Blame student loans on.....

Discussion in 'Economics' started by themickey, Nov 28, 2021.

  1. themickey

    Blame student loans on Sputnik: How the 1957 launch of a Soviet rocket inspired the government to overhaul education
    Ayelet Sheffey Nov. 28, 2021

    Satellite and sunrise in space. Getty Images
    • When the USSR launched Sputnik, the first orbiting satellite, the US worried it was falling behind.
    • Eisenhower responded by creating a program to help more people afford college — and boost the US.
    • While it was created to further educational equity, the student-loan program now furthers debt.
    Sputnik was a wake-up call for the US: Americans needed to be smarter.

    On October 4, 1957, the Soviet Union launched the first Earth-orbiting satellite, Sputnik. It was a clear sign to President Dwight Eisenhower that the US needed to be producing more scientists and engineers to compete with other nations. But there was one problem — the education system at the time was exclusive and shut out low- and middle-income people from participating.

    America wasn’t going to catch up to the Soviets in the “space race” as long as that was the case.

    Congress stepped in and created the National Defense Education Act (NDEA) at Eisenhower’s request, which allowed the government to give loans to students in science and mathematics fields. It was later amended to remove restrictions on fields of study.

    In other words, Sputnik spurred the creation of the federal student-loan program, as detailed in “The Debt Trap,” a new book by Wall Street Journal reporter Josh Mitchell.

    “It is no exaggeration to say that America’s progress in many fields of endeavor in the years ahead — in fact, the very survival of our free country — may depend in large part upon the education we provide for our young people now,” the House report recommending the bill’s passage stated.

    President Lyndon B. Johnson said in 1964 remarks that more than 600,000 additional students had gotten access to education thanks to the NDEA’s student-loan program. But there was still more to do to tackle affordability, Johnson said, noting that Americans were spending $US4,000 ($AU5,616) to $US5,000 ($AU7,020) on each child’s college.

    “Now, ladies and gentlemen, this just must not continue,” Johnson added. “The challenge is obvious and we must meet it. Higher costs must not put higher education out of reach.”

    Today, the average annual out-of-state tuition for a public university is $US15,000 ($AU21,059), fewer and fewer people are enrolling in college as the nation’s student-debt load stands at $US1.7 ($AU2) trillion and grows by the day. What started as an altruistic educational pursuit has now become a full-fledged crisis.

    Government involvement in US education is hurting the people it intended to help
    Johnson, well known for his war on poverty, expanded the education system in an attempt to give everyone a fair shot at college — a core pillar of the American Dream. To fulfill his goal of universal access to education, he signed the Higher Education Act of 1965, which guaranteed loans for the middle class.

    But after the Act’s passage, banks began raising interest rates on student loans and the system came to profit lenders while borrowers accumulated more debt. Colleges kept raising tuition as more federal aid became available. It created a trap for students across the country, as Mitchell explains: The more colleges raised tuition, the more Americans had to borrow, and the more Americans had to borrow, the more colleges raised tuition.

    Alice Rivlin, the first Congressional Budget Office head tasked with crafting Johnson’s student-loan program, told Mitchell in 2019 that the idea behind federal loans was that “higher education added to your future income and therefore loan finance was a sensible thing. You could pay it back out of your future income.”

    But looking back, when asked what she thought of how the loan industry turned out, Rivlin told Mitchell: “We unleashed a monster.”

    The average American holds about $US32,000 ($AU44,925) in student debt after graduating. Due to high interest rates, if the borrower does not make sufficient income, it could be very difficult and sometimes impossible, for the borrower to pay off even the original loan amount.

    For example, David Wise, 59, originally borrowed $US79,000 ($AU110,908) in student debt, had paid off $US175,000 ($AU245,683) of it, and still owes $US236,485 ($AU332,002).

    “I feel like I’ve actually been responsible, and I’ve paid a considerable amount of money on my student loans,” Wise told Insider. “But it really is a debtor’s prison.”

    It’s even worse for parents who want to give their kids a chance at higher education. Parent PLUS loans are federal loans parents can take out to finance their kids’ education, and the loan can cover up to the cost of attendance and is not based on income.

    It’s created a system of unchecked borrowing, and with PLUS loans having the highest interest rates of 6.28%, parents are often stuck paying off debt for the rest of their lives simply because they wanted to give their kids the best future.

    President Joe Biden has taken steps to tackle the student debt crisis. He has begun to reform student-loan forgiveness programs that have failed borrowers over past years, like one intended for public servants, and he promised to pass free community college during his term, which will significantly reduce college affordability issues.

    But even with those reforms, 45 million Americans continue to shoulder significant debt burdens, shutting many out of the American Dream Eisenhower and Johnson envisioned.
  2. newwurldmn


    David wise borrowed 80k to become a lawyer in 1990 and has spent the next 30 years as a waiter by his own choice. he must have gone a fancy private law school to accumulate that kind of debt and then went for a low paying job. Isn’t that his fault?
  3. thecoder


    Hey themickey, as the text clearly says, it's the money lenders, as usual... :)
  4. Blame the government too. They basically told the banks, "you don't have to have any skin in the game and you can lend any amount to anyone who applies for a loan". "Conditions" like that are often abused.
  5. thecoder


    One has to analyze the news who the people/companies are behind the opioid crisis as well the student loan crisis in the US....
    You will be surprised, or maybe not... :)
    murray t turtle likes this.
  6. I blame the people who SIGNED FOR THEIR LOANS.

    Same as I blame the people who signed for their mortgage payments before the RE bubble burst in 2007

    Nobody forced anyone to borrow money for school, housing, cars, etc.

    You borrowed the money, you knew the terms of the loan, PAY YOUR FUCKING DEBT!
  7. RedDuke


    true of course. But the side effect is that cost of tuition became insane so you have no choice to pay more.
  8. ipatent


    It was right after WWII when the SAT became ubiquitous and the GI Bill allowed high aptitude men from the middle and lower classes to start attending the best universities. Transformed American society into a meritocracy, replacing a system where the children of the wealthy took the top spots.

    Then during Vietnam there was a tremendous increase in college enrollment because of the availability of deferrals.

    Colleges started to raise and fix prices in the '80s when student loans became more available and were federally subsidized. The student loan problem is because of dishonest trade schools running up big debts for kids and the lower tier colleges graduating kids who will never be able to earn enough to pay the loans back. A lot of those colleges were created or expanded during the Vietnam era.
    murray t turtle likes this.
  9. Handle123


    What I find amusing, so many getting education, computers are slowly wiping out jobs. Eventually, computers will do all the programming. I can see eventually too many be saying "would you like to Supersize that"?

    I heard on radio you can order a brand new Nissan online. That has to make new car dealerships on edge.
    murray t turtle likes this.
  10. RedDuke


    that eventually is very far off. It would
    Require self aware computer, we are
    Nowhere near that yet.
    #10     Nov 28, 2021
    murray t turtle likes this.