Student Loan Bill finally passed. Shame on everyone.

According to the Federal Reserve Bank of New York, there is close to $1,000,000,000,000.00 (that’s One Trillion) dollars of outstanding student loan debt in the United States today.  That’s more than the GDP of Turkey.  I don’t know what GDP really computes to you and neither do you, but suffice to say it’s a lot of money.  Now, onto the really good stuff :  “Of the 37 million borrowers who have outstanding student loan balances, 14%, or about 5.4 million borrowers, have at least one past due student loan account.”  And, according to the good old Federal Reserve Bank of New York, “…Together, these past due balances sum to $85 billion, or roughly 10 percent of the total outstanding student loan balance.”  But this doesn’t really paint an accurate picture.  Because many students can defer their payments while still in school and for a short period of time after graduating.  The larger problem is that student loan debt is not shrinking.  While students may be paying their loans, many of the loans (due to partial payment, interest only payments and other repayment plans) are actually growing. Good times.


Now, let’s discuss college prices.  According to Bloomberg, the cost of a college degree has increased, oh, about 1,120% in the past 30 years.  “But Daniel, thirty years is a long time.  Prices increase.  You can’t just throw out a number like that.”  Yes we can (wink).  Let’s compare that percentage increase to the increase of medicine (because everyone screams how much costs in health care have increased.)  In that same 30 year period, the cost of medicine has increased 601%.  That’s half the percentage increase of going to college.  Again, health care costs have increased at half the clip of the cost of education in the same period.   According to the U.S. Department of Education,   In the past 10 years, Between 2000–01 and 2010–11, prices for undergraduate tuition, room, and board at public institutions rose 42 percent, and prices at private not-for-profit institutions rose 31 percent, after adjustment for inflation.  


The above does not even mention the actual, real economic impact that student loans are having on the broader economy.  According to the American Institute of CPA’s 75 percent of student debtors had made personal or financial sacrifices because of their student loan payments. Forty-one percent have postponed contributions to retirement plans, 40 percent have delayed car purchases, and 29 percent have put off buying a house.


So, because of this obvious, real crisis this Country is facing, Congress finally put there partisan bickering aside and passed an absolutely pragmatic and rational stupefying bill that does almost nothing to address the crisis we are going to face very, very soon. This new bill, to be signed by President Obama, would “lower” the rates that doubled because Congress failed to find a solution by July 1, 2013.  Further, it will tie the rate of loans to the overall economy.  According the USA Today, the bill will offer lower rates for most students now but higher ones down the line if the economy improves as forecast.  Magical.  And great news, grads; interest rates would not top 8.25% for undergraduates. Graduate students not pay rates higher than 9.5%, and parents’ rates would top out at 10.5%.  We are victorious.  Parents have clearly won here as they will not be paying mafia money on these loans unless and until the overall economy picks up, and, as we all know, this is great because middle class parents who send their kids to college and need these loans, have seen their wages increase  stay flat over the past 10 years.


So far, there has been no movement on stopping the somewhat obscene tuition hikes across the board (along with budget cuts to state schools).  There’s been absolutely nothing done to address the concerns of re-payment for students who can’t get jobs.  And, unless, you an prove that you are blind, have diabetes, a hernia, problems with your hands, are and have been unemployed, and live with your dad in a tiny room in a rural area of the Country with absolutely no access to public transportation, you’ve got basically no shot of getting rid of your student loans in Bankruptcy.  C’est la vie, amirite?!


It is nothing short of disgraceful to suggest this Student Loan bill was evidence of bi-partisanship, unless you consider bi-partisanship as Congress getting together, and, in unison, kicking tremendous cans down the road.  Except the cans are our future generations.  And you’re kicking them off a financial cliff.  And you’re standing under that cliff and are about to get hit in the….you get the point.


I’m not sure what special interests have been lobbying on this bill, and frankly, I really do not care.  I have clients at my office with $1000 in credit card debt because they are “financially responsible” and $75,000 in student loan debt because, you know, they went to college(crazy kids!)  They now suffer. To similarly suggest that future generations should be forced to pay more and more and more to a bloated field that raises costs and budgets at a clip that would make the Department of Defense blush is ridiculous, when in the same breadth the same politicians on both sides of the aisle scream “middle class” and “investing in our future.”  And yet this is not speculative.  We know where this is heading and we know how bad the consequences will be for all of us.  Shame on everyone.