Student Debt: It's Not Just For Young People Anymore

There’s a great story in the Washington Post this morning about how senior citizens are still struggling to pay off their educational debt. Senior. Citizens. The story says that collectively Americans over 60 owe $36 billion in student debt. That figure includes seniors who have co-signed on loans for their children or grand-children.

And yes, I love the holier-than-thou people who lecture me or other debt-defaulters on our financial responsibilities who went to school by putting their parents or grandparents at financial risk.

But seniors are also in trouble because they took out loans to finance continuing education later in life. I’m sure if you look around your law school, you’ll think of a couple of people who are really too old to be there but were led to believe that one more credential would solve all of their life’s problems.

The senior struggle is just one more indication that our system for financing higher education is about to implode…

The Washington Post describes a reality that will surely be in my future, unless I hit one of these Mega Millions drawings:

That even seniors remain saddled with student loans highlights what a growing chorus of lawmakers, economists and financial experts say has become a central conflict in the nation’s higher education system: The long-touted benefits of a college degree are being diluted by rising tuition rates and the longevity of debt…

“A student loan can be a debt that’s kind of like a ball and chain that you can drag to the grave,” said William E. Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “You can unhook it when they lay you in the coffin.”

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Remember, according to some people, 18-year-old people are capable of appreciating what it means to take on a debt that they might end up using their Social Security checks to pay. Saddling the economic growth with non-discharable educational debt is just “personal responsibility” to some.

To me, the fact that people are still paying down debt when they can barely remember the education they received is evidence that cost of education has outstripped the value of education. Why is education one of the few goods or services people will pay for without fully understanding its intended benefit? Because education and increasingly higher education has become a threshold issue. It might not be worth paying $100,000 to go to law school to get a job as a paralegal, but if all the paralegal jobs are going to people with J.D.s, you have to pay to play.

Now, a market is supposed to work this out because smart competitors will offer the good at a more reasonable price point, but the education market is skewed because the government will give everybody a loan and consumers are stupid. There’s no real incentive for a law school, or any school, to control costs, because people will borrow the money to go to “the best,” even if they have no freaking idea of how that will translate into real dollars down the line.

What this senior story shows is that consumers have actually been this dumb for a long time:

Sandy Barnett, 58, of Illinois thought she was doing the right thing when she decided to pursue a master’s degree in clinical psychology in the late 1980s. She had worked her way through college but said she took out a loan of about $21,000 to pay for graduate school so she would have more time to focus on her studies.

But even after earning her master’s, Barnett struggled to find a job that paid more than $25,000 a year and soon fell behind on her payments.

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I’ll say it again: if you cannot point, directly, to the job that you will get by going to graduate school, DO NOT go to graduate school.

It’s too late for these indebted seniors, but maybe they can impart that knowledge to their grand kids.

Senior citizens continue to bear burden of student loans [Washington Post]