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Almost $1 Trillion – America’s College Debt Crisis

Almost $1 Trillion – America’s College Debt Crisis

It’s the next big financial crisis that no one wants to talk about: college student debt in the U.S. is nearing one trillion dollars, with no end in sight. The debt is growing at the rate of $2,853 per second.

Cost Of Higher Education Rising At 2 – 3 Times The Inflation Rate

This means that the cost of higher education is currently rising at two to three times the rate of inflation, so it’s no wonder that many students are leaving college with more than just a degree. They are weighed down by staggering student loans.

Currently, 67 percent of students graduate with debts; the average amount for the class of 2009 was $24,000.

Price Of Admission: America’s College Debt Crisis

But why? How can this be? And why is no one paying attention? These are some of the questions that CNBC’s excellent documentary “Price of Admission: America’s College Debt Crisis” sets out to answer.

Scott Cohn, the program’s reporter, came up with some disturbing information. He found admissions officers encouraging widespread borrowing by students, often with little regard for their ability to pay.

As a result of this increasing student loan debt come rising student defaults. Student loan defaults have doubled since 2005, with seven percent being the official default rate, but in fact this number may be much higher. Many critics believe that colleges and universities are hiding the true default rates in order to keep the government loan money coming.

Increasing Student Defaults

They can do this because the government comes up with that seven percent by measuring loans only in the first two years. In addition, loans are deferred if the former student becomes unemployed, so they are not considered in default. Likewise, if the graduate decides to take a forbearance, a loan is no longer counted as in default. (With a forbearance, the lender will delay their right to start punitive measures or to levy fees and other charges as long as the graduate can catch up to the payment schedule within a certain amount of time. So it is a good solution for someone with a temporary setback.)

So, as Senate Education Committee Chairman Tom Harkin (D – Iowa) stated on the program, “We don’t really know what the default rate is.”

For-Profit Colleges: $24 Billion Per Year In Government Money

The Obama Administration overhauled the student loan system so that the government is now the primary originator of student loans. Noting this fact, “Price of Admission” took an especially close look at for-profit colleges, which take an astounding $24 billion in government money every year.

At these institutions, an estimated 96 percent of students borrow money to attend. And we are talking big business. According to CNBC, the University of Phoenix, the largest university in the country, with 470,000 students, made a staggering $3.8 billion in revenue in 2009.

Schools Using Students To Make Profits

What’s wrong with this picture? How can a group that cares about students and their education treat those same students as simple money-making machines? And there’s more: HigherOne is a Connecticut company that allows students to receive some of their loan proceeds in the form of a debit MasterCard.

There are clearly some ruthless business people involved in the world of higher education. It is unfathomable to me that they apparently could care less that they are landing young people in mountains of debt from which they may never escape. For unlike other debts, student loans cannot, in most cases, be refinanced or wiped out in bankruptcy.

Schools Keep The Money, Students Keep The Debt

Harkin put it this way, “Schools keep the money, students keep the debt, and taxpayers lose out.” And a disproportionate number of students at for-profit colleges are from low-income backgrounds, another disturbing factor. (By clicking here, you can read about Harkin’s Oversight Investigation of Federal Dollars going to For-Profit Schools.)

Shame on unscrupulous colleges, and thank you, CNBC, for focusing a spotlight on this crucial issue.

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89 comments

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11:18PM PST on Mar 3, 2011

HR BINWALEE goes public about Foul Play at a large For-Profit University.

In a recent You Tube Video HR BINWALEE author of the upcoming book
Crisis: Student Loan Debt In America reads never before heard or seen pages from his controversial book. http://www.youtube.com/watch?v=DldtD0zkS48

11:22AM PST on Dec 28, 2010

This... kinda boggles me, really (the numbers, especially). Thank you for the article.

6:52PM PST on Dec 27, 2010

Buen artículo

6:52PM PST on Dec 27, 2010

Buen artículo

1:16PM PST on Dec 26, 2010

More examples of the dysfunctional nature of this country.
It is bad enough corporations can externalize their costs to citizens but it is even worse when they see education as a means to secure welfare checks well into the future, by a government assurance that these loans can't be gotten rid of, should the empty promises of higher education can't be realized.
When this nation let its manufacturing go overseas because the people were under the impression that doing so would make the products cheaper, that is the day this country starting losing ground.
Plenty of opportunities existed for common people in the 1950's, and 1960's, even though they had only high school educations. My dad had many opportunities for good paying jobs.
People were much more realistic back then. Today, investors and executives are always seeking more and more profit and have resorted to doing anything to achieve that goal. The result is what we see today.
Frankly, I wish this society would experience more immediate effects of its failures. Maybe, that would keep people real for a change.
Many college degrees are a joke. They won't pay anything because the society in which they exist is increasingly headed toward the toilet finanically and otherwise. The elites have provided for themselves: to hell with the rest of us.
Corporate entities will say and do anything, like any other addict does, to keep itself in the object of its addiction(money)

9:20AM PST on Dec 26, 2010

education should be free, terrible to think about starting off after education on debts.

7:48AM PST on Dec 26, 2010

Cutting Bush tax cuts for rich would have helped make education affordable.

9:03PM PST on Dec 25, 2010

I'm still paying off the loan I took out to live in the dorm my freshman year, 14 years ago. It's INSAAAAAAAAAAAAAAAAAAAAAAAAAAAANNNEEE!!!!!

8:17PM PST on Dec 25, 2010

Tomorrows Forecast for America: The sun will disappear, Black clouds will gather, and hail will rain from the sky creating black ice. Fatalities on the roadways, and major hardships for everyone expected.
The weather for the next day, and far beyond that is expected to make Noah's flood, look like paradise.

4:50AM PST on Dec 25, 2010

OH YEAH....I WANT A STUDENT LOAN.......BUT BUT BUT, do I want to be a NATIONAL GUARD POLICEMAN as the end result to get my loans "waived" ????? Huh, huh, huh....and am I going to be told what I really have to do to get that loan waived? Think about this one !

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Judy Molland An award-winning writer and teacher, Judy Molland is also an avid hiker, backpacker, and nature... more
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