The student loan debacle is about to hit the crisis stage. Who’s to blame?
Nine Million Borrowers at Risk
CNN notes Student Loan Delinquencies Poised to Hit Record Highs.
Student loan delinquencies are poised to hit record highs, and more than 9 million borrowers could see their credit scores tank in the first quarter of this year, according to new data released Wednesday.
The 2025 Student Loan Update showed that an estimated 15.6% of federal loans — a new record — were likely past due at the end of last year, with more than $250 billion in delinquent debt held by 9.7 million borrowers.
The New York Fed’s estimates are based on Federal Student Aid data available through September 30, 2024. The FSA’s fourth-quarter data is expected to be available after March 31, researchers noted.
New student loan delinquencies have been shown to take massive bites out of credit scores, with deductions averaging 87 points for subprime borrowers and steep 171-point knocks for those with superprime, or excellent, credit standing.
The pandemic provided a reprieve for millions of student loan borrowers, as stimulus checks and payment pauses allowed many of them to bring down their balances. Others’ loans, however, were stuck in limbo and became a political football as the Biden administration’s plans for student loan forgiveness hit a wall of legal challenges.
The 3.5-year payment pause ended in September 2023; however, an additional provision under the Biden administration provided a one-year “on-ramp” where borrowers were shielded from negative effects of a missed payment.
That grace period ended on September 30, 2024; and, based on the New York Fed’s findings — indications that many borrowers were not paying their loans at the same rates as they were pre-pandemic — the potential for negative credit score impacts grew greater.
The latest data shows that student loan debt is becoming more of a burden at a time when the Trump administration’s actions — including dismantling the Department of Education and temporarily halting income-driven repayment applications — could further complicate borrowers’ abilities to manage their debt.
Department of Education Reinstates Income-Driven Student Loan Repayment Plans
The Oregon Chronicle reports Department of Education Reinstates Income-Driven Student Loan Repayment Plans
One month after officials at the U.S. Department of Education abruptly stopped accepting new applications for income-driven student loan repayment plans; they’ve changed course.
As of Wednesday, the agency’s student aid website once again allows federal student loan borrowers to submit online applications for income-driven loan repayment and loan consolidation. Such applications are needed to participate in several loan repayment and forgiveness plans that millions of Americans have used to manage repayment for nearly two decades.
Department officials said in a news release that they stopped accepting and processing applications for a month so that they could ”substantially” revise the income-driven loan repayment application. They say the application needed changes following a temporary pause on one repayment plan — the Saving on a Valuable Education, or SAVE plan — that has been on hold since Republican attorneys general sued in 2024.
Plans that were affected by the stoppage include the Pay As You Earn, or PAYE, program and the Income-Contingent and Income-Based repayment plans. Each of these plans limits monthly repayments to a specific percentage of a borrower’s discretionary income, and each sets out a term of repayment that ends with loan forgiveness after 20 to 25 years of regular repayment.
More than 12 million student loan borrowers rely on all of these plans, according to U.S. Department of Education data, and more than 1 million borrowers had applied for income-driven repayment plans that were still processing as of the Feb. 24 application take down, according to Wyden spokesperson Hank Stern.
The SAVE plan, at issue in litigation brought by Republican attorneys general and frozen since June 2024, made it easier for low-income borrowers to meet monthly repayment terms, requiring they pay nothing if their annual income is $30,000 or less. It also limited the amount of interest that could be collected on loans and forgave loans after 10 to 20 years based on their size. The Republican attorneys general ordered this was beyond the authority of the education agency.
Court Ruling Affirms Blocking of SAVE Plan
Please note a Court Ruling Affirms Blocking of SAVE Plan While Next Steps for the Program Remain Uncertain
In the spring of 2024, a federal court issued an injunction preventing the U.S. Department of Education (ED) from fully implementing the Saving on a Valuable Education (SAVE) repayment plan. Since that ruling the program’s fate has remained uncertain, and now that the 8th Circuit Court has affirmed the blockage of SAVE it is unclear whether borrowers will be able to remain in the payment plan.
Following the federal ruling in the spring of 2024, ED was barred from canceling loans eligible for forgiveness under the SAVE, Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans.
By July 2024, the 8th Circuit Court of Appeals blocked the SAVE plan in its entirety which led to borrowers who were able to enroll in the program being placed into an interest-free forbearance, where they have remained since.
On February 18, 2025, the 8th Circuit Court of Appeals issued its long-awaited ruling, siding with the Republican-led states that filed suit against former President Biden’s administration. The court upheld the injunction, continuing to block the SAVE plan in its entirety, including the forgiveness provisions, which subsequently blocked the administration from processing forgiveness for borrowers enrolled in PAYE and ICR plans as well.
Notably, the ruling also directed the lower court to strengthen the injunction, stating that the block on the SAVE plan should be broader. The decision explicitly ordered the lower court to enjoin both the full SAVE plan ruling and what has been referred to as the “hybrid rule.”
I Side with the Court and Republicans
Biden repeated flouted the Supreme Court in his attempts to cancel student debt.
