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Student Loan Debt

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WATCH THE VIDEO VERSION! http://www.youtube.com/watch?v=wQE0HwF3KR0&feature=plcp dailyreckoning.com As the student loan debt hits $1 trillion, check out some of the facts surrounding this crisis and the future of college tuition. Follow Us On Facebook: http://www.facebook.com/TheDailyReckoning Follow Us On Twitter: https://twitter.com/DailyReckoning

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This is what Americans owe in student loans.

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It’s greater than America’s auto debt or credit-card debt and second only to the mortgage debt in the United States.

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Approximately 2/3 of all college students graduate with loans. In 2010, the average one of those students had

accumulated $25,000 in debt by graduation day.

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In 2010, the unemployment rate for college graduates under 25 years old was over 9%.

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1/3 of all graduates end up taking lower paying jobs that don’t require college degrees. Today, more than 100,000

janitors… 317,000 waiters/waitresses… 18,000 parking lot attendants and 365,000 cashiers - all have college degrees.

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Over the past 25 years, college tuition cost has increased at an average rate that is higher than the general rate of inflation.

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College tui$on  that  was  $10,000  in  1986  would  cost  that  same  student  over  $59,000  today  -­‐-­‐  more  than  2  ½  $mes  the  general  infla$on  rate.  

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There are a number of factors.

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Faculty wants good salaries.

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And a lower teaching load.

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Alumni want new stadiums. Students want nice dorms and facilities – all things that cost money.

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College rankings drive up costs. Colleges can move up in the rankings by paying professors more, having more alumni who donate to the school, and attracting better students and athletes. Colleges compete to be

the best. And to be the best, you have to spend.

want I a raise.

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Budget cuts for state legislators means less money going to public colleges. Public colleges then raise tuition. Compared with the

three other major state expenditures (shown left), college students look more like paying customers than hungry learners and the

easiest solution for state officials is ask them to pay more.

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This is very similar to what happened in the housing market. Through Fannie Mae and

Freddie Mac, the government provided cheap and easy loans for everyone to buy a house.

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And with funding so easily available…

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Prices went up… and up… and up.

We now know how the mortgage bubble ended. And now college education is heading down a very similar path.

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The government will provide almost anyone a loan to pay for college.  This attracts more and more young people to go to college, most of whom can't afford

education without the government's help. 

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With the government backing just about every loan, universities can raise tuition prices. First because of high demand. And second, because they know students won’t

be denied financing from the government.  

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The more government aid goes up, the more tuition will rise.  

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Putting a limit on loans would cap spiraling tuition prices.  By taking away easily available loans, young adults would assess the true value of a college degree

and opt for alternatives to career and business training.  It would reduce the demand for college, thus reducing the ability of colleges to raise tuition fees. The price

of college would flatten or even come down.

Limited Available!

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