Houston we have a problem, but it’s not in outer space. The university system with its out of control tuition increases and lack of regard for the laws of economics is crippling young people with mountains of school loan debt that will take decades or in some cases, lifetimes to repay. The system allows schools to increase tuition at will knowing that students have a blank check from the federal government student loan program to borrow as much as necessary to attend every school regardless of how much the room, board and tuition.
The schools do not warn the prospective students about the consequences of incurring huge student loan debts. Nor do the schools give accurate employment statistics for their graduates in all their majors so that prospective students can know in advance what their chances are of getting a good paying job that will allow them to repay the debts. Truth in advertising does not apply to schools when it comes to the cost of an education. It’s only a matter of time before aggressive trial lawyers start filing class action lawsuits against schools for omitting to tell prospective students the material facts. Only then will schools stop raising tuition through the roof and become competitive in terms of the cost of a college education.
The New York Times published an eye-opening story about big school loans called “Placing the Blame as Students Are Buried in Debt.” The story discusses the sad situation of a 26 year old young woman who ran up a $100,000 debt while getting an undergraduate degree from New York University. She attends night school to defer the payments, but that only causes the interest to accrue and the debt to spiral upwards. The story says:
“It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners. For starters, it’s a shared failure of parenting and loan underwriting. But perhaps the biggest share lies with colleges and universities because they have the most knowledge of the financial aid process. And I would argue that they had an obligation to counsel students like Ms. Munna, who got in too far over their heads.”
Forbes has a related story called “Five Options For Grads With Student Debt But No Job.”
“Taking out student loans is as common among college students as posting pictures on Facebook. But as recent graduates try to find their gainful employment at a time when one in five under-24-year-olds is unemployed, making monthly payments on student loans can range from tough to impossible. . . . Student loans are one of the stickiest types of debt around. Unlike credit card debt, mortgages and most business loans, the money you owe on your student loans won’t be forgiven, even if you file for bankruptcy.”
Large student loan debts can also scare away potential spouses and make it harder to find a mate. Many young people do not want to marry a person who brings the baggage of a $100,000+ debt into a marriage. The worst situation is when two young people meet in school and marry and have a combined debt of the husband and wife. I know of a young couple that met after graduating from law school while they pursued graduate law degrees. They both have over $150,000 in school loans. They newly weds now have a combined loan debt that exceeds the cost of a nice home in most parts of the country.