On June 30, 2023, I commented Flouting the Supreme Court Ruling, Biden Sets Student Debt Repayment to Zero for Many
President Biden is already attempting to circumvent the common sense Supreme Court ruling that struck down his student debt cancellation program. Expect more legal challenges.
Supreme Court Smacks Biden
On the same date, I commented Supreme Court Strikes Down Student Debt Cancellation, Cites Nancy Pelosi
Today the US Supreme Court wisely struck down President Biden’s executive power garb that usurps powers granted by the Constitution to the legislative branch of government. The 77-Page Supreme Court Decision was 6-3.
Enough is Enough
The Supreme Court finally had enough of Biden’s nonsense.
Perhaps you think student debt should be cancelled. I strongly disagree. But that is not the point. The point is, as Nancy Pelosi understood: “People think that the President of the United States has the power for debt forgiveness. But he does not have that power.“
You may believe in student debt cancellation, but you should not believe nor want presidents taking matters into their own hands with powers they do not have. Both Trump and Biden have taken such actions, but Biden far more often than Trump.
This effort by Biden, to the tune of $400 billion, was clearly unconstitutional.
Since when do presidents get to spend $400 billion without any such law being passed by Congress? Try never, as it should be.
Nonetheless, President Biden says “This fight isn’t over.”
Biden on Student Debt Cancellation: “The Supreme Court Didn’t Stop Me”
Sure enough, on February 6, 2024, Biden bragged “The Supreme Court Didn’t Stop Me”
President Biden is bragging the Supreme Court didn’t stop him from handing out still more inflationary free money.
$130 Billion and Counting, Costs Nothing
…There you have it folks, $130 billion with another $25 billion smack in the face of a smack down ruling by the Supreme Court, costs “nothing”.
Here’s free money, now vote for me. And best of all, it doesn’t cost anything.
Austin borrower sues Education Department after monthly student loan payments increase by over 300%
KUT News reports Austin borrower sues Education Department after monthly student loan payments increase by over 300%
[Mish note: This is superseded given the online access is restored, but the details are interesting and worth discussing]
An Austin lawyer is suing the U.S. Department of Education for preventing borrowers from repaying their federal student loans based on their income.
Ashley Morgan, 35, has been enrolled in an income-driven repayment (IDR) plan for the last eight years but when she tried to recertify her income last month, she couldn’t. She said that without warning the Education Department removed the income recertification forms and applications for IDR plans from studentaid.gov. As a result of losing access to this type of plan, she said, her monthly student loan payments more than quadrupled from $507 to $2,463.
“This lawsuit seeks to hold the Department of Education accountable for pulling the rug out from under a student loan borrower and removing her option to repay her loans pursuant to an income-driven repayment plan,” Morgan’s court filing states.
Morgan said she reached out to the Education Department, her loan service provider and her congressional representatives. She also filed written complaints with the Office of Federal Student Aid and the Consumer Financial Protection Bureau. When none of those options resolved the issue, she filed the federal lawsuit last week against the department and Secretary Linda McMahon.
In response, an agency spokesperson shared a news release announcing it had reopened online applications for income-driven repayment plans. While the SAVE Plan remains unavailable, the department said borrowers can apply for Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment Plans. According to acting Under Secretary of Education James Bergeron, the applications were revised in the wake of the Eighth Circuit’s ruling.
Biden-Sponsored Credit Crisis
I commented on Biden flouting the Constitution and Supreme Court rulings at least a dozen times.
Contrary to those who think I only object to Trump taking liberties with the constitution, there you go.
And I accurately predicted Biden would ultimately lose.
The sad thing is Biden convinced millions of borrowers they would not have to repay a dime. So don’t blame Trump for this credit fiasco.
Despite being warned in advance, by Nancy Pelosi, President Biden kept upping the ante with more and more delays culminating in debt forgiveness for at least 16 million borrowers.
Now the proverbial S hits the fan.
Trump’s handling of the Department of Education leaves much to be desired. They still have to process the loans. And some of the forgiveness plans were signed into law and are definitely valid. I do not know if the Austin case above is one of them.
If so, Ashley Morgan and others have seen their monthly student loan payments more than quadrupled. They had no one to reach out to. That’s a side note.
Who’s to Blame?
Give Biden 100 percent of the current blame for this mess. He convinced millions of borrowers their loans would be cancelled.
For those who want to go back further, the Bankruptcy Reform Act of 2005, signed by President Bush, made student loan debts not dischargeable in bankruptcy. That’s arguably the true origin of the crisis.
But what about students?
Going tens or hundreds of thousands of dollars into debt for worthless degrees is ridiculous.
So take all of these points into consideration and assign the overall blame accordingly.
Related Posts
On March 19, I asked Should Congress Eliminate the US Department of Education?
The answer to the question is yes, of course. Let’s discuss why.
On March 20, I commented Trump Signs Order to Eliminate the Education Department, Here Comes the Court
Expect another court battle that Trump will mostly, but not entirely, lose.
Trump has no legal authority to shut down the department, but it can move functions.
