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Student College Loans – Evil or Not? Part 5/5

Harvard University was the first to set up student loans in 1840 but these loans didn’t become mainstream until the 1960s? Source: Free from Broke.com

Did you know that in 1986, President Reagan eliminated student loan interest as a tax deduction. For 10 years, student loans were not deductible until President Clinton once again allowed the interest to be deductible in 1997 (Forbes).  However, Clinton only allowed the student loan interest to be deductible for the first five years the loan was in repayment; in 2001, the law was changed to allow the interest to be deductible for the life of the loan.

Then in 2007, President G. W. Bush, reduced the student-loan interest rate from 6.8% to 3.4%.

A few more facts to put the student, college-loan debate in perspective and what the media isn’t telling us:

The US has the 2nd highest number of higher education students in the world—4.75% of the total population. The U.S. Department of Education shows 4,861 colleges and universities with 18,248,128 students in 2007.

However, the median cumulative debt among graduating Bachelor’s degree recipients at 4-year undergraduate schools was $19,999 in 2007-08 and 65.6% of 4-year grads with BA degrees took out student loans, which means 34.4% did not.

Of the 9 million that borrowed, one-tenth (900 thousand) borrowed $44,668 or more, which means 90% (more than eight million students) borrowed less.

Graduate and professional students borrowed more, with the additional cumulative debt of a graduate degree typically ranging from $30,000 to $120,000.

How many borrowed the most?

More than 80% of students that are majoring in graduate degrees in medicine borrowed an average of $127,272, while 61.6% of those that graduated with only a BA degree borrowed an average of $23,494. Source: FinAid.org

If you recall, my $7,000 student loan in 1973 had the same buying power as $36,178.96 in 2012, and I paid it off in a decade by eventually working two jobs for three years.

That brings me back to the media. Why has the media been creepy-crawling all over how horrible college student debt is today when the facts say, “On average, most college graduates earn back enough to pay off their student expenses within a decade or so. Two studies by Baum found that graduates with a bachelor’s and no further schooling—or as the earnings literature calls it a bit too on point, a “terminal bachelor’s”—are on average able to repay their college tuition and loans, living expenses, and lost income from skipping four years of work by the time they turn 33. Private-college graduates spend more on their degrees, Baum says, but as they also have slightly higher earning power than their public-college counterparts, they still on the average earn back their college costs before age 40.”. Source: Village Voice

How about those medical students graduating as doctors with all that debt? Do you think they will earn enough to pay off his or her student loans?

Although the following site is moaning and groaning along with the national media, take a look at how much an MD earns after she starts practicing medicine: “The mean annual salary of a MD specialist is $175,011 in the US, and $272,000 for surgeons.” Source: MD Salaries.com

I’m really feeling sorry for these poor, suffering MDs. Maybe we should all chip in and help them pay off those student loans so they will have more money to spend on bigger houses and fancier cars.

In addition, I found this revealing: less than half a percent (0.05%) of those who graduate from college have student loans above $200,000—that means 99.5% do not. This may sound callous, but I do not feel sorry for these people. I paid off my student loans and so can they.

In conclusion, there is one more comparison that must be made. In 1980, the average credit-card debt in America was $670 per household, but today that number is up to $7,800 (per household)—an increase of  more than 1,160 percent. If we factor in inflation, that $670 would be $1,875.90 today—not almost $8,000.

In 1980, credit card debt was less than 4% of household annual median income. That number is16% today. In fact, in 1980 through 1994, the US saving rate averaged 8%, but in 1976, the personal saving rate was 12%.

However, in October 2011, that saving rate was at 3.6%.

Where do you think America’s so called debt-ridden college students learned to borrow to get what they want? If the nation lets young Americans (or their parents and/or grandparents) off the hook for that student-loan debt, these people will never learn.

Return to Student College Loans – Evil or Not? Part 4 or start with Part 1

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Lloyd Lofthouse is the award-winning author of The Concubine Saga.

To follow this Blog via E-mail see upper right-hand column and click on “Sign me up!”

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Student College Loans – Evil or Not? Part 3/5

How many college students are “deep” in debt, and what does “deep” in debt mean?

In 2007-2008, two-thirds (65.6%) of 4-year undergraduate students graduated with a Bachelor’s degree and some debt—the average student loan debt among graduating seniors was $23,186 (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans).

Let’s compare that to the student loan I graduated with in 1973 when I earned my BA in journalism.  It took me more than a decade to pay that loan off and eventually I worked two jobs for three years to do it.

I did not complain, moan or groan about it.

In fact, I considered myself an adult responsible for the money I borrowed after my GI Bill ran out so I could finish my college education—it took me five years to graduate, not four and although I worked part time jobs for the first three years I attended college, I decided to focus 100% on my studies the last two years and took out more than one student loan before I graduated.

