[HamSession]

I do wonder what type of effect this will cause with job requirements, will master's now be the new bachelors?

The more worrying issue is the government taking on more student loan debt. There is a student loan bubble but it has not hurt the economy partially due to federal requirements that the loan not be discharged. What happens if current graduation rates hold steady and the US is stuck with a large bill but nothing to show for the effort?

[techsupporter]

"...but it has not hurt the economy partially due to federal requirements that the loan not be discharged."

I'm curious to know what you mean by the requirement that it not be able to be discharged being beneficial. So far there seem to be three types of student loan borrowers:

1) Those who can and are paying their loans; 2) Those who got way over their heads--either through poor borrowing practices or income shortage--and who are struggling yet still paying their loans instead of creating other economic activity; 3) Those who can't pay--again, through poor borrowing practices, income shortage, or some type of major life event--and are now screwed.

The idea behind bankruptcy is to let even the most buried of us be able to at least partially fill in the hole. That certain classes of loans create a permanent millstone seems, to me, a bit skewed.

[kevbin]

#3s can get their student debt discharged if they can demonstrate undue hardship: http://www.law.cornell.edu/uscode/text/11/523

It requires a good attorney & YMMV

[techsupporter]

That's theoretically true but for the "good attorney" part. I wonder how many debtors in that position can afford such an attorney. For example, one proceeding that took a decade and many hours of pro bono work by a five-star bankruptcy firm:

http://www.usnews.com/education/blogs/student-loan-ranger/20...

The 9th Circuit opinion made things a tiny bit better, at least for student loan debtors in the Pacific time zone (plus Hawaii and Alaska), but the standard is still exceptionally, almost punitively, high.

[themartorana]

"...but it has not hurt the economy..."

Really? When people are burdened with mortgage-sized unsecured debt, they spend much less. It places enormous downward pressure on the economy.

http://www.pbs.org/newshour/bb/business-jan-june12-studentlo...

[adventured]

Little question it's removing growth from the economy.

The US Government is printing immense profits from the student loan racket presently. $600 billion in new debt has been added to the government's pool of that in just the last six years.

That $600 billion just for those six years alone, will probably end up costing over a trillion dollars with interest. That's capital no longer available for production or consumption.