There is a growing school loan problem in the United States.  College students have an ever-increasing amount of school loans.  More students are defaulting on those loans.

Last week, someone wrote an article in the New York Times, describing how to default on school loans.

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I believe in the American Dream.  I believe that with hard work, and opportunity, and a lot of luck, people can improve their fortunes in life.

One of the ways to improve those fortunes (I believe) is with a great education.

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I recognize that a great education is getting more expensive every year.  It is possible to spend at least $250,000 on a 4 year private undergraduate education now.  And very few people have $250,000 sitting around ready to pay for that.

I understand that the only way that some students are going to have access to a college education is with school loans.

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The problem is, that there are several problems.

One is that the cost of that college education is going up unchecked.  There isn’t any pressure on colleges and universities to price their offerings competitively.

Another problem is that many students never finish college.  If they borrow money to go to college, and they don’t finish, they are going to have a really difficult time paying back loans.

Another problem is that the cost isn’t really obvious at the beginning of college.    The cost of tuition changes from year to year, and so does the amount of financial aid offered.  So a student who pays $10,000 in his/her freshman year might have to pay $25,000 in his/her sophomore year, because of a change in financial aid received. People borrow money for education, without really understanding how difficult it will be to pay that money back.

My fear is that we are nearing a crisis, similar to the mortgage mess we created about 7-8 years ago. People were borrowing money for home 10 years ago, without understanding what would happen if mortgage rates increased or housing values decreased.

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Something that really bothers me about college education is that every student in a college classroom pays a different amount to sit in that classroom.  Some students are there on a scholastic scholarship, some on an athletic scholarship, and some have received grants.  Others pay 1/2 or 3/4 of the total amount, and some pay full fare.

Why do different students pay different amounts for the same product?  You would not accept paying a different price than everyone else at the supermarket, or for gasoline.  Why is the cost of a college education negotiable?

It reminds me of the situation we face when we purchase an airline ticket.  Some people on the plane pay full fare.  Others purchase discount tickets.  Other people fly for free, because of frequent flier programs.

That kind of a “variable price” situation makes me question the true value of a sea t on an airplane.  If an airline is willing to give some of the seats away for free, how much are the other seats really worth?

I don’t want to be the guy who pays the highest price for an airline ticket.

I also don’t want to be the guy who pays the highest price for a college education.

We pay the same price at the gas pump.  We pay the same price at the supermarket.  Why should we pay different prices for a college education?

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I’ve read that the consequences of defaulting on school loans is life-long.    Declaring bankruptcy doesn’t release people from the obligation to pay back school loans, the same way it does for home or car loans.

So that red mark lasts forever.  I don’t know if there is an easy solution.

Some employers, and some states, offer programs that help workers pay back school loans over time, in exchange for work.  In other words, if you work for certain local governments or companies, they will pay back your school loans, a little at a time.

There are military programs that offer free tuition in exchange for years of military service in return.  Those programs are now very much in demand.  I attended a program at the U.S. Naval Academy, where they explained that they received 14 applications for every offer that they provided.

Starbucks recently offered to pay for the college education for their workers, at the University of Phoenix.  I’ve read that Starbucks doesn’t ask for a payback for that tuition, either.

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If we want to educate young people (and I think we should) and if we want those young people to be able to be financially stable when they graduate (and I think we should), we need to develop creative ways to help them go to college, without hampering them for the rest of their lives.

Hal