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Monday, July 16, 2018

Student Debt Bubble Expands As Parents Do More Of The Borrowing

Not so long ago, student debt was mostly the responsibility of students. That is, you paid for college with loans and then paid off those loans with the proceeds of the good job you got with an advanced education.

These days it’s a little different. The cost of higher education is soaring, the jobs available to college grads don’t pay as much, relatively speaking, as they used to, and the size of loans available to students – though huge – don’t cover the full cost of many degrees.

One might expect these changes to lead more students to work for a few years and save up, or choose a cheaper degree, or eschew college altogether (as a lot of successful people now recommend) and substitute work experience for a diploma.

Some of that is happening but apparently the biggest change is that parents have stepped in to cover the difference between what their kids can borrow and the cost of a degree. As the chart below illustrates, until just a few years ago, the average debt of students exceeded that of students’ parents. But post-Great Recession, parents have given up trying to moderate the cost of their kids’ education and started doing the borrowing themselves. They’re now taking on the majority of new debts, and the gap is widening dramatically.



Anonymous said...

Kids will just have to do what I did. I borrowed enough to pay off my student loan as part of a motor-home loan, then I bankrupted the whole thing. The hilarious part, I was getting credit card offers in just 6 months after dumping over $175,000.00 in debt!

Anonymous said...

Higher education is a joke. Tuition AND FEEs keep getting higher and our kids are no better educated.

Anonymous said...

It will get you a better paying job in the long run. I don't know any doctors, dentists, lawyers or pharmacists without a college degree.

Anonymous said...

9:29 is correct. You are buying a piece of paper, that is all. The "Gen X" age folks still have their student debt because they have not gotten jobs paying well enough to pay it off. Wait until their parents start dying and loan officers are showing up at funerals to collect the inheritance.

Anonymous said...

$100K debt after 4 years. Sometimes its hard to think about it. In-state tuition (room/board) a semester is about $11-$12k, throw in some incidentals gets you to $25K a year...4 years...$100K

THEN you have to get a job and at minimum about 15-20 years payback of what $200K or more.

I got in the wrong line of business, that's for sure!

Anonymous said...

People like you should burn in hell.