The student loan problem in America is what some economists are calling the next big economic bubble that just might burst. Two other bubbles that keep the economy afloat are the housing market and consumer spending. But we’re slowly entering into an era where these bubbles can’t exist forever, and there is likely going to be a day of reckoning on which the entire economy could fold.
Americans can no longer afford to do a lot of things that they used to be able to do: They can’t afford to get sick without insurance, they can’t buy homes in many major cities, they can’t afford attorneys if they get into serious legal trouble, and they can’t afford to send their kids to college without massive loans and financial aid. This scary crisis has long been ignored by government officials, but now students are coming out of college with more debt than they can ever afford to pay.
As a result, this is the first generation of children that are expected to actually DIE IN DEBT. That means that they won’t start in the red and finish in the black….they are going to start in the red and end there. This is hardly the future that we expected.
Our suggestion is that when you send your child to college, send them to the right school for the right reason. That means the $35,000 per year private school might not be the best place to go and study Philosophy, since the degree won’t give enough earning power to deal with the debts. Consider alternative learning options for the things you enjoy, like free classes online and look into spending money to learn skills that actually make you employable or give you the ability to run your own business.
You may also consider allowing your children to take responsibility for at least part of their loans, so that the entire burden is shared and not thrust onto one person. When you’re planning for retirement, they’ll be hitting their peak earning years. You don’t need that kind of financial headache.
PBS talked a little bit about this topic in the documentary below:
We’ve been keeping up with the ongoing shocks to the American economy, the real estate bubble going pop, credit card debt, the bank mess far and wide. Now there is a new headache coming to a family near you, rising defaults on student loans. Many of today’s grads owe more than a hundred thousand dollars. We’re talking tens of millions of people in trouble. Alexander Dean produced our report.
The phone rings often in Gina Moss’s little house in Baltimore.
It rings while she gets her daughter, Alice, ready for school. It rings when she’s putting her to bed and a lot in between.
Gina: For two years, I’ve been screening my calls. Any number that I don’t recognize, I don’t answer.
Host: Because why? Because they might be one of these people?
Gina: Because they might be about collector, right. It might be one of the loan companies.
Host: The calls she’s avoiding are from companies trying to collect on Moss’s overdue student loan payments.
Gina: They treat you like you’re trying to be sneaky and be deceitful and like I’m hiding some Swiss bank account that I’m not giving them access to. That’s not the case at all. If I had the money, I would pay them. There just isn’t any money.
Host: Moss currently owes about a thousand dollars a month in payments. That’s more than a third of her gross salary as a social worker so payments are always hard. A few weeks ago, in the middle of this deepening recession, Moss lost her job. Now she finds the payments are impossible to make.
Gina: It was very devastating initially. The first week was really, really hard.
Speaker 1: Gina Moss isn’t alone. She’s now at the heart of a colossal controversy. In America today, there are 70 million people, about a quarter of the US population.
You can watch the video on the topic below: