021-08-07T12:34:14","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/why-student-loan-debt-is-trapping-more-americans-than-ever\/"},"modified":"2021-08-07T15:34:14","modified_gmt":"2021-08-07T12:34:14","slug":"why-student-loan-debt-is-trapping-more-americans-than-ever","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/why-student-loan-debt-is-trapping-more-americans-than-ever\/","title":{"rendered":"#Why student loan debt is trapping more Americans than ever"},"content":{"rendered":"

“#Why student loan debt is trapp<\/a>ing more Americans than ever<\/strong>”<\/p>\n

\n

In August of 2018, Lisa, a 54-year-old single mother of two, met with a lawyer to discuss her student loans.\u00a0<\/p>\n

As a working psychologist, she\u2019d not just been to undergraduate college \u2014 Fairleigh Dickinson University in New Jersey \u2014 but also to Widener University in Pennsylvania, to earn her Ph.D. in psychology. In total, Lisa took out 16 different federal loans to pay for her education, for a grand total of $95,000.\u00a0<\/p>\n

But by the time she graduated in 2001, the interest charges had already bumped that number up to $120,604. By 2018, Lisa, who runs her own psychology practice in Chester, Pa., had written hundreds of checks, eventually paying off just over $135,000 \u2014 but she still owed $96,820, and was growing desperate.\u00a0<\/p>\n

\u201cMost of it, $100,000, went toward interest,\u201d writes Josh Mitchell in his new book, \u201cThe Debt Trap: How Student Loans Became a National Catastrophe<\/a>\u201d (Simon & Schuster), out now.\u00a0<\/p>\n

Lisa discussed declaring bankruptcy with her attorney, Bob Lohr \u2014 who, like her, lives and works in Chester, Pa. (Lisa goes by a pseudonym in the book.) But Lohr just had more discouraging news<\/a>. The government, which had subsidized her loans, wanted the rest, regardless of how long it took her to pay it off.\u00a0<\/p>\n

\"Completing
Completing a college degree often means being strapped down with huge loans and a large interest rate that follows you through adulthood.<\/figcaption>
Shutterstock<\/span><\/figcaption><\/figure>\n

Lisa \u201creflected on the years of payments,\u201d Mitchell writes. \u201cThe times when the student loan bill came before putting away savings for her children\u2019s college education, how it had prevented her from having a house with a yard.\u201d\u00a0<\/p>\n

That\u2019s when she sent a screenshot of her retirement savings, a total of $12,086.43, to her lawyer.\u00a0<\/p>\n

\u201cIt was all she had,\u201d Mitchell writes. \u201cAnd it was all the government was going to get out of her.\u201d\u00a0<\/p>\n

Lisa is far from alone. Today, more than 43 million Americans owe $1.6\u2009trillion in student debt, a number that\u2019s trip<\/a>led in the past 15 years. College grads owe more in student debt than they owe in credit card debt and car loans combined. Or, as Mitchell writes, \u201cstudent debt in the US is the size of Canada\u2019s economy.\u201d\u00a0<\/p>\n

\n
\"student
NY Post\/Mike Guillen<\/span><\/figcaption><\/figure>\n<\/div>\n

A generation ago, it was almost unheard of for somebody to owe $60,000 in student debt. But today, more than 7\u2009million Americans owe that much. \u201cA million borrowers owe more than $200,000,\u201d Mitchell writes. \u201cAt least a hundred owe over $1 million.\u201d\u00a0<\/p>\n

Those struggling to repay those loans fall into every demographic category, from single millennials to older parents and grandparents. They\u2019re men and women; white, black, Latino and Asian.\u00a0<\/p>\n

And the cruel irony is, higher education has stopped being the ladder to career and financial success that it once was. If anything, \u201cit has become a slide down,\u201d writes Mitchell.\u00a0<\/p>\n

Many borrowers are actually worse off for having gone to college.\u00a0<\/p>\n

\u201cThe well-paying jobs promised by universities never materialized,\u201d Mitchell writes, \u201cleading to a wave of defaults on par with those of the 2000s housing crisis.\u201d\u00a0<\/p>\n

\"At
At the University of Alabama, out-of-state students can pay $180,000 for a four-year education.<\/figcaption>
Alamy<\/span><\/figcaption><\/figure>\n