And the administration can legally block Biden’s ridiculous and unconstitutional SAVE program. Regarding SAVE, the Court made the obvious correct ruling. I would have been surprised if it didn’t.
However, borrowers can still apply for Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment Plans.
Anything Congress specifically funded will survive.
File this student loan situation under “Listen to who was right”.
15-20 years ago when the federal student loan program was kicked in to overdrive, the guys who argued against doing so described today’s situation exactly: Lotta people in debt with no degree to show for it. College pricing pumped up to match the loan amounts. Useless degrees bought with a lot of debt. Calls to “forgive” debt. And so on.
When your loan program funnels money to your friends, forget putting them on the hook to kick back the loans that go bad. Won’t happen.
BTW, at the time, both those for and and against amped-up student loans were heavy on schooled boomers. Savvy, schooled boomers either bankrupted out of paying their own student loans and/or they knew peers who did so. Hence, laws against such behavior. At least that part was honest.
Years and years ago I got a degree in accounting. I really didn’t like accounting but there were jobs in it and it did provide me many years of a good solid income. Majoring in many of areas of the liberal arts or humanities often only provides job paths into retail or fast food. Ask yourself, or your children, do you want to take out large loans to get a degree that provides a good paying job or a minimum wage job? Therein lies the problem of college loans…don’t take out a loan for a poorly paid career path
Education is quite dependent on the goals, desires and aptitude of the student.
Some simply go because they are told that that is the path to success and that path is paved with easy money and lots of partying. Some are more curious about hard sciences and finance, mathematics, physics, medicine or geology. Universities have been places of inspiration for centuries when knowledgable teachers interface with interested students.
Sure there are plenty of debt slaves produced and lots of dropouts. Many should have never attended and gone into the trades where practical skills are rewarded.
In the end, education is a lifetime quest for many and learning becomes a developed skill. The notion of grades defies logic in my opinion because it a student takes a class he/she should apply themselves to get everything they can from the time they spend there…
What so many of these comments don’t address is the ‘market’ for education and education loans.
Lots of people don’t have cash to buy cars or homes. So we might expect them to go to a private loan provider to request such purchase funds. That loan provider will check their credit, likelihood to pay it back and make a market decision of ‘yes’ or ‘no’ with a corresponding risk-based interest rate. The market works fairly well here BECAUSE the law allows the lender to repossess the home or car if payments aren’t made and the buyer is purchasing something of marketable value (home or car) to SOMEONE ELSE (which can be resold later for a return on loanable funds).
This will not and CANNOT work for a higher education. A bank cannot repossess your education degree or knowledge to sell to someone else. So if people want an education they cannot pay cash for (like a home or car), the education loan market will essentially not exist privately because banks will have to take on too much risk. It’s the equivalent of asking for a private loan or credit card and those generally aren’t given out by banks for enough funds (with good risk-based reason) to pay for a higher education.
If your answer to this situation is tough luck, so be it. But our citizen attainment of higher education will drastically decrease which affects macro productivity. If your answer is to allow school loan bankruptcy, you will incentivize students using others’ (taxpayer) funds to fund their own education and then walk away ‘free’.
My point here is this is actually a fairly complicated market/risk-based/social equity issue with alot of nuance and assumptions. If posters can ‘find a solution’ in ten words, they haven’t educated themselves well in how and why higher ed markets do and don’t work like other private markets
And yet, somehow there WAS a sizable, viable student loan market, before the Federal Government intervened.
And because students and parents had more skin in the game, costs mattered, and college prices were also lower (even accounting for inflation).
This is the type of hubris-laden two-sentence “I’m right, you’re wrong” response I’m talking about. Yes, of course, you are correct. There WAS a time when federal education loans did not exist. In 1958, Congress passed the National Defense Education Act to target loans for STEM students for the space race against the USSR. In 1965 (60 years ago), the Higher Education Act guaranteed payment to private lenders if students defaulted (the start of our current system).
The economy was completely different back then. Manufacturing jobs and not the high-end service jobs of today were everywhere. And yes, SOME people were able to afford college (but oh, so few).
But if you want to go back to the 1940s economy and tactics, so be it. That’s your opinion. I just don’t think it’s a well informed opinion
Christ. Seven years of college down the drain. Might as well join the ***** Peace Corps.
It seems to me that this program never should have been created in the first place. How much did it drive up the cost of college, by increasing demand? Who benefited from that? Ironically, Harvard recently announced free tuition for children from families which earn less than $200,000 a year.
This. There’s no Constitutional basis for the Federal Government to be involved in student loans. The politicization of the existing student loan debacle, with resulting uncertainty for all involved, demonstrates why the Feds shouldn’t be involved.
the problem with colleges, and college debt, is High Schools. I attended a rural school, 40 students in my senior year.
By 11th grade we all had an economics class that taught, basic things, like “how to write a check properly” – how to balance a check book. How to read a water/gas/electric meter. How to create a balanced budget. How to know how much debt you should carry etc.
The modern 9th grader knows where to download contraband on their cellphone from half way around the world, but can’t count change for a dollar backwards.
This is deliberate, you can’t economically rape educated people.
