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Here's Fresh Evidence Student Loans Are a Massive, Generational Scam

Published: October 17, 2018
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Over the centuries, America has bestowed generous, state-sponsored privileges upon select classes of its citizens. Veterans and old people get free socialized healthcare—and, for the most partthey love it. Corporations (who count as people, look it up) get sweet tax breaks and, in the case of defense contractors, no-bid deals to build extremely expensive weapons unlikely to be used in the near future. And young people get thousands and thousands of dollars of student loans to pay for college, putting them in a hole they might spend the rest of their lives digging out of.

Obviously, one of these things is not like the others—the United States has put many students in the position of making decisions that can determine their financial futures when they're teenagers. This has nightmarish consequences: Some 44 million people have $1.5 trillion in student loan debt on the books. And even when young people do get through college and find a decent job, many can't fathom possibly buying a home or taking on other trappings of adulthood when faced with decades of monthly loan bills.

The worst part is that those who sought an elite education on the widely accepted notion that it would help them later in life were basically sold a bad bill of goods.

All that debt provides awfully little payoff in terms of boosted wages, even as it ensnares more and more people and hits youth of color especially hard, according to a new paper released Tuesday by two researchers at the left-leaning Roosevelt Institute. Research fellows Julie Margetta Morgan and Marshall Steinbaum concluded that more and more debt hasn't significantly boosted income for college grads—it just seems that way because high school grads without BAs are making less than they once did. They also found that looking at decent rates of repayment by student debtors is a misleading way to look at the scale of this crisis. And thanks to workers lacking the power they once enjoyed in an increasingly skill-obsessed economy, young people are often being pressured into getting extra degrees on their own dime (which is to say by taking on more debt) for minimal payoff.

 

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A new study reveals how many American families are struggling with debt and savings in the “greatest economy ever” More than 80 percent of American families define the “American Dream” as financial security and homeownership, and more than half think this dream is unattainable, according to revelations in the latest State of the American Family Study released by Massachusetts Mutual Life Insurance Company (MassMutual).

Total household debt hit a new record high, rising by $82 billion to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier according to the NY Fed's latest household debt report. It was the 16th consecutive quarter with an increase in household debt, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008.  Overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

The cost of higher education is soaring, the jobs available to college grads don’t pay as much, relatively speaking, as they used to, and the size of loans available to students – though huge – don’t cover the full cost of many degrees. One might expect these changes to lead more students to work for a few years and save up, or choose a cheaper degree, or eschew college altogether and substitute work experience for a diploma. Some of that is happening but apparently, the biggest change is that parents have stepped in to cover the difference between what their kids can borrow and the cost of a degree.

The youngest millennials — Americans born between 1977 to 1995 — graduated college a year ago, but they may soon realize that the initiation into adulthood is a far cry from joining a sorority or fraternity. As if the twin-scourge of soaring student debt and stagnant wages weren’t bad enough, they also pay much higher rent than previous generations.

Burgeoning levels of student loan debt could slow down economic growth over time, Federal Reserve Chairman Jerome Powell said Thursday. While the issue is primarily one for Congress to tackle, Powell said it could become an economic question. "You do stand to see longer-term negative effects on people who can't pay off their student loans," he said. "It hurts their credit rating, it impacts the entire half of their economic life."

According to data from the Federal Reserve, the total amount of student debt in the United States is now $1.5 trillion.

Over three years ago, when the full extent of the student debt crisis was becoming apparent, the Treasury Borrowing Advisory Committee released a startling analysis  and long-term forecast which showed two things: i) up to a third of all student loans are likely to end up unrepaid and ii) the total amount total student loans, which currently amount to $1.48 trillion  (nearly 50% more than all the credit card debt in America), is set to hit a whopping $3.3 trillion by 2024.

Higher education has been financialized, transformed from a public service into a lucrative cash cow for private investors.

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