College Financing: Should America Have Loaned $1.2 Trillion to Teenagers?

Student loans repayments
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By Christopher Harress

This week, the 2013 QS University list was released, revealing the much-awaited global university rankings. Predictably, the top twenty included many U.S. institutions, such as MIT and Harvard, and Britain had four universities in the top 10. However, there was one unlikely entry in the top 20 that might make advocates of free education raise an eyebrow.

The tuition-free Edinburgh University in Scotland is now placed in the 17th position, a mere three places behind the Ivy League powerhouse Columbia University, where tuition fees are upward of $45,000 a year for undergraduate school.

Five places ahead of Edinburgh in 12th position is ETH Zurich, which only charges tuition of about $700 per year.

In America, current student debt is $26,000 on average per person and has recently reached $1.2 trillion in total, which means U.S. student debt is more than the external debt of 173 nations in the world and would place 15th on a list ahead of China and Brazil.

About 1 percent of students accumulate more than $100,000 or more of debt and one in 10 end up with $40,000.

Since 2003, student debt has increased nearly 500 percent in just 10 years as colleges have increased tuition by nearly 600 percent since 1980, fast outpacing inflation. In addition, the amount of borrowers has increased by about 65 percent in only seven years, increasing the student loan balance by 50 percent. Needless to say, a majority of the debt (58 percent) belongs to the bottom 25 percent of America's households.

Clearly, America thrives on allowing all people to access education, and in order to access that education, financing facilities have to be available. However, Lawrence McDonald, author of the New York Times Best Seller, 'A Colossal Failure of Common Sense', says that the current student debt crisis has got way out of control.

"There's no conditions on the loans relative to the income you're going to produce. Anyone can get a loan," said McDonald. "What blows me away is that Elizabeth Warren was at the CFPB and the thing was up and running in 2010 when this problem exploded. This is like Sub-prime all over again. Somehow you can borrow money with no qualifications. The consumer financial protection bureau seems to be the least effective regulatory agency in my opinion and now student debt is over a trillion today. What have they done?"

In a recent tweet, Mark Cuban said that if there was a cap on how much debt there could be, college tuitions would implode. And McDonald said this is unlikely as long as self-interested people like Warren, now a U.S. senator and once a Harvard professor, are continued to be allowed to earn large salaries.

"All of the professors that are at these schools are making 200,000-600,000 a year and only teaching one course every six months."

At the moment debtors are lobbying congress to do something about the high levels of student debt and many are asking for debt forgiveness. McDonald believes that Obama is the most likely President to take that route, although currently the administration has plans in place to reduce interest payments by more than half.

But McDonald predicts good news for America's students.

"I think the debts are gonna go on the U.S. government balance sheet eventually," said McDonald.

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Maybe if the loans were not so easy to get, the parents would have planned better for their kid's future.

September 16 2013 at 7:37 PM Report abuse rate up rate down Reply
1 reply to vlady1000's comment
Edward Springfield

that's pretty ignorant to say

December 08 2013 at 12:27 AM Report abuse rate up rate down Reply

Read badsomey's post below. It is by the poster child for gimme, gimme, gimme.

September 12 2013 at 8:32 PM Report abuse rate up rate down Reply
1 reply to betty_brock's comment

He is the poster child for gimme, gimme, gimme. In other words, Evan.

September 12 2013 at 8:33 PM Report abuse rate up rate down Reply

Granted, the American educational system (and that includes both students and institutions) is broken. There are enough substantive problems that need fixing that it is not necessary to add mythical issues to the mix. McDonald's "over paid faculty" is one of them. According to the most recent AAUP survey (, his $200-$600K observation just does not hold water. Harvard's faculty can claim the highest paid full professors in the country and they average $198K.—they also have a faculty student ratio of 1:7. Of the 1285 institutions surveyed, the average full-prof is making $150K once you get past the top 20 highest paying schools—the students faculty ratio also increases to the double digits.

At public sector institutions, instruction averages about 50+% of their budgets and admin/support about 37% (research institutions about a 60/30% split). Private schools are another matter. Here the split is about 40/40%—the research schools split is about 58/33%. At public institutions tuition makes up a very small portion of operating revenue; the lion's share comes from public funding. Except for Master's programs, in the bulk of private institutions, foundation funding exceeds tuition funding. So where is all this student debt going? (

A good chunk is going to "degree mills." For those who are seeking a degree instead of an education, there are numerous alternative institutions willing to provide one for a premium price. Anyone can get in and everyone gets out. Yes, you can earn your degree from your bedroom. A more recent development is the "lifestyle student." They take minimum course loads at traditional institutions and run up their student loans to support their standards of living. The student parking lot at a lot of public institutions have far more new and expensive cars than do the faculty lots.

The point here is not to place the blame for high student debt on one or another party, but rather, to call attention to the fact that it is a more complex issue than some would have us believe. Perhaps, part of the problem is that we have become a society that values credentials more than content—degrees more than education. Higher education should be about personal growth and improvement and that requires change. But as Menninger reminds us, "change is stressful and stress is painful." One has to ponder if so many are simply seeking affirmation that the institutions are complying by morphing into what we have today.

September 12 2013 at 3:07 PM Report abuse rate up rate down Reply

This is a crisis that is connected with the American economy crisis...Fix the economy, less students in debt.

September 12 2013 at 12:07 PM Report abuse +1 rate up rate down Reply

Time for students to consider starting out in affordable Junior Colleges. The first 2 years are review courses anyway. They can also work part time and save money on all that illegal drinking. Of courses finding a job in the Obama world is still not easy!

September 12 2013 at 11:57 AM Report abuse rate up rate down Reply

And how much money did we waste in Iraq????????

September 12 2013 at 11:33 AM Report abuse -1 rate up rate down Reply
2 replies to bilhee's comment

We did lose $60 billion dollars to waste and fraud in both wars. We neo-cons voted more than the democrats to go to war in Iraq.

September 12 2013 at 1:13 PM Report abuse +1 rate up rate down Reply

We were ATTACKED. Libs have short memories.

September 12 2013 at 8:34 PM Report abuse -1 rate up rate down Reply

The solution to student debt is not more student debt, it is greater subsidies to students pursuing desirable careers and who earn academic achievement.

Predatory lending and sham for profit schools are the greater problem.

September 12 2013 at 11:32 AM Report abuse +1 rate up rate down Reply

Absolutely not.............the money should have been used to fund education at trade
schools and schools which encourage jobs with graduation rather than shcools which
emphasize sports and cheerleading. True amatuers are too few , but College graduates
are working today in meager jobs or not working at all. Sure there is the exceptions, but
College should be mainly for Doctors,Engineers,Architects, and Educators as well. Other
worthy occupations come to mind, but too many graduate in "Political Science" Way too

September 12 2013 at 11:15 AM Report abuse +2 rate up rate down Reply

Predatory lending.

September 12 2013 at 11:06 AM Report abuse +1 rate up rate down Reply

America or American tax Payers ? America is Broke ,1.2 trillion going to a selected few .

September 12 2013 at 10:55 AM Report abuse +1 rate up rate down Reply