COMMENTARY
The TVM value chain shows that student loans are wonderful in theory, but a disaster in practice. The conventional wisdom is that a good education is the foundation for a good job and financial success ... and to some extent that is true.

Unfortunately , the student is not the only actor in this play ... and the other players are more experienced, more powerful and more greedy.

The educational establishment has gamed the system so that the financing has been maximised for the benefit of the educational establishment whose 'costs' ... or should we say 'prices ... have been increased at a rapid rate ... rather than calling this an unsustainable rate, I would prefer to characterise it as a ridiculous rate.

The finance establishment has also gamed the system. They have found ways to turn stuident lowns into just another vehicle for their financial games ... derivatives and securitized products ... that make the finance industry good money and leave the rest of society wondering where wealth went!

Lesser players in the value chain and the 'gaming' debacle include the political community, parents who should have known better, employers who bought into the 'certificate' until they realized that productivity for investors would be enhanced using offshore labor rather than well educated local US workers!

Sadly versions of the US education debt bubble are replicated around the world ... but with a difference. The financing od education may have been done by the state, but the situation is still the same. The educated youth cannot put their skills to work because as a society there are too few jobs. The unemployment rate for educated youth in many countries around the world is around 50% ... so what should be a national asset may well turn out to be a dangerous national liability.

This is, of course, quite ridiculous. It is not as if there is nothing in the world that needs doing ... the backlog of maintenance of almost everything suggests that there is work to be done .... the lack of energy for a huge part of the world's pop[ulation .... ... the lack of infrastructure .... the lack of food and water ... the lack of education ... the lack of healthcare ... and you can go on ...

The crisis is that the money profit capitalist market system cannot get money capital to where it is needed. Sadly unless the money profit capitalist system can see money profit ... and quickly ... the money capital cannot be mobilized. This needs to change and for this there is an urgent need for something like TrueValueMetrics which adds a social dimension to money profit accounting.
Peter Burgess

Is the US student debt bubble about to burst? As student loan debt exceeds $1tn, we ask if it is the ball and chain that follows Americans to the grave.

The cost of higher education in the US has been referred to as the ball and chain that follows many Americans to the grave.

Debt from student loans has exceeded an estimated $1tn in the US for the first time, surpassing credit card debt.

'You have students that are torn between making a decision about paying rent, buying food, doing laundry, buying books or paying back their student loan debt.' - Victor Sanchez, the president of the United States Student Association

And more and more recent graduates are having difficulty finding jobs to help them pay off their loans. It is a burden that some economists say is threatening any economic recovery in the US.

And it is not just having an impact on young people: Americans of 60 years of age and older still owe more than $30bn in student loans. Consumer advocates say that debt collectors go as far as seizing their social security cheques.

The cost of college education, which is six times more expensive today than it was 30 years ago, is only expected to rise.

Raeann Roca, a former student straddled with tens of thousands of dollars of debt, says: 'We were always told that if you don't go to college, you're not going to make any money, you're not going to live the American dream.'

Her university course cost more than $30,000 a year and to pay for it she did what her college advised and took out student loans.

'There are no bankruptcy protections associated with, uniquely, student loans. This has given rise to a predatory lending and collection mechanism where not only do the lenders make more money on defaults than on loans that remain in good stead through their collection activities but ... even the federal government are making more money on defaulted loans ....' - Alan Collinge, the author of The Student Loan Scam

When she graduated she had $70,000 in student debt. She has already paid off $14,000 but the terms of her loans mean that five years after her graduation, she still owes just over $106,000 for her education.

It has been suggested that all this debt will crimp the lifestyles of students so much once they are in the workplace that they will not be able to afford homes, cars and holidays - further damaging the limping US economy. In other words, there is a bubble of student debt that is about to burst.

So what led to the rising cost of higher education and what does it mean for the struggling US economy?

Joining Inside Story Americas with Shihab Rattansi to discuss this are: Alan Collinge, the founder of StudentLoanJustice.org and the author of The Student Loan Scam; Pat Garofalo, the economic policy editor for ThinkProgress.org at the Center for American Progress; and Victor Sanchez, the president of the United States Student Association.

'At this point with where the US economy is ... student loan debt is going to cause us a lot of problems in getting the kind of growth that we need, getting the kind of sustained growth, because the people that we are counting on to drive that growth - to spend money, to go out and form new households, to buy products and buy cars and start their own families - are instead going to be at home not doing those things because all their money is going towards paying off their student loans.'

Pat Garofalo from the Center for American Progress

Source: Al Jazeera