Student loans to soon trigger economic crash

You may not want to hear this, but a threat is facing the U.S. economy that no one is talking. As discussed today in Le Monde, a veritable Frankenstorm of factors is now coalescing to crash the U.S. economy in the near future, along with other nations. Student loans are spiraling out-of-control  due to declining family incomes, skyrocketing tuition costs, and the wholesale abandonment of public universities by state governments. Christopher Newfield writes in “America’s Degree Scam” that “student debt may succeed subprime mortgages as the next disaster in the crisis of US capitalism. It is estimated at more than $1-trillion and has doubled over the last 12 years. Average debt for graduates with student loans rose to $23,200 in 2008; public university debt was only slightly lower, at $20,200. Despite the impossibility of discharging student debt through bankruptcy, the student loan default rate has gone from 5% to 10% between 2008 and 2011.” A similar story entitles “Debt Tops $1-Trillion” appears in the current Voice of Detroit.

Private universities in America cost more than anywhere else in the world. According to Le Monde,  “US universities long ago established the market price of a college education at the world’s highest levels — now over $36,000 a year at Harvard, or $52,650 if you include living costs. Leading universities, like Cornell, Johns Hopkins and Stanford, which charge over $200,000 for a four-year degree, have set a very high ceiling, encouraging the entire sector to charge high fees and then spend on offering Harvard-style services. Public universities can charge “only” $13,000 a year, with $30,000 a year living costs, and still feel they are being virtuous. The founding ideal has vanished, and for students the bill goes on growing.”

And the situation seems to be getting worse and worse. “College tuition keeps going up, at 2-4 times the rate of inflation. Overall, the costs to students of attending a public university have doubled in the past 30 years (3). The economic crisis has not restrained price rises, but increased them. Fees are up at private universities — by 8.3% on average last year; they are rising far faster at public ones, and especially in states in the west that historically rely on public universities for nearly all of their college graduates. They are up by 21% in California, 17% in Arizona and 16% in Washington. Most of the 50 states have systematically disinvested in funding for higher education, on which core funding for public universities depends. In 1990 Washington paid nearly $14,000 and students paid $3,100 in tuition fees. Today it pays under $5,000 a student and each student contributes nearly $11,000 (5). As a result of the long-term reduction of public funding, student costs (in 2010 terms) have increased from $8,800 in 1999-2000 to $14,400 in 2010-2011.”

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