Telling that there are no Federal standards for financial literacy for high school graduation … and even if there were, kids that cannot meet existing reading and math standards certainly won’t meet basic “responsible adult finance” standards either.
Much truth. I went to high school in one of the poorest towns in the US with classes being in run down trailers. The civics teacher taught us about government, finance and personal finance. My favorite story he told was this one about Ben Franklin and compound interest:
https://www.mymoneyblog.com/ben-franklin-compound-interest.html
I never forget this story and applied it when I went to college. There are many ways to get a free education or just fund it yourself. I have no empathy for anyone who took out these massive loans, especially when all reserve branches offer free tuition, paid skills training and cheap healthcare. Total insanity.
How many times have you used that ‘read a water/gas/electric’ meter skill? More importantly why would anyone need such a skill?
Learning how to manage money is definitely an important skill. I learned that from my parents / family which is where it should be taught.
But these days you can self-educate yourself on this on countless websites if you are so inclined or aren’t taught via parents/school. I do not feel sorry for anyone who is not so inclined.
The reason why you need a meter-reading skill is to assess the resource consumption of different parts of your home, and decide how to manage it.
We have an irrigation system with multiple zones. I ran each zone separately for a fixed amount of time and checked the water meter, to learn how much water each zone uses. I then knew where to switch from sprinklers to driplines, and where to adjust timing, to use less water while still getting the desired results. We constructed our own water budget and tracked the costs. Over 20 years we saved around $25,000!!
You can play similar games with electric appliances, air conditioning, etc. Is that hot tub really worth $100/month (or more) in electric bills?
Bonus: you also learn which of the small luxuries in life are really cheap. Long showers aren’t too expensive. But accidentally leaving the windows open while running the heat is pretty dumb.
Here in Florida, the power company FPL will monitor and do all the electric stuff for you if you want to track what’s using what. Definitely pool pumps, hot tub heaters (if you live up north) cost a ton along with any other motor that runs a lot (AC).
Lucky for me, my irrigation water is free (live on a fresh water canal). But can’t you just work it out in your head? Each of my sprinkler heads is rated for X amount of flow per minute. If you multiply by the number in the zone and the amount of time you are going to run you can calculate the water usage without needing to monitor the meter (or at worst you know your irrigation pump can deliver X amount of gallons per minute).
Incidentally, you must be paying a fortune for water if you can save 25K in 20 years. My bill here in Florida (again, I don’t use irrigation water but do need to keep my pool filled) runs about 50-75 a month for water or 600 a year so in 20 years I couldn’t even use 25K in water much less save that amount.
by reading your own meters, you can verify your billings from the utility companies. You can understand your billing rates, you can understand what you are paying for.
It is knowledge, if you learn how to use it, it becomes wisdom.
“The student loan debacle is about to hit the crisis stage. Who’s to blame?
That’s who!
How about a student loan repayment program that allows family or friend to repay the student loan of another and receive a federal tax deduction for the amounts paid? Since the federal government enabled this mess by disallowing the discharge of student debt through bankruptcy. Not a perfectly fair solution for the public but something must be done to keep a generation out of endless debt payments.
The Great Depression demonstrated that the best way to keep a generation out of endless debt payments was to observe the prior generation facing the full consequences of their financial stupidity.
Why only for student debt? What about covering someone’s mortgage so they don’t lose their house or making a car payment to keep away the repo man.
or their vacation home, or 2nd car, or jet skis, etc.
I bet those renters, blacks and hispanics will wish they had sleep Joe back soon enough, mid-terms are just around the corner.
It is good that they didn’t want Biden back, in 2024. That’s the main thing. Sharp drop in illegal immigration, ending DEI racism, exposing agency corruption. All good.
And they will still receive multiple credit card offers daily in their mailbox.
An Illinois school district, where just 7% of kids are proficient in math, rewards superintendent with $480K salary – Wirepoints | Wirepoints
includes
results of the top 20 paid supers statewide
Illinois top 20 TRS pensioners will receive more than $8.4 million in lifetime pension payouts
Includes net employee contributions vs. lifetime pension payouts.
“What’s fascinating about this malgovernance is that it’s happening at the same time that Illinois’ legislature is looking to attack homeschooling. State lawmakers can’t hold accountable what they do control, and yet they now want to make a mess for homeschoolers and homeschooling.”
No one wants to talk about this but it’s a problem that mainly affects women (2/3s of all student debt is held by women).
https://educationdata.org/student-loan-debt-by-gender
Men are paying their debt off faster and actually finishing paying it off. More likely in my mind because they are getting getting degrees in jobs that legitimately need the degree and that pay well enough to justify that degree.
The truth continues to be that WAY too many useless degrees are given out and more importantly money is loaned for those useless degrees. If you want to get a degree in something that doesn’t pay, you should have to self finance.
And if everyone got a “STEM” degree or whatever degree you deem valuable, then all jobs would pay less. The reason degrees are valuable is because there are not too many people that have the intelligence to think at that higher magnitude.
But for those that think “arts” degrees are useless, Hollywood movies are one of the largest money making exports of the U.S. Netflix alone has a very nice market cap and employs a ton of people. A Picasso painting can sell for hundreds of millions as well.
