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The Student Debt Time Bomb

Economy Education Memo Pad

The Student Debt Time Bomb


There’s a generational time bomb ticking — and the student debt crisis is the trip wire.

Adults under 35 disproportionately bear the brunt of escalating inequality.

America’s educated youth are graduating into an economy with stagnant wages and a torn safety net. Federal and state budget cuts, meanwhile, have spiked tuition costs and cut public services that aid young workers, such as transportation and affordable housing.

A rumble of legitimate discontent is mounting from the 40 million Americans saddled with student debt totaling $1.16 trillion — a number expected to increase to $2 trillion by 2022. College debt now touches 1 in 5 U.S. households and exceeds total credit card indebtedness.

The most frustrated students are blocking highways over tuition hikes. Others are launching “debt strikes” by refusing to pay the for-profit schools that bilked them.

Many more are defaulting after facing the stressful realization that they can’t find a job that pays enough to repay their debt. Over half of outstanding student loans are presently in deferral, delinquency, or default.

The student debt debacle has huge implications for the future. The average college graduate is now almost $30,000 underwater, with some on the hook for over $100,000.

This debt keeps young people from starting families, buying houses, and taking risks on new businesses. It also exacerbates the growing problem of wealth inequality and declining social mobility, since it gives debt-free graduates from wealthier families an enormous head start over their peers.

Many Baby Boomers without kids in college don’t fully appreciate how the economy is tilted against the rising generation — or how much higher-education financing has changed from previous generations.

Since the 1970s, tuition rates have risen over 1,000 percent, while state funding of universities has declined by 40 percent. And the proportion of young Americans with education debt more than quadrupled, from 5 percent to 22 percent.

The powerful student loan industry lobbied for — and got — draconian laws that penalize student debtors more than people holding mortgages, car loans, or credit cards. Servicers can garnish young graduates’ wages and disability payments to get their due.

And not even bankruptcy can cancel out these loans.

In some states, student debtors who fall into default can lose their professional certifications and even their driver’s licenses. Imagine borrowing money to get a nursing or cosmetology degree, falling behind in your payments, and having your source of livelihood revoked.

It doesn’t have to be this way. Other countries have offered free public higher education for decades.

In the 30 years after World War II, the government expanded access to debt-free college for millions of Americans. These included GI Bill recipients, but also millions of men and women without military service records who attended the great public universities of our land, paying a tuition bill they could afford with only a summer job.

Lawmakers should reverse the cycle of state budget cuts in higher education that shift tuition costs onto students and their cash-strapped families. Some states are considering creating “opportunity trust funds,” capitalized by state estate taxes on the richest 1 percent, to finance debt-free public education.

The national Strike Debt movement calls on Congress to spend an additional $15 billion a year to make public education free. They could accomplish this by cutting out for-profit colleges and the parasitic college loan industry, and by simplifying the existing labyrinth of education subsidies.

The vast majority of college debtors still suffer in isolation, viewing their struggle as a personal problem, not a societal issue. But this is about to change. When college debt borrowers wake up and flex their political muscles, they’ll be a force to be reckoned with.

Photo: thisisbossi via Flickr



  1. 1standlastword March 11, 2015

    “America’s educated youth are graduating into an economy with stagnant wages and a torn safety net. Federal and state budget cuts, meanwhile, have spiked tuition costs and cut public services that aid young workers, such as transportation and affordable housing.”
    Which is the results of failed government policy that works only for the corporate citizens and the permanent political class

    1. charleo1 March 11, 2015

      It’s true. In the pay to play system, money talks, and the politicians listen, and obey. And the rich get richer, and all is fine in Mayberry. But, there will come a day, when the young people of this Country cannot be simply dismissed as whiners living in their parent’s basement, that need to get a job. As the Occupy Movement, mostly made up of students was. As the politicians larded the corps with bailouts, and insisted on making tax cuts permanent for the wealthy, and demanded austerity, for everyone else. A legacy of the, “Me” Generation, gone to rot, and ruin. My generation, I’m sorry to say. But it’s true. I hope they can fix this mess we’ve left them. In fact, they are our only chance.

  2. browninghipower March 11, 2015

    Among the many social and financial “IEDs” lurking in our immediate and medium term future, student debt is one of the most troubling and dangerous. I cannot agree more with this article. The implications of not only the mounting student debt, but the horrific demands and penalties of carrying, defaulting or even becoming delinquent on this debt are a form of penury and slavery that knows no race or gender…only age and social strata. The willingness and downright glee of conservative state and federal lawmakers to saddle a young generation..the hope of America..with such a vile yoke of oppression is beyond evil. It goes against every principle of the Founding Fathers. Moreover, the vile and debilitating penalties and features of such debt reflect the worst of English Feudalism rather American Exceptionalism. There will be a day of reckoning on many fronts in the near future – I hope – if legislators do not remedy this cruel injustice.

