Reason #65: Don’t Pay ‘Til You Graduate

You can run up a million dollars in credit card debt and wipe it all away with chapter seven. But take out money to better yourself with an education and you’re on the hook for life.

The housing market isn’t the only place where bad loans have been handed out like candy. Easy credit has flooded our entire society. Just turn on the TV and you’ll see ad after ad for student loans. “Don’t pay till you graduate!” they chime happily, promising tens of thousands of dollars within a week.

But what happens when all those young people graduate and have to start repaying their loans? After all, outsourcing and globalization hasn’t just hurt blue collar workers. Good paying jobs for college grads in fields like computer programming and engineering are flying away to places like India and China, too.

What kind of society burdens its young people with such crushing debt and doesn’t give them a way to pay it off? The cruelest part of it is, while deadbeats like the guy who bought ten houses in a year can walk away from their mortgages without being penalized, student loan borrowers aren’t even allowed to clear their debt with bankruptcy. You can run up a million dollars in credit card debt and wipe it all away with chapter seven. But take out money to better yourself with an education and you’re on the hook for life.

Besides the despicable fact that our society gives credit card and mortgage debtors a way out while preying on American youth, simple bookkeeping logic says all those millions in student loans cannot be viable. What happens when these young people find themselves swamped in the rising ocean of debt and interest rates? Who gets left holding the busted loans? Just like with home mortgages, financial traders bundle college loans into bond issues and swap them on the open market. But when millions of student borrowers default because they can’t afford to pay, we’re looking at a massive meltdown.

NEXT: Reason #66: The FDIC and the Myth of Insured Money