One would think that after the horrors of the tech boom, then the real estate boom, people and bureaucrats would avoid obvious bubbles for a while. The stage is set for a huge disaster in student loans. This will be brought about once more by the oh-so special blend of Wall Street greediness and government idiocy.
While most people would agree that college education is good, some question whether grads receive a positive return on their large college investment. A college degree is required for many occupations such as engineers, accountants, and doctors. College students also learn a lot from their university experience, both academically, and personally. Education is a great thing in general. But, is the cost of college worth it?
The 2010 class had a smaller percentage of graduates who are working, and an average wage that was lower than the graduates just a few years ago. According to Rutgers University’s John J. Heldrich Center for Workforce Development, 22% of 2010 graduates aren’t working, while 22% are in non-college jobs. Nearly half of graduates have not been able, at least until now, to benefit from their shiny diplomas. This large number of graduates cannot repay student loans.
While the country is home to many excellent universities, for-profit paper mills do not belong among them. These for-profit “colleges,” which are run by companies, have been able to make a substantial profit for their investors and owners. Most students don’t see any benefits. According to Pew, “Students attending for-profit institutions make up 9% of all college students but they receive approximately 25% of all Federal Pell Grants or loans and are responsible for 44% student loan defaults.” While the Federal Government and Sallie Mae have hundreds of billions of dollars in student loans, a large portion of them will never be repaid. You and I, the taxpayers, end up paying the high cost of defaulted loans which are spiraling. Graduates also pay a high price, because student loan debt is not forgiven.
Why does a mortgage buyer like me care about student loan fraud? How can recent college graduates afford to purchase a house if they can’t find work and still have a large student loan debt? This could lead to a loss of potential home buyers for a whole generation. Young families may not have many options for getting into a starter house. They can either get parental help or find property owners willing to sell their home using owner financing. Then, they will need a mortgage loan.
What is the solution to the student loan crisis? I believe that cracking down on for-profit schools, and other institutions that have a combination poor graduate success in job markets or high student loan defaults, is a good place to start. Education of the masses is a more difficult and general problem that must be solved without further straining the government budgets. I am sure our politicians can do the job. !