    1. Ken from the Seacoast March 12, 2015

      This is the fault of gleeful conservative lawmakers? Really? Not the parents, not the kids themselves? And the solution is to make it “free”. i.e. government takeover by the same people who’s fault you suggest it is??

      1. browninghipower March 12, 2015

        You really hate kids who are trying, don’t you? Ever wonder why the future of America is so bleak, you moron? When every other industrialized country looks at its younger generations and sees its future and its greatness and continuation, people like you look at our children with scorn and envy and whatever. Do you realize just how many other countries are waiting to dance on America’s grave you jerk? And we’re playing right into it. For no, it’s only our military that keeps the sharks at bay. Nice, huh?

        1. Ken from the Seacoast March 12, 2015

          more insults. more attacks. Have you nothing better?

          1. browninghipower March 12, 2015

            You don’t deserve any better.

          2. Ken from the Seacoast March 12, 2015

            You have nothing better

          3. browninghipower March 12, 2015

            Okay…I’m done. One adult..me..out of the sandbox, Timmy. Time for your cocoa and nap.

  3. Ken from the Seacoast March 12, 2015

    Mr Collins, can you please share your definition of “free”? Then, can you also please explain how making something “free” bends the cost curve down? Unless of course you’re suggesting that professors, administrators and support staff work for free?? You state that tuition rates have risen over 1,000 percent but you don’t state the reason nor how making it “free” will reverse that trend.

    I live in a small town. Like most small towns in America, 83% of local taxes go to the “free” K-12 education, leaving just 17% for ALL other town services such as police, fire, roads….. How will “free” college impact already strained local and state budgets?

    I would suggest a different solution. Don’t incur school debt! Teach kids to make fiscally responsible choices. Go to state schools, commute, get a scholarship…. Who’s telling these kids that incurring 50k of school debt for a degree in gender studies is a good choice? Where are the parents?

    1. browninghipower March 12, 2015

      Gee Kenny, state schools used to be affordable. The University of California system was the envy of the world until Reagan gutted it and began to engender hatred of those college hippies. And you seem to continue the trend. Just in what bubble of ignorance do you reside? Your short-sightedness is disgusting as is your slop of a brain.

      1. Ken from the Seacoast March 12, 2015

        Insults are not arguments. When you can’t argue facts, attack the messenger. Ugh, what a waste.

        1. browninghipower March 12, 2015

          And your facts are what?

          1. Ken from the Seacoast March 12, 2015

            That graduating college debt free, or with minimal debt, can be a better alternative. That parents should discuss with their kids the consequences of taking on that kind of debt at the age of 22. That college education should be viewed as an investment – what is the potential ROI of a given degree? I picked on gender studies because I recently met an undergraduate student at St. Michael’s College who was concerned about the debt she will graduate with and the earnings potential in that field. And, that no one, not even gleeful conservative lawmakers, are forcing these kids to assume crushing school debt.

            What’s wrong with teaching kids to make good fiscal decisions and take responsibility for their choices?

          2. browninghipower March 12, 2015

            Those are not facts. They are conjecture and dreams from another era. Get real, skippy. Venture out of your bubble, please.

          3. Ken from the Seacoast March 12, 2015

            That a kid can graduate college without debt is a fact. You and the author infer that that a kid must assume crushing debt in order to obtain a 4 year degree – not a fact. That taxpayers should pony up for “free” college education is predicated on that false premise. You state that it is gleeful conservative lawmakers saddling these kids with debt, also not a fact.

            I think everyone is, or should be, concerned about mounting school debt but making it “free” only transfers the burden to others. It doesn’t address a root cause, which the author stated, that tuition has risen over 1,000%. It would be interesting to understand why it’s risen that much because making it “free” virtually guarantees it will eventually rise to 2,000%.

  4. Whatmeworry March 12, 2015

    I’d fully support free tuition for those enrolled in STEM degrees. Those who want to major in throw away degrees like art, dance, psych, soc, history, black and women’s studies should pay the full freight with no State subsidies let alone Fed $$$

    1. Daniel Max Ketter March 13, 2015

      Heck, I applied some of my unemployment and disability premiums to send my kids through college. With that and their pell grants, my kids got their degrees funded 100% by tax dollars. I made out quite well beating the system with that.

  5. Whatmeworry March 12, 2015

    I’d fully support free tuition for those enrolled in degrees like art, dance, psych, soc, history, black and women’s studies taxpayers should pay the full freight with State subsidies along with Fed $$$

  6. Melissa Montana March 13, 2015

    If democrats are willing to force you to buy health insurance, is there anything they aren’t willing to force you to do?

  7. Insinnergy March 15, 2015

    Equality of Opportunity.
    It’s the only way you Republicans get to actually use your flawed argument that the poor just “don’t work hard enough”.
    Killing off for profit colleges and their own custom made rules inserted into bankruptcy law would also be very beneficial. What does this industry contribute?
    Nothing except, suffering, stress, heartache, poverty and criminality.


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