TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, June 8, 2016

WSJ:  Student Loans Increasingly Backfire, Leaving Borrowers Worse Off For Going To School

Wall Street Journal, College Loan Glut Turns Sour:

The U.S. government over the last 15 years made a trillion-dollar investment to improve the nation’s workforce, productivity and economy. A big portion of that investment has now turned toxic, with echoes of the housing crisis.

The investment was in “human capital,” or, more specifically, higher education. The government helped finance tens of millions of tuitions as enrollment in U.S. colleges and graduate schools soared 24% from 2002 to 2012, rivaling the higher-education boom of the 1970s. Millions of others attended trade schools that award career certificates.


The government financed a large share of these educations through grants, low-interest loans and loan guarantees. Total outstanding student debt—almost all guaranteed or made directly by the federal government—has quadrupled since 2000 to $1.2 trillion today. The government also spent tens of billions of dollars in grants and tax credits for students.

New research shows a significant chunk of that investment backfired, with millions of students worse off for having gone to school. Many never learned new skills because they dropped out—and now carry debt they are unwilling or unable to repay. Policy makers worry that without a bigger intervention, those borrowers will become trapped for years and will ultimately hurt, rather than help, the nation’s economy.

Treasury Deputy Secretary Sarah Bloom Raskin compares the 7 million student-loan borrowers in default—and millions of others who appear on the same path—to homeowners who found themselves underwater and headed toward foreclosure after the housing crash.

Legal Education | Permalink


Once again, law schools prove to be the canaries in the coal mine. This is not limited to the "for profits."

Posted by: Jojo | Jun 8, 2016 3:36:03 AM

Once again the road to Hell is paved with good intentions.

Posted by: Ralph Gizzip | Jun 8, 2016 9:15:30 AM

Many, whether they graduated or not, majored in fields in which there was virtually no chance of getting employment. That's yet another blunder.

When I worked at the Seattle Art Museum, I was surrounded by art and art history majors struggling to pay off college debts by selling tickets at the museum, something they could have just as easily done out of high school.

They'd have been far better off, coming out of high school, to immediately get a job and study art on their own, supplementing their reading with an occasional trip to Europe.

To give one illustration what they could have done. Go into the iTunes app, open the iTunes U section, and search for courses on art history. There are over a hundred such course, many from leading professors at top universities. There's far more there than someone would take at an art history major and all are free.

More and more, I'm becoming convinced that a folly or a madness has overcome this country. We seem to be making incredible blunders at enormous costs. This 'gotta go to college' madness is but one among many.

Election 2016 is the worst of the lot.

Posted by: Michael W. Perry | Jun 8, 2016 10:27:25 AM

We live in an age where high schools no longer teach a skill/trade, everyone thinks that the only way to success in life is to get a college degree. Not so, have you seen what a plumber makes?!!! Not only that, learn a trade, work, save $$$ and then go! Shorter time to save than it would be the lifetime to pay off loan!!!!

Posted by: Lois | Jun 8, 2016 11:09:55 AM

Judge Smails (Caddyshack): "Well, the world needs ditch diggers, too!"

Posted by: John Novack | Jun 9, 2016 9:13:13 AM

There should be gov't "excess endowment" taxes on colleges to create a fund to give some limited relief to debt ridden students.

Posted by: Tom G | Jun 11, 2016 5:55:23 AM

No Tom, no they shouldn't get their grubby fingers deeper into the pie. The government inflated this bubble and your suggestion would pour gas on an already burning tire fire. You remember that saying about the definition of insanity as doing the same dumb shit over and over....your idea fits like 50 dollar isotoners.

Posted by: mike | Jun 11, 2016 11:38:51 AM

Oh please....give me a break.
The stupid is strong amongst the current generations of snowflakes.
The "public schools" have been very successful at "training" the past four decades of imbeciles.
They taught it all backwards....""follow your passion! and then maybe you'll find a job to support your self"" instead of ""get a job to support yourself and then you can do your passion as a hobby and maybe turn it into a vocation""
Not rocket science 50 years is beyond the mental capacity of 80% of high schoolers today.

Posted by: Sgt Stryker | Jun 11, 2016 1:03:52 PM