In 1973, that student loan was $7,000.  Compared to today’s average student loan debt of $23,186, it looks as if my student loan was a bargain.

Think again!

If you check the CPI Inflation Calculator, you will discover that $7,000 in 1973 had the same buying power as $36,178.96 in 2012.

How about a few more comparisons—in January 1975, the unadjusted average home value in the united States was $39,500—in January 2011 that average had increased to $275,700—a 700% increase. Source: US Census

Note: In 1975, my $7,000 student loan equaled about 18% of the value of the average house in America. However, the average student loan today is only 8.5% of the average value of a house in America.

How about the price comparison of a car, average wages, cost for a gallon of gas, loaf of bread, and hamburger meat?

Continued August 17, 2012 in Student College Loans – Evil or Not? Part 4 or return to Part 2

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Lloyd Lofthouse is the award-winning author of The Concubine Saga.

To follow this Blog via E-mail see upper right-hand column and click on “Sign me up!”

 
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Posted by on August 16, 2012 in Uncategorized

 

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Student College Loans – Evil or Not? Part 2/5

Today, student loans are the largest source of financial aid for college. Since the mid-1970s, when student borrowing started to grow, loans have increased from about one-fifth to nearly two-fifths of all available student aid—from 20% to 40%, a hundred percent increase.

A half century after the initial GI Bill, three decades since the establishment of federally guaranteed student loans, and more than two decades following the creation of a national basic grant program, both the central commitment to federal support for higher education and the mechanisms of such support are under attack.

There are choices to make. One choice is to serve the United States and earn the financial aid of the GI Bill.

Fifty-one percent (6.2 million) of World War II veterans used the GI Bill to attend college.

Forty-three percent (114,000)  of Korean War Veterans and Seventy-two percent (1.9 million) of Vietnam Veterans.

For college students that do not want to join the US Military, what is fueling this media/Blog assault on colleges and student loans?

“In the 1970s, family income levels increased faster than tuition; growth in student aid outstripped both tuition increases and growth in the number of eligible students; and grant aid was more common than borrowing.

“All these trend lines, however, turned against college affordability in the 1980s and 1990s. Family income has generally remained flat (when inflation is factored in) and has been far outpaced by tuition increases, which at both public and private four-year institutions have averaged at least twice the rate of inflation since 1980. Tuitions have risen annually by more than 8 percent over this period, while annual growth in the Consumer Price Index has averaged about 4 percent. Public sector prices have increased most sharply in the 1990s, rising at 3 times the rate of inflation as the economy and revenues in most states have declined.” Source: Federal Student Aid Policy: A History and an Assessment

Continued August 16, 2012 in Student College Loans – Evil or Not? Part 3 or return to Part 1

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Lloyd Lofthouse is the award-winning author of The Concubine Saga.

To follow this Blog via E-mail see upper right-hand column and click on “Sign me up!”

 

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What, Me Worry about Debt! – I’ve got self-esteem protecting me – Part 3/3

What looming disaster has the self-esteem movement created?

Rachel Dwyer of Ohio State University says, “By age 28, those students may be realizing that they overestimated how much money they were going to earn in their jobs. When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped.”

According to The Smart Student Guide to Financial Aid, these debts range from $10,000 to more than $100,000.  In fact, a total of more than $1.7 trillion in federal education loans have been made since beginning of the loan programs.


Link to the entire program of Your Life, Your Money

In addition, the estimated total private student loans outstanding as of June 30, 2009 were approximately 157.8 billion.  The overall total education loans outstanding, federal and private, was about $763.4 billion in 2009.

When I wrote this post, the Student Loan Debt Clock said that number now stood at more than $900 billion dollars.

If we go back to the beginning of this series of posts, you will recall that many of these young adults also carry credit cards beyond the student loans and undergraduates are carrying record-high credit card balances. Source: Credit Cards.com

The average (mean) balance grew to $3,173, the highest in the years the study has been conducted. Twenty-one percent of undergraduates had balances of between $3,000 and $7,000, also up from the last study.

In addition, close to one-fifth of seniors carried balances greater than $7,000, while the average college graduate has nearly $20,000 in credit card debt. (Source: Sallie Mae, “How Undergraduate Students Use Credit Cards,” April 2009)

The results of this study has revealed that the movement to boost vanity among our children for the last five decades has created a debt crises that many young adults may struggle for decades to pay off while sacrificing a better lifestyle than their parents may have experienced.

Even more disturbing is a piece by Lori Gottlieb in the Atlantic, How to Land Your Kid in Therapy, which deals with why the obsession with our children’s (self-esteem) happiness may be dooming them with unhappy adulthoods. I will write summary of this long article in another post (Gottlieb’s Atlantic piece ran 12 pages printed).

Return to What, Me Worry about Debt! – Part 2 or return to Part 1

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

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