Is Student Debt Ruining the Recovery?

[SirLinksALot]

SOURCE: REALCLEARMARKETS

URL: http://www.realclearmarkets.com/articles/2016/08/11/is_student_debt_ruining_the_recovery_102300.html

by Robert Samuelson


Maybe the college student debt burden isn't so crushing after all. That's the surprising gist of a new study by economists at the president's Council of Economic Advisers (CEA).

It's surprising because burgeoning student debt has become a new economic worry and a political "cause celebre." It adds to the hurt of millennials, who already face a tough job market and are living with parents in record numbers. Defaults could go higher.

Strapped borrowers won't qualify for home loans. The recovery will suffer. Both Bernie Sanders and Hillary Clinton made proposals to lighten the debt load.

What are the facts?

Clearly, college student debt has exploded. Since 1996, outstanding loans have risen from $200 billion to $1.3 trillion, says the CEA. The number of borrowers has nearly doubled over a shorter period, from about 23 million in 2004 to more than 40 million now. Counting undergraduates at community colleges and four-year colleges, more than half (56%) borrow.

Almost all these loans are backed by the federal government. If borrowers default, taxpayers pick up the tab. The justification for federal support is that both individual borrowers and society benefit. College graduates earn about 70% more than high school graduates, a gap called "the college premium." Higher earnings make it easier to repay the loan, and the country benefits from a better-educated work force.

That's the theory. The reality, as the CEA discovered, is more complicated.

For starters, the college premium may be overstated. Some of the earnings advantage enjoyed by college graduates may stem from inherent talent or harder work. As the report says: "Students who attend college may (be) more skilled or more connected." They would do better even if no one went to college.

Similarly, debt burdens may be exaggerated. Although the average loan balance -- after correcting for inflation -- rose 25% to 30% from 2009 to 2015, the "debt owed by the typical student remains modest," the report asserts. For undergraduates who attended two- and four-year colleges, more than half of loans were less than $20,000, 42% were less than $10,000 and only 10% exceeded $40,000.

Graduate students incurred the largest debts; 43% of loans exceeded $40,000. But their repayment record was the best of any group, mainly because they took better-paying jobs and were "better equipped to manage (their) debt."

Still, default rates have risen. At five years out of school, about 70 percent of loans are being repaid or have been repaid. Of the rest, some are in officially sanctioned "deferment" or "forbearance" and will someday resume repayment.

The highest default rates occurred at community colleges (23% in 2012) and for- profit colleges (18%). Most hurt, the CEA says, were some low-income and minority students, who never graduated but have unpaid debts.

The good news about this bad news is that the debt levels aren't yet high enough to depress the overall economy, the CEA contends. As a share of the economy, student debt today is about one-ninth the size of mortgage debt in 2007, when the country was on the brink of the financial crisis. The smaller student debt today curbs the danger to disrupt the economy.

For example, student debt didn't cause home buying to collapse among the young. True, home ownership for those 24 to 32 dropped from 42% in 2005 to 33% in 2014. But the main reason, says the CEA, was an almost 20% decline in the earnings of recent graduates. A comparison of home ownership rates for college graduates with and without debt showed little difference -- and none by age 34.

The lesson of all this seems obvious. The young today don't need debt relief. They need good jobs. If those materialize, repayment rates will rise. So will home ownership rates. It's as simple and difficult as that.

 

[jmyrlefuller]

The lesson of all this seems obvious. The young today don't need debt relief. They need good jobs. If those materialize, repayment rates will rise. So will home ownership rates. It's as simple and difficult as that.

I disagree. It would seem the lesson is that both of the issues are problems.

[IsailedawayfromFR]

I'd say what students really need is to focus on subjects that can earn them a worthwhile job.  That after all is the goal, isn't it?

