Student loans top credit card debt

20 04 2011

Perhaps you’ve already seen the news: student loan debt is on track to surpass one trillion dollars this year, having already topped national credit card debt.

This is a big deal.

From the above NYT article, obviously

Unlike other forms of debt that may be forgivable under bankruptcy, student loan debt follows student like a dark cloud – a cloud pelting him with hail as he struggles to make his useless Philosophy of Interpretive Dance Therapy degree pull its own weight.

Here are just a few consequences of defaulting on a student loan, courtesy of finaid.org:

* Your wages may be garnished.
* Your federal and state income tax refunds may be intercepted.
* Your defaulted loans will appear on your credit history for up to 7 years after the default claim is paid, making it difficult for you to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job [oh, the irony].
* You may not be able to renew a professional license you hold.
* You may be prohibited from enlisting in the Armed Forces.
And, of course, you will still owe the full amount of your loan.

Of course. But there’s another consequence of taking on student debt that is almost never discussed: it robs graduates of their dreams. I personally know students with entrepreneurial ambitions that will go unfilled for years while they grapple with loans they were promised would help make them viable members of the workforce.

Young, bright individuals without the responsibilities of a mortgage and a family are supposed to be risk-takers – but it’s hard to launch the next tech revolution when you’re being interrupted by calls from debt collection agencies.

Maybe we as a nation are finally recognizing that the higher ed bubble is unsustainable.

There’s certainly a growing awareness of the problem, as the increasing number of studies on the topic seem to indicate. Unfortunately, there won’t be a shift away from the high-cost, diminishing-returns model we currently tolerate until students themselves begin demanding-or creating-alternatives to the current system.

In the mean time, pioneers like PayPal co-founder Peter Thiel, who is in the process of awarding twenty would-be college students $100,000 each to found their own companies instead of seeking a degree, should be praised for their initiative. Until we are able to address the true causes of out-of-control tuition rates and the debt burden that accompanies them (a situation that simply increasing financial aid to students will only exacerbate), individuals with ideas may be wise to follow Thiel’s urging and look for opportunity outside of the academic-industrial complex.

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4 responses

21 04 2011
Student loans top credit card debt « Graham Kozak's Blog | Student Loan Rates

[…] the original post: Student loans top credit card debt « Graham Kozak's Blog ← Consolidation Federal Loan Student- Important Guidepost For […]

27 10 2011
Student loans and the new dependent class « Graham Kozak’s Blog

[…] in April, I reported that student loan debt had surpassed national credit card debt and was set to hit the big $1 trillion before the end of 2011. Looks like student debt accumulators […]

27 10 2011
Student loans and the new dependent class

[…] in April, I reported that student loan debt had surpassed national credit card debt and was set to hit the big $1 trillion before the end of 2011. Looks like student debt accumulators […]

1 12 2011
david

ccoooooooolll

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