- George Zimmerman will not be charged in domestic dispute
- Russian officials press bilateral U.S. trade deal
- Selfies at Funerals blog creator retires after Obama flub: ‘Our work here is done’
- New Obama adviser Podesta is against Keystone but will steer clear of pipeline deliberations
- 40 Australian adults, children found in ‘one of the worst accounts of incest ever made public’
- Venezuela’s Maduro calls on student ‘price vigilantes’ to hit the streets, report businesses
- Atheists smug as Hindus join Satanists to demand display at Oklahoma Statehouse
- Bow before Valkyrie, NASA’s ‘superhero robot’ entry in DARPA challenge
- 10-year-old Pennsylvania boy suspended for pretend bow-and-arrow shooting
- Budget deal exposes GOP divisions; conservatives slam tax hikes, vague cuts
Economic recovery threatened by runaway student-loan debt
Question of the Day
The federal student-loan program seemed like a great idea back in 1965: borrow to go to college now, pay it back later when you have a job.
But many borrowers these days are close to flunking out, tripped up by painful real-life lessons in math and economics.
Surging above $1 trillion, U.S. student-loan debt has surpassed credit-card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis.
With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work, many students have returned to school, further driving up their indebtedness.
Average student-loan debt recently topped $25,000, up 25 percent in 10 years. And the mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed.
Lifting student debt higher and higher is the escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And enrollment has been rising for years, a trend that accelerated through the recent recession, fueling even more borrowing.
Mark Zandi, chief economist at Moody's Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because “universities and colleges just raise their tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
“Of course, it’s very hard on the kids who have gone through this, because they’re on the hook,” Mr. Zandi added. “And they’re not going to be able to get off the hook.”
It’s not just young adults who are saddled.
“Parents and the federal government shoulder a substantial part of the postsecondary education bill,” said a new report by the Federal Reserve Bank of New York. And some of the borrowers are baby boomers, near or at retirement age. The Fed research found that Americans 60 and older still owe about $36 billion in student loans.
Overall, nearly three in 10 of all student loans have past-due balances of 30 days or more, the report said.
Complicating the picture further: Like child support and income taxes, student loans usually can’t be discharged or reduced in bankruptcy proceedings, as can most other delinquent debt. This restriction was extended in 2005 to also include student loans made by banks and other private financial institutions.
“This could very well be the next debt bomb for the U.S. economy,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys.
“As bankruptcy lawyers, we’re the first to see the cracks in the foundation,” Mr. Brewer said. “We were warning of mortgage problems in 2006 and 2007. The industry was saying, ‘We’ve got it under control.’ Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing huge defaults on student loans and people driven into financial difficulties because of them.”
Nigel Gault, chief U.S. economist at IHS Global Insight, said the student loan crisis may not torpedo the financial sector as the mortgage meltdown nearly did in 2008, but it could slam taxpayers and the still-ailing housing market.
By Matt Kibbe
The short-term deal will assure long-term overspending
- Rand Paul: Budget deal 'shameful,' 'huge mistake'
- Teen thugs in D.C. run wild -- even while wearing GPS ankle bracelets
- KIBBE: Another Republican budget surrender
- Study IDs reasons for late-term abortions
- Obama takes 'selfie' at Mandela's funeral service
- Obama administration blasts GOP for criticism of Castro handshake
- CARSON: Why did the founders give us the Second Amendment?
- Obama's antics at Nelson Mandela tribute: Jovial conversation, handshake with Raul Castro
- Biden guarantees victory on immigration reform
- VEGAS RULES: Harry Reid pushed feds to change ruling for casino's big-money foreigners
Independent voices from the The Washington Times Communities
Interviews and show reviews from the Los Angeles punk scene past and present. Los Angeles has always been rich in punk rock talent since punk rock was born.
Buzz on Bees is a column promoting the love and life of God’s greatest pollinators on earth: The Honeybee
Brazen, leading-edge, “call it like it is” columns and reporting from Ohio native, radio host and writer, Sara Marie Brenner.
A libertarian look at breaking news and political trends by author Tom Mullen.
Extraordinary day at Redskins Park
White House pets gone wild!
Let it snow