Taking course like these will never make it.  My kid would have been cut off entirely if he tried any of these. http://socawlege.com/the-15-most-ridiculous-college-courses-you-wont-believe-are-being-taught/

The 15 Most Ridiculous College Courses You Won’t Believe Are Being Taught


15.
“Oh, look, a chicken!”
College: Belmont University, Nashville, TN

Course Description: Students must write papers using their personal research on the five senses. Entsminger reads aloud illustrated books TheSimple People and Toby’s Toe to teach lessons about what to value by being alive. Students listen to music while doodling in class. Another project requires students to put themselves in situations where they will be distracted and write a reflection tracking how they got back to their original intent.
14.“Demystifying the Hipster”

College: Tufts University, Medford, MA

Course Description: The hipster is a divisive cultural figure that elicits both envy and outrage, and some argue that it has run its course — but what exactly is (or was) the hipster? Are hipsters part of a counterculture, or are they just another marketing niche in the mainstream? How can we tell the difference? In this course, students will interrogate contemporary writing–both academic and popular–that claims to define the hipster, examining these arguments beside exemplary texts that have warranted the hipster label. We will focus on film, fiction, fashion, and music (among other genres and media) produced in the last twenty years, connecting these more contemporary examples to a longer history of the hipster that dates back to Norman Mailer’s controversial 1957 essay, “The White Negro: Superficial Reflections on the Hipster.”
13.“Zombies in popular media”

College: Columbia College, Chicago, IL

Course Description: This course explores the history, significance, and representation of the zombie as a figure in horror and fantasy texts. Instruction follows an intense schedule, using critical theory and source media (literature, comics, and films) to spur discussion and exploration of the figure’s many incarnations. Daily assignments focus on reflection and commentary, while final projects foster thoughtful connections between student disciplines and the figure of the zombie.
12.“What if Harry Potter is real?”

College: Appalachian State University, Boone, N.C.

Course Description: This course will engage students with questions about the very nature of history. Who decides what history is? Who decides how it is used or mis-used? How does this use or misuse affect us? How can the historical imagination inform literature and fantasy? How can fantasy reshape how we look at history? The Harry Potter novels and films are fertile ground for exploring all of these deeper questions. By looking at the actual geography of the novels, real and imagined historical events portrayed in the novels, the reactions of scholars in all the social sciences to the novels, and the world-wide frenzy inspired by them, students will examine issues of race, class, gender, time, place, the uses of space and movement, the role of multiculturalism in history as well as how to read a novel and how to read scholarly essays to get the most out of them.
11.“How does it feel to dance?”

College: Oberlin College, Oberlin, OH

Course Description: This course is a guided exploration of the social and cultural phenomenon of dancing. We will dance in various contexts, exploring both structured and improvised approaches to moving to music. Whether you say ‘I don’t dance.’ or ‘I love to dance.’ this course is for you. We will experience dance, watch dance on video and live, read and discuss dancing, and ask the question: How does it feel to dance?
10.“Patternmaking for dog garments”

College: Fashion Institute of Technology, N.Y.

Course Description: Learn to make patterns to take dog and pet-related design concepts from sketches to reality in this hands-on workshop. Instruction starts with the fundamentals of proper measuring on the doggie dress form to get the correct specifications for the needed pattern, including slopers for size variety. Learn to work with various dog body types to produce pattern pieces for garments, collars, and sleeves. Make patterns in creative muslin for dresses, coats and collars.
9.“The joy of garbage”

College: University of California-Berkeley, Berkeley, CA

Course Description: This class aims to highlight some of the major trends and issues wrapped up in the current global garbage crisis. We will look at policies here on the UC Campus, in the Bay Area, as well as national and international issues. Further, we will constantly be returning to the questions of why such problems exist as they do today, trying get to the roots of the matter. This requires a very multi-disciplinary approach, as these issues certainly are complex and often rooted in subtle cultural attitudes. Thus, we hope to bring ethical, political, economic, social, and other perspectives into our discussions and search for solutions. Guest speakers will talk to us about issues they specialize in, from environmental-justice, landfill design and operations, zero-waste philosophies, the pros and cons to recycling, composting, etc.
8.“Queer musicology”

College: University of California- Los Angeles, Los Angeles, CA

Course Description: According to this course, those who are homosexual create and experience music differently than their straight counterparts. While many experts in the field see this as a growing field of study, most outside were quite critical when this course was introduced in the 90s.
7.“The Hunger Games: Class, Politics and Marketing”

College: American University, Washington, D.C.

