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Student Loans -- A Life Sentence

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Student loans - a life sentence

Forget about getting married and buying a home. This generation is thinking about next month's payment.

By Christian Zappone, CNNMoney.com staff writer

May 2, 2006: 11:43 AM EDT

NEW YORK (CNNMoney.com) - Mayrose Wegmann, 25, should have been starting on her dream career as a political consultant by now. And saving toward her first home.

Instead, Wegmann, who graduated with a degree in political science and journalism from the University of Iowa in 2004 and moved to Washington, D.C., is working at a non-profit because it pays significantly more than entry-level politics work. And she won't even consider buying a home for several more years.

In fact, she won't consider much except how to meet the $300 a month she owes on her $34,000 student loan balance.

"The school debt makes you decide [about your career] based on the money factor. Not based on what you want to do," said Wegmann.

The Class of 2006, set to graduate this month, will soon be in the same boat.

Approximately two-thirds of all students use loans to pay for their higher education, according to the Center for Economic and Policy Research using data from the College Board. The average debt for students graduating in 2003-2004, the latest data available, was $15,622 for public schools and $22,581 for private – many students rack up even more on their credit cards.

As recently as 1990, only 46.2 percent of students at public schools took out loans, averaging just $9,798 in 2004 dollars. Private school debt in 1990 averaged just $15,054.

Call it a reverse dowry: college debt diverts careers and delays or impedes graduates' plans to get married, buy a home or even to start a family. The effects can last years.

A 22-year old student graduating this year who consolidates their $40,000 loan at 6.125 percent will need to pay $243 a month...until they're 52. By that time, they will have paid $47,494 in interest alone.

A reverse dowry

"My student loan debt is my biggest source of stress in my life at the moment," said Steve Desroches, a 2002 graduate from Columbia University's Graduate School of Journalism. "I live paycheck to paycheck."

The degree left Desroches, who works for a newspaper on Cape Cod, $50,000 in debt with no savings. He's unable to buy a needed car or to even think about entering Massachusetts's "out of control" real estate market.

The repayments were so financially restrictive he briefly considered declaring bankruptcy, until he learned it wouldn't affect his student loans because they're federally guaranteed.

"My feelings about my degree now? My graduate education was invaluable [to my career], but it wasn't worth $50,000, or more accurately, it isn't worth the debt. My options are definitely limited."

Christine Moellenberndt of Sacramento, California has given up on the idea of owning a home, at least anytime in the next 10-15 years./b] She graduated last June from the University of California, Santa Cruz with a degree in anthropology, and moved back in with her mother when she realized not doing so would mean living paycheck to paycheck with no chance of paying down her debts.

"That $675 I could be spending in rent could also be a good chunk of a credit card payment, or a huge payment for my student loans. I see that as a bit of a better investment than living on my own and struggling paycheck to paycheck."

Moellenberndt says at least half her monthly income working at a state regulatory agency goes to pay off her $18k in federal student loans. And although the debt is daunting, her plans to become a community college professor call for an advanced degree...hiking her debt in the future.

A growing issue for the economy and society

The cumulative effect of such student debt on graduates is unclear, although few would argue that its impact will be positive for the graduates, the economy or society.

"We've never done this to a generation of young people before," said Dr. Heather Boushey, Senior Economist at the progressive Center for Economic and Policy Research. "We've never put a generation in their 20s in debt they can't get out of before they started their work life."

"The normal approach in any healthy society is to help young married couples get started in life through marital gifts, dowries, and the like," Allan Carlson of the socially-conservative Howard Center for Family, Religion, and Society said.

"We now burden many young adults with student debt, sometimes massive in nature; the price being paid includes marriages delayed or foregone and fewer children. This is foolish public policy."

Growth in student debt: 59%

$9,798: Average debt of public school grads in 1990. 46.2% of grads had loans.

$15,622: Average debt in 2004. Roughly 67% of grads had loans.

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Student loans - a life sentence

Forget about getting married and buying a home. This generation is thinking about next month's payment.

By Christian Zappone, CNNMoney.com staff writer

May 2, 2006: 11:43 AM EDT

----------------------------------

Average student debt in the UK is currently about £14K.

This is now due to expand to around £30K in the next few years as the £3000 tuition fees come in this sept.

Average student debt will be £30KFFS

Who do the boomers think are going to buy their £500K 5-bed family houses in the future?? Especially with UK wages going down in real terms or at best staying flat as we have to compete with the rest of the world.

House prices may have peaked in 2006 for many more years than even the most bearish of us could imagine

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Higher education is a waste of time and money anyway - degrees are worthless nowadays - everybodys got one

Graduates going onto one of the remaining company "graduate schemes" are made to sit more exams as the employers have no faith in the education system

Anyway, higher education expansion is only ploy to keep unemployment figures down at YOUR expense

I don't think the younger generation comprehend how they are being screwed - can understand why some go ballistic with debt...

