Ballooning Student Debt Levels will Usher in New QE
-- Published: Wednesday, 18 March 2015 | Print | Disqus
By Nathan McDonald
The average American student graduating with a bachelors degree leaves with approximately $28,400 of debt to be repaid over the course of their career. In fact, over 70% of students graduating will be in this position, making it the norm.
Of course, that is simply a bachelors degree, which in today’s world will get you a management position working at McDonald’s. Let’s face reality. Most of those starting their post-secondary education today, will not find a job that is related to what they studied at university after graduation. At best you can chalk it up to a grand social experiment, although a costly one.
The student debt category has been one of the biggest culprits of debt accumulation in American history. Loans backed by the government have led to runaway inflation in secondary education, as the universities know that they can charge more and more every year and the government will simply issue students larger loans.
The fact that so few people can understand this, is truly mind boggling. Get the government out of education and the loans will dry up. The massive risk of exploding student debt levels will naturally disappear over time as universities are forced to restructure and reduce cost, or face plummeting student enrollment.
Gone are the days when a student could work a part-time job and graduate without debt. Unless students have wealthy parents, or parents who don’t mind taking out a second mortgage on their house, then you are in the debt slave camp for 10-15 years of your work life.
The only saving grace, or curse, depending on how you look at it, that has allowed for this Ponzi scheme to go on for so long is the fact that student loans cannot be defaulted on. Although that may be changing.
President Barack Obama will speak this coming Tuesday to students at Georgia Tech. The topic of discussion, none other than student debt management and repayment.
Obama and his administration know that this is an issue that affects a large segment of the American people. If there is a way for a politician to buy votes, they’ll find it. Not only is this a great political move, but it is also becoming a growing issue within the banking system.
It is estimated by the Treasury that there is $1 trillion in student loan debt. This is a staggering number, which exceeds even that of American household credit card debt. The most shocking fact is the rate of expansion that this debt is about to undergo.
As previously mentioned, universities know they can raise tuition fees, therefore they will. This will cause an explosion in student debt, even greater than the rapid rise we have already witnessed. Levels are set to hit $3 trillion by 2024.
What has the government now looking at taking action and changing the rules of the game is the fact that 9% of all student debt are currently in default, 12% are in deferment and 11% in forbearance. This means that almost a third of student debt is going unpaid!
Given current estimations, this means that over the next decade, the Treasury is looking at over $1 trillion for student loans going unpaid. Amplifying the fact that secondary education has become increasingly unaffordable for a large majority of Americans.
The White House’s solution is to revisit bankruptcy laws surrounding student debt. It is looking like a new bill will be passed, one that will restructure student debt laws and allow for students to better “manage” debt levels (i.e. default).
Who will be left holding the bag in the end? You guessed it, the American taxpayer. Get ready for the next wave of QE, the next wave of money printing. QE to infinity continues.
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