SNAPSHOT: A PRIMER ON THE STUDENT LOAN CRISIS

Up to about a year ago it was generally believed that the value of housing in America would always increase. With that as a basis, people lent and borrowed money based on projected appreciation in equity. When the bubble broke, people found themselves in "upside-down" mortgages; the value of their home was less then the value of the mortgage they were paying on (negative equity). If you replace "mortgages" with "student loans", and "equity" with the value of an education, I would submit that the same dynamic of "upside-down" value exists today for the value of most degrees. Unlike the mortgage industry that dynamic is increasing in intensity and is exasperated by the impact of similiar degrees in lower cost countries, both in the form of imported personnel and exported jobs.

In this country the individual pays for the cost of training oneself to earn. In a sense, the worker pays for what are essentially productivity enhancements to american industries. As an exception, the DOD Military Acadamies pay for the education of their officer corp to insure they are the best in the world. Maybe its time we begin (again) to view a capable and prepared work force, of US citizens, as a national security issue deserving of the same sort of support we provide to military sciences.

The loan industry is content with the knowledge that, at least in the case of Stafford Loans, they are guarenteed payment in the instance of loan default. However, the greater picture is that as more of the next generation of consumers is saddled with paying of huge loans they are less likely to be consuming and providing for their children. Further, if they are forced into default, they are removed , in large part, as full participants in the job market and as consumers.