Edited by dnd

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As the bearer of huge student debts, it think it is pretty fair to say that you become kind of used to it - it's not 'real' debt (it leaves your pay packet before it hits your account), and you tend not to think about it at first.

The big shock comes when you try and get major credit (maybe a mortgage, or a car) and you have to declare your outstanding debt - at this point most lenders a} put the IR up to something silly, or b} walk away.

So what happens next? Well, your can't (and wouldn't want to) try for LCHO (too much dept), you can't really save up any deposit (saving when you have debt is a strange notion to me), and so you leave the country late at night, headed for a small island in the south China sea, where you can live in peace.

- and about degrees and their worth - I think that you still get more than just the qualification, Uni is a life experience and well worth doing (if you are from a horrible town like mine, and need to get away, what are the options? The Army??).

Just some thoughts, but if a HPC does not happen then expect to see FTB's get older, make up less in % terms of transactions per annum, or not bother at all and to rent (like in many places in Europe).

Cheers,

OD

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Kohlberg's Stages of Moral Development provide a good framework to analyse the ethics of the current situation.

He proposes that there are 6 stages of morality - but most people only actually function at a relatively low level (stage 3-4). They do not comprehend the morality of their behaviour at the highest level.

Kohlberg's Theory of Moral Development

Level One: Pre-conventional Morality

Stage 1: Punishment-Obedience Orientation

Stage 2: Instrumental Relativist Orientation

Level Two:Conventional Morality

Stage 3: Good Boy-Nice Girl Orientation

Stage 4: Law and Order Orientation

Level Three: Post-Conventional Morality

Stage 5: Social Contract Orientation

Stage 6: Universal Ethical Principle Orientation

The behaviour of society towards young people today is at around Level one, stage 2. The concern is "What's in it for me?" Still egocentric in outlook but with a growing ability to see things from another person's perspective. Action is judged right if it helps in satisfying one's needs or involves a fair exchange. (I know, this is being rather generous - they aren't really concerned with fairness).

Ideally society should be functioning at level 5 or 6.

Level 5: The concern is social utility or public interest. While rules are needed to maintain social order, they should not be blindly obeyed but should be set up (even changed) by social contract for the greater good of society. Right action is one that protects the rights of the individual according to rules agreed upon by the whole society.

Level 6: The concern is for moral principles ... an action is judged right if it is consistent with self-chosen ethical principles. These principles are not concrete moral rules but are universal principles of justice, reciprocity, equality and human dignity. Essentially, do unto others as you would have them do unto you.

Given the immorality of the treatment of young people in society, the moral thing for all of us to do is to take out as much debt as possible with no intention of paying it back. This will hasten the demise of the system which has produced such immoral outcomes.

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Unless something drastic changes in the next 18 years I wouldn't recommend university to my boy.

Degrees have become pointless.

Even when I went to uni it was easily possible to get a job and promotions and work your way higher up the food chain in the time you would have taken to get a degree.

I left after one year of uni with the intention of taking a single year out to build up some funds, but got a job. Within a year I was earning at least £10K more than I could have hoped for as a graduate salary.

By the time my fellow students were graduating I was earning at least double what they would have been getting as grads. Did it hurt me not getting a degree?? Nope.

People who are intelligent and can apply themselves, and can demonstrate that for an employer will always be more desirable regardless of whether they have a degree or not.

I think that this push to get 50%+ to uni and then saddle them with ever more debt is just a way to hide the fact that there are very few decent jobs being created for the younger generation while cutting the public spend.

Theres a girl working in our office at the moment who is doing a phsycology degree. I asked her what she was going to do when she graduated, she replied "Dunno, try and get a graduate position".... that to me sums it up, there was no point to the degree or anything she learned, she just plans to get a completely unrelated job at the end of it all.... she hadn't even thought that she might be able to do this without going to uni and getting into loads of debt.

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Degrees have become pointless.

People who are intelligent and can apply themselves, and can demonstrate that for an employer will always be more desirable regardless of whether they have a degree or not.

Totally agree with that. Even as little as 10 years ago they were still important but these days with every Tom, Dick or Harry going it kind of negates the point.

I think it used to be the case that those going to Uni were the sort of people that had intelligence and could apply themselves and thats why you might have been successfull if you had one, I don't think thats the case anymore.

I'm not saying getting a degree is easy but just that the point used to be it sorted the wheat from the chaff, now it's not doing that it's not worth while.

I have met plenty of people in my career many of the best ones didn't have degrees (like me), not all however and there were people with and without them that were next to useless in the workplace, but I haven't found a direct corrolation between having a degree and being good at a job.