It’s all relative, there is a market and supply vs demand. The way to get rich is to stay to the right side of the normal distribution table in anything you do.
so women aren’t as smart as men, per you description of the situation. Stem jobs are valuable because they are rarer, but art is valuable because there is more of it?
I’m finding difficulties in following your reasoning..
You’re a misogynistic a$$hole. I said nothing about men or women but it’s understandable why you can’t follow my reasoning, you’re an idiot.
if you are a non-idiot, I don’t think I want to be in the same club with you.. I’d rather be thought an idiot
Denninger said STEM degrees were being promoted in order to drive wages down. Disney imported H1B’s, had their staff train them, then fired the staff, to drive down wages. The strike by writers & actors, did a lot of damage to Hollywood. California government is more heavily subsidizing Hollywood to keep more production here. Disney has harmed its brand by going off script due to the arts degree types.
“The reason degrees are valuable is because there are not too many people that have the intelligence to think at that higher magnitude.”
This is false. Even if only 1% of the population was smart enough to get a STEM degree you’d still have 3.4 million such people in the US alone (and 20x that world wide). And WAY more than 1% of the population is smart enough to get such a degree. In other words there is no shortage of people smart enough to get such a degree. The problem is finding people smart enough AND actually interested in that type of work.
“It’s all relative, there is a market and supply vs demand. The way to get rich is to stay to the right side of the normal distribution table in anything you do.”
This is very true. But luck plays a larger role in this that you might think. Entering a job field at exactly the right time that demand for such work is taking off is as much a key as supply/demand. Sometimes you just happen to enter a field at the right/wrong time (ex, software took off in the early 80s and if you picked electrical engineering / chip design in the late 70s which was big at that time you picked wrong). Basically once you start your career it’s VERY hard to change mid career if you ended up on the wrong job path.
adjacent fields are always a good interest to pursue as a back up plan.
I would shorten it to “if you want to get a degree, you should have to convince a lender whose money is at risk if you don’t repay”. Then at least 2 people have skin in the game and the public isn’t going to be fleeced by wasting effort on either worthless degrees or deadbeat borrowers.
Get them kids in debt as soon as possible!
It’s the American way and our future relies on ever increasing debt.
God Bless Debt.
Ever been to Dolton and Riverdale Illinois?
Already at $450k, Dolton SD board approves pay raise for superintendent – The Lansing Journal
Already at $450k, Dolton SD board approves pay raise for superintendent
Instead, they received an earful from about a half dozen people who took part in audience participation.
They said a raise for the superintendent is not justified, given the performance of district schools, and that a salary increase could mean even higher taxes.
“The poor people have to pay his salary,” said Anthony Travis, a Riverdale property owner.
Michael Smith, of Riverdale, spoke of how his taxes have increased, suggested merging with a neighboring elementary school district, and implored the board “to do better.”
“This is not what we put you guys in office to do,” Smith said. “To help make one person rich.”
Sherry Britton, of Dolton, called it “bananas” to pay one person a half million dollars.
“And then when you look a the statistics of how our children are doing … it’s ridiculous,” Britton said.
Anyone in the Chicago area knows Dolton has been screwed up for a while — their latest mayor (Tiffy) isnt helping. But Dolton is only following the Trump playbook: get in there and steal as much as you can as fast as you can, and disable as much as you can before someone realizes what you are doing and throws you out, right into the lap of the US Attorney (who is now a Trump person and likely will be spending all their time trying to get Tesla vandals executed.)
Trump must have been pretty young to put these up –
Pacesetter Gardens Historic District – Wikipedia
Let me know how it goes when you do a drive-by this weekend.
Actually, Trump accepts no Presidential pay and never has.
And, most of his appointees are highly successful in their fields and have accepted their appointments even though they will probably lose money due to time away from their respective businesses.
Biden never turned one nickel down while in office and grifted tens of millions more in ‘deals’ made with adversaries of the U.S. such as China..
School administrators are considered part of the elite of society (mostly by themselves) and therefore deserve the big bucks.
There was an uproar back in the early 2000s in the working class town I lived in over the salary of the school district head (over $200K as I recall and that was over 20 years ago). The excuse is always “rare executive talent” doesn’t come cheap.
Meanwhile, the teachers are buying supplies for their kids on their own dime.
Trump is also to blame for this. He should have never paused the Student Loan Payments in the first place! Terrible decision!
Using ridiculous loans that cant be bankrupted away, and giving the students (18-21 yo who arent used to this) the ability to borrow ridiculous sums to stay in a luxury dorms chasing stupid degrees is where the blame lies.
Sure, higher education is a scam. You can go 100K into debt with no hope of ever being able to pay it back.
First of all, reform the 2005 Bankruptcy Act – let people discharge this debt so they can get on with their lives. If members of congress can discharge their PPP loans why can’t we?
And secondly, make higher education free or close to free. When I went to UT back in 1988 my in state tuition was $280 per semester. It’s now over $5000 a semester. I don’t think the value of a BA has gone up that much in the ensuing years.
