Student Loan Debt: Now More Ridiculous Than Ever
- Joshua M Brown
- September 9th, 2012
Bloomberg BusinessWeek has a massive piece on the student loan bubble that you should probably get to this weekend.
While proponents of college educations will rightfully cite the differential pay statistics between high school and college graduates, there are clearly other considerations. Even despite the fact that college educated unemployment is around 4%, much better than the national number (which is double that).
Because really - at what cost?
This much we know: College pays. You can lose your house to foreclosure, but never your education. Four-year college graduates’ pay advantage over high school grads has doubled over the past 30 years. If money for tuition is tight, the advice goes, borrow what you need. Students have been listening. In 2010 student debt exceeded credit-card debt for the first time. In 2011 it surpassed auto loans. In March, the Consumer Financial Protection Bureau announced that student debt had passed $1 trillion. It grew by $300 billion from the third quarter of 2008 even as other forms of debt shrank by $1.6 trillion, according to a separate tabulation by the Federal Reserve Bank of New York.
The answer to this puzzle is a nuanced one - whether or not college debt in the high 5-figures to 6-figures makes sense probably depends on what field you plan to work in after school. Being $90,000 in debt for more than a decade after school hardly makes sense if you're working for a non-profit or you're in the arts, for example.
Schools will have to get used to this reality, they are the last holdout in terms of realizing that they too must adjust to the New Normal.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.