In 2016, a study from George Washington University and the Treasury Department found that most graduates from for-profit colleges earned $600 to $700 a year less than what they\u2019d made before enrolling in college, mostly because of student loans.\u00a0<\/p>\n

As of this writing, 8\u2009million borrowers are in default on a student loan, which Mitchell points out isn\u2019t that far from the number of people who lost their homes after the housing crash. \u201cIn recent years, despite a strong pre-pandemic economy, 3,000 people a day defaulted on a student loan,\u201d he writes.\u00a0<\/p>\n

How did it happen? A big culprit was definitely the universities, which have been raising tuition at an alarming rate.\u00a0<\/p>\n

\"Al
Al Lord, who served as Sallie Mae CEO from 1997 to 2005, now says the loan system is \u201ccriminal.\u201d<\/figcaption>
Getty Images<\/span><\/figcaption><\/figure>\n

The average tuition and room and board at most four-year private colleges in the United States has risen by nearly 800 percent since 1980, or more than five times the rate of inflation. Today, a four-year degree at a private college costs nearly $200,000 on average. Meanwhile, a public college costs half that for in-state students but almost as much for those from out of state.\u00a0<\/p>\n

At the University of Alabama, for instance, out-of-state students pay $180,000 for a four-year education, and even after grants and scholarships are factored in, \u201cmany Alabama students and their parents take on tens of thousands of dollars in debt, and in some cases more than $100,000,\u201d Mitchell writes.\u00a0<\/p>\n

And that\u2019s the cheap option. At the University of Southern California\u2019s dental school, tuition and room and board cost $152,000 \u2014 for the first year.\u00a0<\/p>\n

\n

If you\u2019re looking at the broader overview, it was a big f\u2013kup.<\/p>\n

Ed Fox, the first CEO of Sallie\u00a0Mae, the quasi-public agency created by Congress to act\u00a0as a middleman for the\u00a0student-loan industry\u00a0<\/cite><\/p><\/blockquote>\n<\/figure>\n

But those ridiculous tuition fees didn\u2019t come out of nowhere. The problem started when the federal government gave families a blank check to allow students to attend the school of their choice, regardless of its cost. The more Americans borrowed, the more colleges raised tuition. \u201cColleges have abused their tremendous pricing power,\u201d Mitchell writes.\u00a0<\/p>\n

Lyndon B. Johnson, as the Senate majority leader, first argued for the federal government to create a student loan program in the 1950s. His idea had the best of intentions \u2014 Johnson himself had benefited from student loans \u2014 but it soon evolved into what Mitchell describes as \u201cthe quintessential form of crony capitalism.\u201d\u00a0<\/p>\n

By the 70s, Congress had created a quasi-public agency called Sallie Mae, a sort of middleman for the student-loan industry. The agency funneled billions to schools and banks, \u201cand itself made enormous profits off the whole operation,\u201d writes Mitchell.\u00a0<\/p>\n

But to millions of families, the loans offered by Sallie Mae were seen as a gift. They believed these institutions \u201chad their best interests at heart,\u201d Mitchell writes.\u00a0<\/p>\n

\"Before
Before the rise of the government\u2019s loan program, colleges like Stanford (left) and the University of Minnesota made loans to students directly. \u201cDefault rates were low,\u201d Josh Mitchell writes.<\/figcaption>
Alamy (2)<\/span><\/figcaption><\/figure>\n

When Lisa applied for her student loans, she was shocked at how easy it was. She found it even less complicated than when she applied for a loan to buy a stereo. \u201cHere, the school didn\u2019t even check her credit,\u201d Mitchell writes.\u00a0<\/p>\n

The financial counselors at each of her schools reassured her that student debt, which was rapidly rising, was \u201cgood debt,\u201d because it was an investment in her future. \u201cYou\u2019ll be able to pay it off with the money you earn once you graduate,\u201d they explained.\u00a0<\/p>\n

But by the time Lisa graduated, \u201cshe owed more than twice as much as the average annual salary of $55,000 for college graduates that year,\u201d Mitchell writes.\u00a0<\/p>\n

\n
\"student
NY Post\/Mike Guillen<\/span><\/figcaption><\/figure>\n<\/div>\n

This type of debt has reshaped modern American lives in many ways. It has caused many couples to delay marriage, to rent rather than buy homes and to hold off on starting businesses.\u00a0<\/p>\n