What many student loan borrowers were looking for was a more manageable deal and a more stable situation. It is not fair to be jerked around like whiplash at the change of each administration and it is something no other loan holders deal with. Compounding interest and unlike a home loan you cannot refinance to get a lower interest rate and are stuck with 7 or even 8% interest if you happened to take out your loans during high interest periods. manageable loans with consistent terms is something that would help not just the imagined and stereotyped “freeloaders” maligned and targeted in the conservative press, but probably also the ER doctor (especially a younger one) who treats you at an ER, the nurse who brings you or your loved one their medications and makes sure their sheets are dry, or the veterinarian who takes care of your pet. (Trump is wanting to change the classification of many hospitals from nonprofit to cut off PSLF for many of these borrowers. (Probably most people come into contact with student loan borrowers in many fields on a daily basis and don’t even realize it).
Excellent analysis. Thank you.
An explanation for a structural economic & societal issue that pins blame on 18-year olds is a poor one. Really the most informative thing about such an explanation is the likelihood that those offering it are unlikely to have been in contact with an 18-year old since their own adolescence, likely before color television.
Of course no one is responsible for making bad decisions. Who ever heard of paying back money you owe. How evil. The only addition to the dumbass 18y/o wanting to go away and party to get a gender studies degree, are the parents and the universities. If colleges were made responsible for student loans it would solve a lot of the problems we have.
wait.. I can buy a television in different colours? when did this happen?
Our students entered Biden’s sinkhole. Many state colleges are closing branches and
faculties, especially in liberal states. Foreign student in the US are not good enough.
Just make student loan debt dischargeable in bankruptcy, and remove most of the federal backstops. Then lenders would actually vet students to make sure they were making a good loan, and students that fell on hard times through no fault of their own could get their lives back.
TRADE SCHOOLS are not cheap as well. I have a nephew who avoided college only to go to HVAC school (Trade School).
Tuition: $12,000 per Semester.
Thats not bad. My friend went to cosmetology (hair cut) school for one $12,000 payment in Chicago 15 years ago.
The loan-sharking Education lender scheme has made it possible for College Professors to make over $100K a year with considerable benefits and Summers off.
“In Oregon, tenured college professors typically earn an average salary around $99,338, with salaries ranging from $79,996 (25th percentile) to $136,308 (75th percentile) annually.”
That’s not a lot of money, given the years of education they must have first – with no assurance they will ever get tenure (most end up in ‘non-tenure’ track positions that provide minimal pay and benefits). Many high school teachers (in wealthier regions, at least) make this much (and not all justified, in my opinion).
6+ years of higher education and then 20+ years in to get those numbers in a wealthier blue state where that’s on the low end compared to similarly educated folks… and spending all day in a classroom with OPK (other people’s kids)… no thanks…
The moral of the story being … get educated?
8+ years of college just to earn on average just under $100k? Who would ever do it if the pay was any less? I suspect you’re still thinking in 1980’s dollars.
i’m sure bluestates could work on the indoctrination program and get it down to 4 years.
It will be “technically” Biden’s fault, but the Entire BLUE CONTINGENT will blame TRUMP and the ENTIRE RED CONTINGENT will continue to remain silent.
Has anyone noticed how quiet the McConnells and Johnson’s of the REDS are like Mice, creeping around but NOT TAKING SIDES?
Europe doesnt charge anywhere near what we charge for college.
and look at all those old buildings they have there. they cant even do urban renewal….
Who’s to blame?
It doesn’t really matter because there will be no consequences (legal, financial, humiliation, or otherwise) for those who would be deemed responsible.
One component was setting up federal education loans to increase ‘accessibility’ and that led to a lot of people pursuing higher ed who normally wouldn’t have done so. That increased the $ going into the system, which grew fat on the excess. Administrators everywhere as the party continued into the 21st century (partly due to the need to employ recent grads to keep up the stats). Now enrollments are dropping and a reckoning is upon the system.
https://www.forbes.com/sites/paulweinstein/2023/08/28/administrative-bloat-at-us-colleges-is-skyrocketing/
A big cousin Eddy B.I.N.G.O.
Free tuition for students (the parents) making under $200,000 a year at Harvard.
If Harvard can do it, all colleges can do it.
Oh wait, no student at Harvard (the parents) make under $200,000 a year.
Nevermind.
Shouldn’t college be free? It just about was until student loans came into the picture.
I began College in 1971 and it was NOT free; Books, however, cost me more than Tuition back then.
$60,000 for 4 years 1985-1989 tuition, room and board. Thanks, grandma!
Only a few top of the list universities have big enough endowments to theoretically let their students go to school for free. The average college cant afford that as their alumni dont donate that much.
That’s private ones.
State school don’t have endowments and the cost of going there is a fraction of private schools. The education is roughly the same for normal students (for true genius’s, you need the elite private schools but then if you are a true genius you generally get in free on scholarship).
The state schools arent stupid and if other schools can get away with high tuitions, the state schools just charge more in fees. In a capitalist system, everyone charges as much as they can .. no matter how.
