By: Jeffrey Klein
The U.S. Department of Education-managed student loan program is another financial “meltdown” waiting to happen, which is nearly equal in size to the “Sub-Prime” mortgage loan program meltdown–both of which were initiatives from the Democrat-dominated first term of the Clinton Administration.
The amount of student loan debt held by Americans in June 2010, exceeded the amount of credit card debt held by Americans–at least $830 billion, of which approximately 80% was federal student loan debt and 20% was private student loan debt. In October 2011, the total amount of money owed in student loan debt was said to exceed a staggering $ 1 trillion.
There are two additional correlated issues that are exacerbating our economic recovery and driving up the student debt load.
Gordon H. Wadsworth captures the essence of the problem in his brilliant InflationData.com article from October 19, 2011, appropriately titled, “Skyrocketing College Costs,” wherein he identifies the sharp upswing as beginning with the inception of the Federal Stafford Loan program more than a decade ago.
“When Uncle Sam opened the floodgates to [another form of wealth re-distribution] government-backed student loans without parent income restrictions in 1992, colleges welcomed the news with open arms. The sudden injection of millions of additional aid dollars only furthered tuition increases. Add to that the government’s continued promotion of the Stafford Loan as a low-cost program, and you have the formula for hyperinflationary costs.”
College tuitions soared each year since 1986 by 498.31%, advancing far in excess of the inflation rate, which increased by only 115.06%, during the same time period (click on article link above to see chart).
For example, if tuition cost $10,000 in 1986, under normal inflation it would not cost $21,500, however, it now costs $59,800, or over 2 ½ times the inflation rate.”
Economists predict the cost of attending state colleges will soar to $120,000 by 2015.
Structural Unemployment Problem–A Mis-match of Skills for Jobs
Eric Spiegel, U.S. regional President and CEO of German engineering conglomerate Siemens, recently told the Financial Times that much of America’s employment problem isn’t because of a lack of jobs, but because there are too few qualified workers, according to Harry Bradford’s Huffington Post article.
Siemens 15 divisions in industry, energy and healthcare employed around 405,000 U.S. workers last year, but filling their 3,200 job vacancies has been no easy task.
Even with 13.9 million unemployed Americans, companies cannot find the number of “skill-qualified” candidates they need. Amazingly, in the manufacturing sector, the number of people employed [lower-skilled labor] has declined–but the number of [higher skilled] job openings has risen from 98,000 in 2009, to 230,000 today.
A recent study by employment agency Manpower found that 52 percent of American companies are experiencing difficulty finding employees qualified to fill mission-critical positions, compared to only 14 percent in 2010.
President Obama’s former Chair of the Council of Economic Advisers, Christina Romer, said in a speech last April, that “structural unemployment has risen somewhat nationwide, and could rise further if we don’t reduce cyclical unemployment quickly[.]”
Important author’s note: Much like most of President Obama’s advisors, Ms. Romer has never worked in the private sector or ever created a single job. Since 1988 she has been a Professor of Economics at University of California at Berkley. She co-authored the Obama administration’s ‘job-creation plan’ for economic recovery. Tenure: January 28, 2009 to September 3, 2010.
This “structural unemployment” situation is obviously the result of Liberal federal government “engineering” the path of education, combined at the same time with the “sub-prime-like” student loan funding apparatus.
The focus on traditional college educations, eclipsed vocational, trade and technical training schools, by design, whereby high schools eliminated long-standing shop, auto mechanics and work-study classes–now leaving the country lacking people to fill those high paying jobs.
And it appears that curriculum counseling favored Liberal Arts, particularly for teachers (the birthplace of liberalism in America), not “doers,” such that now many college graduates have degrees of dwindling, or non-existent commercial viability in our contemporary economy–versus broader, high demand technical degrees in healthcare, engineering and applied science.
In fact, a young lady amongst the lower Manhattan Occupy Wall Street “tribe,” who was interviewed on camera, bitterly complained that she had $60,000 in education loans, demanded that the government give her a “bailout,” by forgiving her loan, because she has been unable to find a job since graduation.
Need I say more?
Be on the lookout tomorrow for the final article in this series, wherein I will outline the solution to the Student Loan and Tuition Crisis.
Copyright (c) 2012 by Jeffrey Klein