A new report in the Wall Street Journal details how delinquency on student loan debt is actually highest among the middle-aged, defined roughly as adults between 40 and 60. Delinquencies for those in their 40s stands at an alarming 11.9 percent. Meanwhile, over the past seven years debt rates for those in their 50s and 60s have doubled and tripled, respectively:
Many debtors over 40 are still paying balances from college years ago, while their home values and savings have declined sharply in recent years. Some have stopped payments after losing jobs. Many parents—no longer able to tap home equity to pay for their children’s education—are taking out new student loans to do so. An Education Department program that provides loans to parents to fund their kids’ education is among the fastest-growing of the government’s education loan programs.
Sadly, government’s fingerprints are all over this mess. In a well-intentioned effort to make higher education more widely accessible, the government offered large student loans without asking many questions. Two things happened.
First, colleges kept raising tuition. College tuition has been rising faster than inflation for quite some time, in part because schools added layers of administrative bureaucracy and offered gold-plated student services. As long as students could rely on government loans to help pay their way, colleges have chosen to compete on amenities rather than on value.
Second, students got out of the habit of thinking about a college education as an economic decision. Students were encouraged by parents, teachers, college guidebooks and guidance counselors to find the school of their dreams rather than a school that they could afford. Unfortunately, if you borrow money, you have to pay it back. Many graduates are now learning this lesson years too late.
Banks and Wall Street, as usual, got into this act too. And with all that student debt on their hands, they lobbied to make sure it couldn’t be discharged in bankruptcy. Now we have $1 trillion of student debt, and a lot of it can’t be repaired. Lives are being damaged, and young people who should be thinking about starting families and careers are instead being saddled with new burdens.
This is terrible social policy. It is deeply destructive. Education costs have to come down, dramatically. Work and school need to be better integrated, so that students can earn while they learn rather than rolling up so much debt. And parents, students, and their counselors need to start thinking very carefully about what kind of education they can afford.