Student Loan Debt Exceeds Credit Card Debt

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Creative Commons License photo credit: Manuel FERRANTE

In a previous blog, I wondered whether or not college was worth cost?  Now we are getting a better picture of the cost and it isn’t pretty.  According to a story in the New York Times about student loan debt:

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

Yet, I found this passage even more disturbing:

In some circles, student debt is known as the anti-dowry. As the transition from adolescence to adulthood is being delayed, with young people taking longer to marry, buy a home and have children, large student loans can slow the process further.

What this means is that America’s youngest generations will not only have to bear unprecedentedly large debt burdens to take care of themselves, but will also be shouldering unprecedented tax levels to take care of the generations before them.  This sounds to me more like a recipe for indentured servitude . . .

Is College Worth the Cost?

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Creative Commons License photo credit: mattbuck4950

In a fascinating blog, Doug Short (of DShort.com) finds that college costs are soaring above the growth in income:

The top 5% of households saw their real incomes increase by 71.5% . . . the growth of college tuition and fees, up 596% since 1980. Mind you, that’s 596% above the core rate of inflation, which increased by a “mere” 160.4% over the same time frame . . . College tuition and fees are another matter in several respects. Not all households incur these costs, and they happen over relatively short periods of time. Also, the costs may be split between households — parents, children and occasionally grandparents — and financed over time. But one hypothesis we might formulate from the data is that college for lower-income families create an enormous debt burden. Unless the education purchased helps to move its recipient into the higher income quintiles, its value is no bargain.

And he is using total income over this time-period, the growth in after-tax income would be much lower.  So, in a nutshell, the cost of college has grown, just as with any business, to the point where there are no economic rents left to be earned.  Any surplus that use to go to the college graduate is now absorbed up-front by colleges.  The debt burden is a vestige of that absorption.

IMHO, if Wealth Alchemists are going to be defeated we need more entrepreneurs and fewer college graduates . . . and it does seem as if the two are inversely correlated.