Essentially, the article is stating that the United States government is shockingly uninformed on the status of student loans. The following analogy from the article details how the department of education is the primary reason for this lack of information:
"Imagine
that a big, complicated company holds a huge portfolio of loans, many
of which are in default or delinquency. The company’s leadership and
some vocal shareholders demand a detailed review but receive a thin and
incomplete report from the loan division. Financial
analysts at headquarters want to scrutinize the data. But the loan
division doesn’t turn it over. Without better data, the firm can’t move
forward. This
dysfunctional enterprise is fictional, but in at least some respects it
bears more than a passing resemblance to the United States government,
which has a portfolio of roughly $1 trillion in student loans, many of
which appear to be troubled. The Education Department, which oversees
the portfolio, is playing the part of the loan division — neither
analyzing the portfolio adequately nor allowing other agencies to do so."
"These
loans are no trivial matter — not for the borrowers responsible for
them or for the country as a whole. Student loans are now the second-largest source of consumer debt
in the United States, surpassed only by home mortgages. In a major
reversal, they now constitute a larger portion of household debt than
credit cards or car loans. Student
debt has grabbed the attention of the Federal Reserve, the Treasury and
the Consumer Financial Protection Bureau. Officials in these
organizations worry that student debt threatens the well-being of
households and the federal budget, since taxpayers are liable if student
loans go unpaid."
What is most upsetting after reading this last quote is that these organizations that are concerned about the debt have no way to help as a result of not having access to data. Even more upsetting, "The Federal Reserve, which tries to keep a close eye on household debt,
has purchased credit records from Equifax that let it track trends in
student debt. That’s right: The central bank relies on a private firm
for data about student loans, when much of the data it needs is held by a
federal agency. The credit records are better than nothing, but they
lack crucial details like the type of loan and the college the borrower
attended".
For what seems to be such a big issue, it really is disconcerting that even the Federal Reserve cannot access the data it needs from the Department of Education. I cannot fathom why this is an issue and why nothing is being done. I am hoping for better news in the future, but with the way this issue has gone so far, I am not confident.
I've always been in disbelief at the cost of a college education. The costs are so high, it puts students in a pattern of loans on top of loans, leading to student debt. It's almost unfair that in order to get an education, you or your family has to be wealthy, or you have to graduate being choked by debt. The high costs are an issue contributing to inequality, seeing as education costs increase it becomes harder for the general population to attain (pay for) that education. Among this, after students graduate and become employed, they are trying to start their lives which may mean needing loans for a car a home or something else. But how can they do that when they have so many loans already from just getting the degree? In some ways it might even place fear to graduate for some students. Like Nolan said, this is disconcerting and I'm optimistic for change, such as government subsidizing education or something.
ReplyDeleteThis article does a great job at showing how dysfunctional our current system for student college financing is at the government level. I think that high levels of debt, including student debt, could certainly reach unsustainable levels in the near future, especially considering that economists do not have access to data that would allow them to systemically asses if the increasing level of debt is a problem.
ReplyDeleteWe can often learn a lot from looking at other countries, as the end of the article suggests when referencing the UK's student loan agency. However I did a little digging into the Student Loan Company (their semi-independent student loan agency), and from what I understand, it does not seem to be doing such a great job either. What I think that the UK and a lot of Europe do much better than we do is make higher education much cheaper in the first place, while still maintaining high quality education.
I completely agree that this is a great article because it does show the issues with our current student loan financing by the government. I have thought the entire time I have been in school that I believe the cost for a college education at a 4 year institution is extremely high. I don't understand the purpose of already having extreme amounts of debt right after college. I agree with Cameron that a college education has become hard to get and now depends on your families socioeconomic standing and is causing inequality within our society.
ReplyDeleteThe extremely high costs of college educations is a real problem for individuals and the economy. It's nearly impossible for students to leave college without loans. Even students who don't want to take out loans have them sneaked into their financial aid packages and have to deliberately decline the loans every single semester. Expensive schools have decent financial aid, but still have a higher price; and cheaper schools have a lower price, but aid is hard to come by. No matter what institution you choose, or your socioeconomic standing it is hard to not encounter a student loan at some point or another. Leaving school with this debt is discouraging to graduates entering the job market, they are already in debt and the money they're earning at their new job isn't really theirs to keep. These blood sucking student loans can deter people from pursuing a college education which makes for a lot of unskilled workers in the economy. We have an unsophisticated labor pool with the potential to obtain skilled jobs and higher pay, but they don't want to because the cost of school is too high. I agree with what Beth pointed out, in that the US should follow the lead of many European countries who are actively trying to lower the cost of tuition itself while still providing quality college education.
ReplyDeleteI agree with everything being said here. Important also is te notion that the situation can not be assessed as expressed by the analogy of one firm with many loans with some in trouble. I can't help but think of the housing problem where mortgages were given to unqualified buyers which kept driving the cost if homes up and increasing the number of troubled loans. This issue seems similar. Banks are handing out loans to students who typically have little to no proven credit in order to finance a large portion of their education while being unsure if they will be paid back. How does the federal reserve and central bank account for loans that they are uncertain of?
ReplyDeleteThe student loan debt problem is unbelievable in this country. And the prices of tuition are undoubtably out of control...and articles like this really make you scratch your head. If you guys want to learn a bit more about how amazingly bad the situation is, you should watch this video by John Oliver: https://www.youtube.com/watch?v=P8pjd1QEA0c
ReplyDeleteI agree with all of the comments. I also think that this is a complicated issue that has a lot of dilemmas within itself. Fearing that they will graduate with a huge debt hanging over their head can discourage people from getting an education. But since the cost is too high, people who are unable to afford an education will never be to get one without loans. In other words, I agree that the high cost is the main issue here which needs to be considered.
ReplyDeleteI agree with everyone as well. Student loan debt is outrageous and the cost of attending college continues to increase each year. This is definitely causing inequality in our society because many people just simply cannot afford to attend a four year institution and scholarships sometimes don't help enough. I also think this is causing many people to attend community colleges, but this can also cause issues because some people look down upon an education from a community college. I also agree with the comment made before, that it doesn't make sense to have to enter life after college with enormous amounts of debt. I'm not sure how the issue of student loan debt should be addressed, but it is an issue in our economy that needs more attention than it is getting right now.
ReplyDeleteI agree that the high cost of a college education makes economic mobility very difficult. The astronomical cost of tuition really discourages people from lower income groups from considering higher education. It's also definitely upsetting that there is so much ambiguity around such an important topic. I think that making education more affordable should definitely be a priority for the United States. I feel that a better educated population could only bring benefits to American citizens so it's definitely worth investing in.
ReplyDeleteI agree with all the above previous comments. I think that the U.S. government needs to really do something about the increasing cost of college education. I find it interesting that the government does not work hard to help more students in this country to afford a college education without having to take on so much debt. In order to have an effective as well as efficient work force, the U.S. government needs to make college education more affordable. The reason being, an educated work force and citizen will make smart purchasing decisions and, ultimately contributes to a growing economy.
ReplyDeleteThe high (and rising) costs of college seem only to further income inequality in America. People who want to continue their educations but can't quite afford it are left in very uncomfortable circumstances. Even if they're fortunate enough to be gifted in the high paying fields of the sciences, they'd still have to borrow an obscene amount of money (grad school is usually a requirement). Then, right when accept their first offer out of undergrad or grad school they instantly have to start making payments, which at this early point, they probably can't afford. Clearly, this is a horrible situation for both the lender and the borrowers, so something major needs to change.
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