State schools though answer to the State government and a board of overseers. That’s entirely different than a ‘for profit’ model that private schools use where they need to make money.
Who is to blame – the student loan borrowers. They took out loans and didn’t pay them back per the agreement they signed. They should’ve been making payments until they received written confirmation the student loan was paid off and/or forgiven. These people will be learning a hard lesson when they find out they won’t be able to get a mortgage without paying off the past due amounts. They’ll have higher interest rate on a car loan and may have a hard time getting a landlord to rent to them. Who wants to rent to someone who doesn’t pay their bills.
You forgot to assign blame to the lenders. Tens of thousands of dollars to people with minimal or no credit or work history, little or no income, and no plan to make payments for 1-7 years while they may pursue education that won’t position them to be able to repay the loans and interest? Well, since the loans can’t be discharged in bankruptcy there isn’t any risk so sign away!!
Don’t want to do that? Then refer back to to Mish’s comment about the change in bankruptcy rules. There’s more blame to go around beyond that, you are wrong to stop at the ‘kids’.
Everything you said is correct.
So why did They do that?
We recently watched a Youtube Video of a Guy living in Madrid. He was American and had LEFT AMERICA to avoid his substantial ($77,000) Credit Card Debt. “I have to stay here 7 plus years to dodge paying that debt for good.”
He wiggled his way into a Free Flat in Madrid, and does odd jobs and runs his Youtube video business from that flat.
If he wiggled into a free flat, why would he ever want to come back? More importantly, why would we ever want him back.
Seems to me, bankruptcy would have gotten rid of the debt a lot faster than 7 years. LOL
Chart college tuition vs. inflation over the last 30 years. Not everyone should go to college. Its like daycare for young adults in many instances. The overhead is administration and campus facilities. The insatiable creep and then waterfall of bureaucracy.
Freezing the average wage to just above inflation over 50 years made a lot of families think the only way their kids would be able to get by was to go to college. Except for the homework, I liked college. My 35-year job afterward really didnt require a college degree. But the degree separated the serious people from the screw-ups. Bad planning all around.
You don’t need a degree to separate serious people from screw-ups.
You just need a non-union job environment where you can fire screw ups. If you’ve ever worked in the private sector in a non-union job you’d know that screw-ups get let go very quickly (this is why most jobs have a 3-6 month trial period where they let you go if you can’t perform).
But what about before you hire someone? The degree is a certificate that says “this person will do work they DONT want to do,” which is what every manager wants. In the 1980s I wanted to watch Must See TV (NBC), but I did my college homework instead. Serious people vs screwups.
I’m not the first nor I’ll be the last to say this; the fastest way to drop the cost of schooling is to end student loans.
The Universities, Colleges, community colleges, trade schools etc. will all scream to the moon and back but if student loans that can’t be discharge by bankruptcy is ended within a few years schooling costs will drop like a rock.
Plus over time the stupid degrees will be phased out along with some Universities advertising that they only have degrees with high levels of job placement.
Also applies to health care.
You (Ken) are right on. If the loans are not guaranteed then the banks and other lenders will be much more careful about who gets the loans and what colleges should even be allowed to participate. This will bring down the costs and will get rid of the for -profit schools that get the money but provide little in the way of a worthwhile education. This should (and probably would) be combined with mandatory student counseling so borrowers will know exactly what they will have to pay when they must start repaying their loan. Maybe this will help them make better career choices.
(Hounding those who made bad choices or ran up debt they will never be able to pay accomplishes nothing. Biden’s attempts to release onerous debt from those who were simply trying to better their prospects (which were many, not all) was wrong but, at least in part, good intentioned. I have a niece who went full boat on scholarships, didn’t plan ahead, got no advice, didn’t pay down her student debt (and would be able to, given what it was), and bolted to an-off grid life to avoid dealing with this. Everyone lost…
Who’s to blame? The Affordable Care Act, as usual. The SAFRA student loan federalization scheme was the final nail in the coffin for already terminally ill college affordability.
And it is a scheme: in the guise of broadening access to college, the real purpose of SAFRA was to guarantee business for big banks with zero risk as payback for big 2008 campaign donations.
Just like Brandon’s student loan forgiveness scheme also plotted to enrich banks while further indebting students. How? After 10 years of students paying interest to the banks, the government would call in the loans — but in return, the family split cost rule was to be eliminated, forcing parents with 2 or more kids to pay full price, thus being forced to take out loans and create new customers for the banks.
One helpful decision is to force colleges with endowments to make student loans themselves and allow bankruptcy proceedings. That will straighten out the high-flying ivy leagues.
Since 7/1/2010, The Federal government has provided direct student loans not the banks and the taxpayers own all the risk. Many of the federal student loans made by the banks prior to 7/1/2010 were refinanced by the direct student loan program so borrowers could get the more favorable income contingent and income based repayment plans.
Biden Admin. kicked every can down the road w/ real ($150+ billion) and proposed ($500 billion) debt forgiveness, new income based repayment plans (SAVE) that would require some borrowers to make no or substantially reduced monthly payments based on absurdly high income thresholds and delays that would push the worst of the delinquency and default performance off until after the 2024 election.
