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Thursday, March 06, 2014

What Student Loans Are Really Used For: The Depressing Case Studies

Some of our readers may have missed our post from September 2012  in which we showed that far from being used for their generally accepted purpose, student loans - now well over $1 trillion and more than the total credit card debt outstanding - in numerous instances are instead abused to fund virtually everything else besides paying for tuition. Recall: "Robert Thomas Price Jr. borrowed about $105,000 for his tuition at Harrisburg Area Community College from 2005 and 2007, federal authorities say. It doesn’t cost anywhere near that much to study at HACC, though. So Price, 45, of Newport, is facing federal student loan fraud and mail fraud charges. A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games."

At the time many derided this case study as an isolated example of fund abuse by an isolated individual. Nearly two years later, a study by the WSJ confirms  what most have known: far from an isolated incident, "student" loans have become a primary source of funding for an every greater portion of the US population, and that when looking at total credit creation in the US economy, non-revolving student debt has as much if not more relevance than mere revolving credit, when it comes to determining how pays for what.

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