College Graduating Class of 2014 ... You're #1 ... In Debt, That Is .... But Wait Until Next Year ... Then You'll Be #2

Indebtedness in America and the rest of the world has reached epidemic proportions, and the problem is especially troubling for the future well being of our young college attendees and graduates.


In that regard, the issue of financial literacy and college affordability is big and getting bigger each year. And to top it off, the economy that awaits these college attendees and graduates is woefully underperforming due to an ever expanding big government spending spree.

The cost of college is already much too high and it's going higher as taxpayer subsidies allow college administrators to raise tuition each year and pay themselves more than they are worth, all at the unnecessary expense of the unknowing students, their families and taxpayers generally.


Of course, government grants, subsidies and guaranteed student loans are nothing more than taxpayer guarantees.


And in the end, it's the ability to make the principal repayment by an income earning adult that matters most to both the borrower and the taxpayers --- in addition to the accumulated interest bill on that hopefully non-defaulted principal amount.


But just how bad is it? For the answer, Congratulations to Class of 2014, Most Indebted Ever contains the gory and truthful details:


"As college graduates in the Class of 2014 prepare to shift their tassels and accept their diplomas, they leave school with one discouraging distinction: They’re the most indebted class ever.


The average Class of 2014 graduate with student-loan debt has to pay back some $33,000 . . . . Even after adjusting for inflation that’s nearly double the amount borrowers had to pay back 20 years ago.

Meanwhile, a greater share of students is taking on debt to finance higher education. A little over 70% of this year’s bachelor’s degree recipients are leaving school with student loans, up from less than half of graduates in the Class of 1994.

The good news for the Class of 2014 is that they likely won’t hold the title of “Most Indebted Ever” very long. Just as they took it over from the Class of 2013, the Class of 2015 will probably take it from them.


But as the debt burden of college graduates continues to rise faster than inflation, it begins to complicate the question of whether a bachelor’s degree is worth the expense. So far, that answer is a firm “yes.”. . .

But will the debt associated with a college degree always be worth it? That’s a little less clear....


The problem developing is that earnings and debt aren’t moving in the same direction. From 2005 to 2012, average student loan debt has jumped 35%, adjusting for inflation, while the median salary has actually dropped by 2.2%. If that continues debt burdens could start to become more unwieldy.

There is already evidence of this in the housing market. . . . for the first time starting in 2012, having student loans made it less likely that a 30-year-old would have a mortgage. . . .

Summing Up

College attendance and graduation continues to be an appropriate financial decision for young people, but it need not be a lifelong albatross resulting from taking on onerous student debt obligations.


Too many of our young people exit college behind the proverbial 8-ball.


And as bad as that is, the negative impact isn't just on the young adults, as the debt burden associated with student loans is impacting the important housing industry and our overall U.S. economy in a negative manner as well.


We owe too much, our economy is too weak, and as a result, good jobs continue to be scarce.


And then there's the Keystone Pipeline decision delay and all the political back-and-forth gamesmanship going on in this election year --- none of which is helpful to confidence or prospects for a prosperous future America.


All that said, all this negativism adds up to a great opportunity for us to think about and then react to why we have so much debt. {Hint: In large part it's been due to the encouragement and facilitating actions of We the People's duly elected "public servants."}


In other words, when are we going to decide that too much of anything, including debt, is not a good thing, even if the reason for taking on that debt was a sound one?


When will we the realize that value is merely a function of both the price and benefits of whatever it is that we're purchasing, and also that value is therefore partly determined by whether we're purchasing that something with our own money or with borrowed money?


And when will we act with the knowledge that borrowed money is expensive and must be repaid by somebody, even if it's the unsuspecting taxpayers.


And when will be get mad as hell and not take this big spending government any more?


Soon, I hope, for the sake of us all, and especially our kids and grandkids.


That's my take.


Thanks. Bob.