Biden Admin. provided an on ramp for the post-COVID resumption of student loan payments for over a year from the 9/1/2023 start date where delinquent borrowers were allowed up to 180 days delinquency and then reset to current through 9/30/2024. All with no reporting to the credit agencies until Q1 2025. Estimated borrowers making payments during the pandemic pause was maybe 15-20% while capitalized interest was 0% and when borrowers could have made serious headway in paying down their debt.
Borrowers, whether they made payments or not during the pause, were credited as making payments towards # of payments required for debt forgiveness (10 yrs. for Federal/State/Local Govt./Non-Profits/NGOs and 20-25 yrs. for other Income Based/Contingent Repayment Plans for private sector).
In 2022, Biden also provided borrowers that previously defaulted on their debt (pre-COVID) an opportunity to make 2 payments on their loan and be reinstated as current under the payment pause not requiring any payments until 9/1/2023.
Suffice to say, the final # and $ volume of consumer credit ratings, delinquencies and ultimately defaults will be much worse than the original projections by the Federal Reserve researchers.
Federal Reserve used total portfolio #’s to calculate delinquency #’s vs. just looking at repayment and forbearance #’s. Student loan borrowers in an in-school, grace or deferment status are not required to make payments and borrowers in a forbearance status has qualified for an economic (Unemployment) or administrative (COVID/SAVE) hardship with no payments required (usually 6 to 12 mos.) and interest capitalizing to the loan at the end of the status (except COVID).
Roughly, $600 billion was in repayment on 9/30/2024 of which close to 31% of repayment loans was greater than 31 days delinquent up from 8.4% at 6/30/2024 and 13.3% was 91+ days delinquent. Again, any borrowers that progressed to 180+ days delinquent were marked current to start the cycle again until 10/1/24. This is the current pig in the delinquency/default python.
Roughly $500 billion was in Forbearance on 9/30/2024 up from $175 billion on 6/30/2024 due to the court ruling on the SAVE repay plan so no borrower payments required until these borrowers can enroll in much less generous repayment plans in Q2 2025. This will be the second pig in the delinquency/default python.
Federal direct loan servicers do not have the requisite resources to effectively handle the delinquency/default servicing and changes to repayment plans coming at them over the next two years while newly graduating students enter the repayment pipeline.
Consumer credit ratings throughout the pandemic and the on ramp for student loan repayment were artificial. Expect deterioration in BNPL, Credit Card, Personal, Auto and especially private credit student loans over the next two years.
Cohort gross cumulative defaults on Sallie Mae Bank’s underwritten and largely co-signed private credit student loans (90% of originations) is currently 6-9% and for non co-signed is currently 11-15%. Much of this default performance was while student loan borrowers were not required to make payments on their direct student loans, effectively improving the default performance.
Cohort gross cumulative defaults for the Direct Student Loan Portfolio will probably experience 3x Sallie Mae’s non co-signed performance or 33-45% gross cumulative defaults. Sallie Mae has a market rate of interest on these loans (7-15%) vs direct student loans (3-8.5%) and has largely priced in the expected defaults while the taxpayers hold the bag for the direct student loan portfolio.
Student loan borrowers have undertaken additional debt that they otherwise wouldn’t have been granted (credit score increases), have not made payments or payments sufficient to pay down their student loan debt balances and were duped by Biden Admin. to think that their debt would be forgiven (in-whole or in-part) or would be granted full or substantial payment relief (SAVE).
Expect a liberal rage against the system and deep recession in late 2025/2026 w/ Trump and Republicans getting the blame in the 2026 Mid Terms. DOGE should audit the $150+ billion in Debt Forgiveness granted by Biden and provide stats on who received the bulk of the forgiveness (Federal/State/NGOs vs Teachers) now to preposition for the coming sh*t storm.
– Who’s to blame? > Harris / Biden of course. You cannot promise a bunch of youth, that their “College Bill” will be PIF by the Taxpayers and expect them not to “Count On It” That would be the same as telling a bunch of 35 year Old fairly new homeowners, that the Taxpayers are covering it, so your all set. What would happen? Chaos!!
Yes, I paid off my student loan, credit cards, and house payments, and my credit score reflects that. It’s that simple. I took my risks and got my rewards. It helped make me who I am, a legitimate stakeholder in this society. It is the foundation of seeing the guy in the mirror as respectable, one who takes promises seriously, and keeps them. I never borrowed casually or lightheartedly. I scrimped and went without, to pay my bills.
Biden’s efforts otherwise, damage the concept of upholding contracts, and the social contract of our society.
Agreed, and “upholding contracts, and the social contract of our society.” Is sort of the Foundation that keeps everybody Honest.
Once you start giving anything away, expect more hands in front of you, asking for “More Please”
Free Food, School Loans, School Lunches, Education, Daycare, Etc.
It’s a cycle of dependency, that never has its cycle end, but rather just passed onto others…
A lot of luck also played a part.
Always right? Nobody knows where int. Rates will go when you buy, or perhaps more importantly when you sell?