\u201cThey are choosing jobs solely for higher salaries, rather than jobs that best suit their talents and interests, so they can pay off their debt,\u201d Mitchell writes.\u00a0<\/p>\n

In one way, it could be argued that the federal student loan program achieved its mission. \u201cIt opened up higher education to the masses,\u201d Mitchell writes. \u201cAnyone who has wanted to go to college has been able to, rich or poor. Today, half of the US adult population has an associate\u2019s or bachelor\u2019s degree, because student loans gave people the money to pay for it. Without loans, many would have never gone to college.\u201d\u00a0<\/p>\n

But also, because of student debt, millions of Americans haven\u2019t been able to save for retirement. And it\u2019s not just the people paying off student debts who suffer.\u00a0<\/p>\n

\n
\"Author
Author Josh Mitchell<\/figcaption>
Thomas Cluderay<\/span><\/figcaption><\/figure>\n<\/div>\n

\u201cWhen borrowers fail to repay, taxpayers cover the tab,\u201d Mitchell writes. Only two-thirds of the $1.6\u2009trillion in student debt is expected to be paid back by the borrowers, which leaves more than $500\u2009billion to be paid by taxpayers.\u00a0<\/p>\n

\u201cThat\u2019s almost the amount of subprime mortgage debt that private lenders wrote off after the housing crash,\u201d Mitchell writes. \u201cIt\u2019s seven times what the government spends on food stamps each year.\u201d\u00a0<\/p>\n

Even those involved in the creation of the student loan system are starting to have regrets. Al Lord, who joined Sallie Mae in 1981 and served as the company\u2019s CEO between 1997 and 2005, calls the system \u201ccriminal.\u201d\u00a0<\/p>\n

He told Mitchell that when he attended Penn State, he paid just $175 a semester. The tuition he paid for his grandson to attend the University of Miami was $75,230 per year. This inflation has given him hindsight about the damage caused by Sallie Mae.\u00a0<\/p>\n

\u201cOur customer was almost every bit as much the college as it was the student,\u201d Lord told the author.\u00a0<\/p>\n

Ed Fox, Sallie Mae\u2019s first employee and CEO for almost two decades, before retiring in 1990, begrudgingly accepted some blame for the student loan mess.\u00a0<\/p>\n

\n
\"The<\/figure>\n<\/div>\n

\u201cIf you\u2019re looking at the broader overview, it was a big f\u2013kup,\u201d he told Mitchell. \u201cEventually you wind up with $75,000 tuitions at institutions that have $40 billion in reserves.\u201d\u00a0<\/p>\n

Mitchell believes the solution may lie in the universities themselves, not just the government that set up the system. Some colleges like Stanford and the University of Minnesota make loans to students directly and keep the default rates low, he writes. In the early 20th century, before the government got into the loan business, universities would make loans to students in this manner.\u00a0<\/p>\n

\u201cDefault rates were low,\u201d Mitchell writes.\u00a0<\/p>\n

\u201cWhen schools \u2014 or banks \u2014 put their own money at risk, they are more careful with it, and less likely to extend loans at amounts that will be impossible for borrowers to pay off.\u201d\u00a0<\/p>\n

But until then, the cycle of debt continues. Even as Lisa learned that she would still owe thousands for the foreseeable future, she was driving her oldest daughter, Stephanie, to college.\u00a0<\/p>\n

\u201cInstead of the American tradition of parents passing wealth to their offspring,\u201d Mitchell writes, \u201cher daughter was about to join mother in debt.\u201d\n <\/p><\/div>\n

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Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

“#Why student loan debt is trapping more Americans than ever” In August of 2018, Lisa, a 54-year-old single mother of two, met with a lawyer to discuss her student loans.\u00a0 As a working psychologist, she\u2019d not just been to undergraduate college \u2014 Fairleigh Dickinson University in New Jersey \u2014 but also to Widener University in…<\/p>\n","protected":false},"author":1,"featured_media":317978,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2021\/08\/Buried-by-Bills-student-debt.jpg?quality=90&strip=all&w=1200","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[113660,67890,72134,80241,47020],"class_list":["post-317977","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-8-7-21","tag-college","tag-debt","tag-student-loans","tag-students"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/317977","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=317977"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/317977\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/317978"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=317977"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=317977"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=317977"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}