Thursday, December 13, 2012

Behind the Numbers

There is a Biblical verse that Dave Ramsey (2-5 weekdays on WOSH) likes to quote all of the time:  "The borrower is slave to the lender."  In Biblical times, that had very literal meaning, as those who owed someone could be forced into slavery to repay a debt.  This week, the folks at the activist group One Wisconsin took it nearly that far, comparing student loan borrowers to "indentured servants"

The group conducted a small amount of research and found that the average college graduate takes 19-years to pay off their student loans--at monthly payments of $388.  My calculator tells me that is a total repayment of more than 88-thousand dollars over the life of the loans.  The only problem is, that doesn't jibe with the national averages cited in dozens of other locations:  that the average college debt is $26,600 dollars--and the average time to pay that off is 11-years.  As the Left often likes to do, it appears One Wisconsin made sure to find as many people in the deepest possible holes to make the situation look as dire as possible.

What the One Wisconsin study also fails to tell us is what other economic factors are playing a role in their study group's inability to repay their loans.  What is the average credit card debt carried by these "servants"?  And what were those charges spent on?  Basic needs or, shall we say, things that wouldn't be considered necessities (e.g.: spring break trips, pizza and student section football tickets)?  What is the average car loan payment for these borrowers?  Are these "poor" people all driving "Hoopdees" (another Dave Term) And when were these car purchases made?  Immediately after graduation--before their student loan payments kicked in and it seemed like there was plenty of room in the budget?  And how big a data package are they buying for their cellphones, tablets and laptops?

And what were the fields of study for these "struggling" masses?  Are they in the fields of business, science and industry that have always provided job opportunities?  Or are these graduates sitting around with degrees in the Arts and Social Sciences--which usually depend upon more disposable income for consumers--or increasing numbers of children in need of education?

Where are the parents in all of this?  $26,600 divided over the 22-years from birth to graduation would require a parent to put away $1,209 a year into a college savings account--or about $101 a month.  And those numbers are based on the money being put into an account that draws no interest or investment income for those 22-years.  You're telling me the generation of Middle-Class Americans that enjoyed some of the longest, sustained periods of economic growth in US history was totally incapable of putting away that amount of money?

One thing that stands out in the One Wisconsin recommendations to "fix" the student loan "problem" is to have governments spend more money on college systems to lower the cost of tuition.  Perhaps these folks would like the 5% interest (which is tax deductible by the way) that student loan borrowers pay just added to 18 to 24% in income taxes that the graduates are already paying.  We all know it's more "fair" to give Uncle Sam your money to "redistribute" than it is to give it to the "Greedy Wall Street Banks".

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