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Higher education is a waste of time and money anyway - degrees are worthless nowadays - everybodys got one

Graduates going onto one of the remaining company "graduate schemes" are made to sit more exams as the employers have no faith in the education system

Anyway, higher education expansion is only ploy to keep unemployment figures down at YOUR expense

I don't think the younger generation comprehend how they are being screwed - can understand why some go ballistic with debt...

As I said on another thread, the problem we have is a de-basing of the educational measurement system, such that it is no longer possible to distinguish the outstanding candidates from the median. Under New Labour everyone can be brilliant. Which of course they can't if you think back to your primary school class, which is probably the most recent time you weren't streamed according to ability.

This is where the true problem lies from the employer's viewpoint, hence the tests.

This doesn't stop brilliant people being brilliant, of course, it just makes it X times harder to demonstrate that.

The current system also encourages people who, in the past, may have benefited from a non-university path, to chose university instead. This is not necessarily a worthwhile thing, and there was nothing to be ashamed of by taking a non-university route in the past, anyway, were it not for Tony's "Things Can Only Get Better" party's policies.

I see massive ongoing expansion in Universities, and I do wonder when they are going to hit the buffers. There must come a point in the near future where would-be students start to vote with their feet and reject university on the basis of the debt expectations alone. Maybe employers will come to the rescue as they would see (through the need to do tests) that a return to offering "on the job" training for 16-18 year olds would be beneficial.

I wouldn't invest in UK Universities ;)

I don't think the younger generation comprehend how they are being screwed

Quite. They are susceptible as they don't know what to expect, as such.

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I see massive ongoing expansion in Universities, and I do wonder when they are going to hit the buffers. There must come a point in the near future where would-be students start to vote with their feet and reject university on the basis of the debt expectations alone. Maybe employers will come to the rescue as they would see (through the need to do tests) that a return to offering "on the job" training for 16-18 year olds would be beneficial.

what are the alternatives? You can go to university, have fun, a little bit of social status (being a student is a little bit cool, in that it shows you maybe have some intelligence, ambition etc. especially if you study a traditional subject e.g. law, medicine etc).

Alternatively, you can work in a call centre, a soulless existence, your former friends will regard you as a no-hoper.

Option 3 is going on the dole.

Better to have fun with borrowed money, long holidays, a lot of beer and women and holidays.

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In other words, people start their working life with a mortgage sized debt and no home to show for it.

What really pains me is that all these fees don't seem to be helping the Universities. I come into contact with plenty of academics and most of them seem to be very hard up and working in poor conditions.

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Guest pioneer31

Theres a girl working in our office at the moment who is doing a phsycology degree. I asked her what she was going to do when she graduated, she replied "Dunno, try and get a graduate position".... that to me sums it up, there was no point to the degree or anything she learned, she just plans to get a completely unrelated job at the end of it all.... she hadn't even thought that she might be able to do this without going to uni and getting into loads of debt.

You've touched on an interesting point. So many people do degrees without any clear idea of what they'll do with it. BIG MISTAKE. I've made that one myself.

I've got (nearly) 2 degrees...but if I had my time again, I'm not sure I'd bother.

Reasons:

95% of degrees don't get you any more pay

Too many idiots filter through. I saw some right spoons graduate. They give everyone else a bad name.

It costs a fortune (ie opportunity cost of 3 years lost wages and a sodding great loan)

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Unless something drastic changes in the next 18 years I wouldn't recommend university to my boy.

Degrees have become pointless.

Even when I went to uni it was easily possible to get a job and promotions and work your way higher up the food chain in the time you would have taken to get a degree.

I left after one year of uni with the intention of taking a single year out to build up some funds, but got a job. Within a year I was earning at least £10K more than I could have hoped for as a graduate salary.

I disagree, though I suspect I'm splitting hairs.

Yes, in some (perhaps many) cases it's better for a person to get out there on the job market and start grafting. But it does depend on the person and the industry. You try getting a job as a programmer without a degree and you'll get nowhere... perhaps start in QA and work up to web design, but it's a very hard path. The same goes for any technical occupation.

I agree that the new wave of degree subjects are pointless, and pushing 50+% of students through is counter-productive. However, if your son obtains 4 A-grade 'proper' A levels and is capable of studying law or medicine at Oxbridge, would you really recommend against it???

Edited by Nijo

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The purpose of doing a degree thoguh is not the piece of paper you get at the end of it.....it's the development of skills that you can take with you through life. I seem to remember a quote (can't remember who) that education is all that remains when we've forgotten all that we've been taught.

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Guest Winners and Losers

The purpose of doing a degree thoguh is not the piece of paper you get at the end of it.....it's the development of skills that you can take with you through life. I seem to remember a quote (can't remember who) that education is all that remains when we've forgotten all that we've been taught.