Course Description: The Hunger Games trilogy is a publishing phenomenon that has dramatically impacted American popular culture. Using the series as a case study, this course examines the interplay of class, politics, and ethics. Over the course of the semester, students will read The Hunger Games trilogy and theory discussing the text, exploring aspects of The Hunger Games and its cultural impact. Topics covered include oppression, feminism, food deserts, rebellion, the publishing industry, and social media marketing.
6.“Learning from YouTube”

College: Pitzer College, Claremont, CA

Course Description: Students meet in a classroom but mostly work online, viewing YouTube content, commenting, and encouraged to create short video clips. One class member, for instance, posted a 1:36-minute video of himself juggling.
5.“Science from Superheroes to Global Warming”

College: University of California-Irvine, Irvine, CA

Course Description: Have you ever wondered if Superman could really fly? What was Spiderman’s spidey sense? How did Wonder Woman’s invisible jet work? What does it really mean for something to be a scientific “fact”? Explore how science works and what constitutes “good” science through case studies drawn from a wide spectrum of people’s experience, for example superheros, movies, and real world issues such as global warming. The case studies will provide the change to act as science critics as the students develop a better appreciation for science and the scientific method.
4.“Lady Gaga and the sociology of fame”

College: University of South Carolina, Columbia, S.C.

Course Description: The course will introduce students to a sociological analysis of issues related to the work of 24-year-old Stefani Germanotta, a.k.a. Lady Gaga. A classically-trained child prodigy pianist, singer, and songwriter from New York, Germanotta began her meteoric rise in popularity about three years ago.
3.“Juggling”

College: Reed College, Portland, Oregon

Course Description: Learn to juggle, starting with three balls, then progress at your own pace to learn new tricks and explore other props. A wide variety of related object manipulation and circus skills are available to be explored, including club passing, unicycling, contact juggling, poi, diabolo, rolling globe and much more. The instructor works with students individually and in small groups, and many local jugglers are on hand to help as well. In addition to surprising yourself and impressing your friends, juggling is frequently used by sports trainers to help develop eye-hand coordination, peripheral vision, and a range of other skills.
2.“The sociology of Miley Cyrus”

College: Skidmore College, Saratoga Springs, N.Y.

Course Description: “From Disney tween to twerking machine, Miley Cyrus has grown up in the public eye, trying on and discarding very different identities onscreen and off,” reads the course description. “She provides rich examples for analyzing aspects of intersectional identities and media representation.”
1.“How to watch television”

College: Montclair State University, Montclair, N.J.

Course Description: This course, open to both broadcasting majors and non-majors, is about analyzing television in the ways and to the extent to which it needs to be understood by its audience. The aim is for students to critically evaluate the role and impact of television in their lives as well as in the life of the culture. The means to achieve this aim is an approach that combines media theory and criticism with media education.

[dfwgator]

Do they ever bother to mention that forgiven debts are taxable as income?

[geronl]

the same people decrying student debt are usually the ones who think deficit spending helps the economy

[jmyrlefuller]

I'd say what students really need is to focus on subjects that can earn them a worthwhile job.  That after all is the goal, isn't it?

Taking course like these will never make it.  My kid would have been cut off entirely if he tried any of these. http://socawlege.com/the-15-most-ridiculous-college-courses-you-wont-believe-are-being-taught/

True enough, but what constitutes a "worthwhile job" depends heavily on the economy —and if you graduate at the wrong time, your degree can go from lifeline to worthless in an instant. I learned that the hard way.

[skeeter]

What a silly premise. Tuition debt isn't ruining anything.

Government regulation, taxation and unfettered immigration are what are ruining the "recovery".

[montanajoe]

I think the concern is that some on Wall Street are bundling the student loans into exotic financial instruments (eg Junk) and peddling them to unsophisticated investors and nobody really knows if the return will be what is promised and if it is not, will a collapse of the instruments, drag the rest of the economy like 2008..