Or

Education is expensive, but ignorance is even more expensive. ;)

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The purpose of doing a degree thoguh is not the piece of paper you get at the end of it.....it's the development of skills that you can take with you through life. I seem to remember a quote (can't remember who) that education is all that remains when we've forgotten all that we've been taught.

That might have been the, idealist, case in the past

Nowadays, the only skill you gain is surviving on next to nothing - coz that's the only skill you'll need after graduating with massive debt :lol:

Edited by dnd

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You try getting a job as a programmer without a degree and you'll get nowhere.

Many of the best programmers I've worked with have no degrees: same, for that matter, with the best programmer I ever hired, who'd never even worked professionally as a programmer before but had done some interesting stuff in his spare time. Certainly very few of the programmers I've worked with have computer degrees.

You're probably better off spending three years working on a well-known open source project and getting your name out there than spending three years on a degree. I've had offers of work in the past based purely on the software I've written in my spare time and given away for free, with no knowledge of how many years I wasted at university.

Certainly if I was at school today I wouldn't even think of wasting 30k taking a degree. Many of the graduates I've interviewed for programming jobs were absolutely dire, so it no longer provides any information about the applicant other than that they're willing to take on big debts to get a piece of paper.

Edited by MarkG

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Many of the best programmers I've worked with have no degrees: same, for that matter, with the best programmer I ever hired, who'd never even worked professionally as a programmer before but had done some interesting stuff in his spare time. Certainly very few of the programmers I've worked with have computer degrees.

I dropped out of my software engineering degree in 99 for various reasons but one of them being that the 13k debt I had accrued was keeping me awake at night... I now work for a major telecommunications company earning at least 20k more than any of my fellow students are... uni was useful for the engineering principles, but as far as programming goes - you've either got it or you haven't (IMO). :)

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I dropped out of my software engineering degree in 99 for various reasons but one of them being that the 13k debt I had accrued was keeping me awake at night... I now work for a major telecommunications company earning at least 20k more than any of my fellow students are... uni was useful for the engineering principles, but as far as programming goes - you've either got it or you haven't (IMO). :)

This is how degrees should be obtained.

btp

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In other words, people start their working life with a mortgage sized debt and no home to show for it.

What really pains me is that all these fees don't seem to be helping the Universities. I come into contact with plenty of academics and most of them seem to be very hard up and working in poor conditions.

That's my experience, too - apart from the top dogs and managers they are absolutely brassic and the younger ones have struck owning a home from their list of things to do. But they're very philosophical about it!

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My attitude to debt as a student was perhaps symptematic of society today...buy now..pay later...I saw debt as a problem to be solved at a later date, in the distant future. debt, indebtness, enslaved? Anyway, I had a cracking time at least. :blink:

Edited by bob monkhouse

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Higher education is a waste of time and money anyway - degrees are worthless nowadays - everybodys got one

Not if you want to be a medic, lawyer, chartered engineer, veterinary surgeon etc. etc. etc.

Degrees have become pointless.

People who are intelligent and can apply themselves, and can demonstrate that for an employer will always be more desirable regardless of whether they have a degree or not.

I never understand this type of comment. If I need an operation on my heart I'd rather be seen by a doctor with a medical degree than a 16 year old with a bubbly personality and a willingness to learn.

Surely your comment only applies to jobs that don't require a degree level education. Plenty of jobs do.

Edited by Casual Observer

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Not if you want to be a medic, lawyer, chartered engineer, veterinary surgeon etc. etc. etc.

I never understand this type of comment. If I need an operation on my heart I'd rather be seen by a doctor with a medical degree than a 16 year old with a bubbly personality and a willingness to learn.

Surely your comment only applies to jobs that don't require a degree level education. Plenty of jobs do.

I couldn't agree more. I graduated in Electrical Engineering nearly 3 years ago, and have used much of what I learnt in my job. Experience on-the-job develops you, but no employer wants to spend several years teaching you the basics.

What winds me up is the devaluation of degrees through sending too many people into Higher Education. Then again, even this wouldn't be so bad if most of these extra bodies weren't doing Media Studies, etc. Anything where there's 'no wrong answer' has got to be guff.

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Not if you want to be a medic, lawyer, chartered engineer, veterinary surgeon etc. etc. etc.

I never understand this type of comment. If I need an operation on my heart I'd rather be seen by a doctor with a medical degree than a 16 year old with a bubbly personality and a willingness to learn.

Surely your comment only applies to jobs that don't require a degree level education. Plenty of jobs do.

I think that experience and on the job training is more important than the academic qualification. In parts of Africa you can find some remarkable medical practioners who have have very little formal training.

I am certain that many nurses would make top rate doctors but the various professional bodies keep them out for obvious reasons (a nurse gets 20-40K and a doctor can get £100K for part time work).

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  • 301 Brexit, House prices and Summer 2020

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