student loans

Coronavirus To Decimate Colleges and Universities

Published by Anonymous (not verified) on Tue, 12/05/2020 - 8:50pm in

US universities are facing a world of hurt.

Radical Imagination: Imagining How the World of Finance Really Works

Michael Hudson rings the changes on some of his favorite themes: the logic of ancient debt jubilees. and the role of finance in contemporary rent extraction.

Student Enrollment Dropped 11% Since 2011, Student-Loan Balances Surged 74%. Why?

Published by Anonymous (not verified) on Sat, 01/02/2020 - 1:55am in

Drilling into why the student loan problem keeps getting worse.

Book Review: Indebted: How Families Make College Work at Any Cost by Caitlin Zaloom

Published by Anonymous (not verified) on Wed, 22/01/2020 - 9:01pm in

In Indebted: How Families Make College Work at Any CostCaitlin Zaloom draws on more than 160 interviews with college students and their families to explore how middle-class households in the US pay for university. This is a timely and accessible study that breaks through the taboo surrounding family finances, making useful sociological points not only about the cost of higher education, but also about the nature of middle-classness today, writes Chloe Reid

Indebted: How Families Make College Work at Any Cost. Caitlin Zaloom. Princeton University Press. 2019.

Find this book: amazon-logo

Laura and Chris are the proud parents of Sam and Mark who respectively attend Western Michigan University and Grand Valley State University in the US. Whilst Sam and Mark utilise federal loans of $7,500 and $5,500 each year, Laura takes on additional nursing shifts and her father had a second job to support the boys financially. Laura’s father also helped Sam and Mark with the cost of college by giving the boys $20,000 from the proceeds of the sale of his property. This is accompanied by a college savings plan that Laura’s parents started when the boys were small. To keep track of how this hard-earned money is spent, Laura has a spreadsheet for each son, recording how much each book cost, room and board, how many credit hours they’ve taken and so on. For this family, paying for college is a three-generation effort.

The issue of how US middle-class families pay for college is at the heart of Caitlin Zaloom’s new book, Indebted. She details the results of a four-year study, comprising of more than 160 interviews with college students and their families at private and public higher education (HE) institutions. As she discusses in the book, it was difficult to recruit interview participants because of the widespread reluctance to discuss money. ‘Sex, politics, religion – Americans are far more likely to discuss these sensitive topics with friends, neighbours and relatives than they are to share information about how much money they make, save and owe’ (21). For Zaloom, it is important to bring these private discussions about money into public view.

Zaloom herself is Associate Professor of Social and Cultural Analysis at New York University and has previously written the book, Out of the Pits: Traders and Technology from Chicago to London. In Indebted, she provides a comprehensive and compelling description of the US student finance system. Zaloom defines the issue of what comprises middle-classness precisely by the capacity to pay for college. These families may not be able to afford the full fare, but they also do not qualify for grants.

For these families, their lives are organised around the problem of paying for college, because they believe HE will give their children an ‘open future’ and ‘opportunities that will allow them to fulfil their potential’ (6). This preparation begins at a young age, with the parents of a two-year-old spending considerable time and energy planning how to fund their education. Such time and effort means that the families in Indebted must speculate whether college will indeed ‘pay off’ for their children.

Reports have described how some graduates may be faced with the issue of underemployment after leaving college. Of course, there are important social and personal benefits to university education. However, Zaloom suggests that the US emphasis on loans and finding a well-paid job means that the value of higher education is primarily seen as financial. Do college graduates and their families, who have put considerable time and effort towards affording college, believe this was well-spent? This is an area the book could have explored in more detail.

Aside from this, Indebted evokes sympathy for students and their families in their aim to meet the challenges of affording a college education. Zaloom describes how the cost of tuition and fees for in-state students at public universities has risen more than threefold since 1987, with private colleges costing more (13). Even for those who have chosen to invest in a college savings programme, they may still struggle as college costs have sky-rocketed since they began saving.

Within the book, there is a discussion of how parents’ faith that their offspring will attend college is key to their middle-classness. Parents assess their child’s potential ‘like accountants’ (45), and investing is seen as an ‘expression of how much they care’ (34). As a reader, this evokes questions about what impact this pressure has on children. One must wonder how much choice and freedom a young person may feel about their future if their parents have been assessing their potential and saving for their college education since birth.

As well as college, parents must also save for their own retirements. This leads parents to ask themselves: ‘just how likely is my child to graduate from college? Does it make sense to take the risk of devoting my savings to that possibility?’ (45). Again, this brings questions to my mind as to whether there are scenarios whereby a parent has decided their child is unlikely to flourish in HE, but the young person decides that they want to attend.

Even for families who agree that their child should pursue college, it is apparent in Zaloom’s book that finance may limit student choice of where they attend. Zaloom describes how one mother told her son ‘he would attend the school in which the most robust aid package gave him access to the most prestige, and that he could not attend schools outside of New York City’ (160). This seems to be a missed opportunity to discuss the implications for meritocracy that arise from the US college finance system. If a US student’s access to college is limited by finance and not their own ability, is the system meritocratic?

It is a truism that not all middle-class students and their families are the same because some will face greater challenges. The chapter ‘Race and Upward Mobility’ provides an illuminating account of the story behind historically black colleges and universities (HBCUs) and why this is crucial for understanding modern African-American experiences of education and social mobility. It is a troubling statistic that black students carry almost 70 per cent more debt than white students. Historical discrimination has left many African-American families with limited assets and weaker credit ratings, meaning that they are more likely to be denied loans.

The book ends with a stirring and important reminder that college is not just an investment, but also creates the possibility of intellectual growth and unconstrained potential. Zaloom therefore calls for a system of student finance that is more generous and not as complex as the current provision. This would recognise that education is an investment in the nation’s future and would aid students in being more capable of making crucial life decisions about their degrees and careers.

Finance is sometimes regarded as a taboo and difficult topic. However, Zaloom has produced a book that is accessible to those without a prior understanding of economics. In addition to the discussions around finance, she makes useful sociological points about the nature of middle-classness and the intrinsic obligations held by family members. Overall, it is a timely book and may be of interest to all parents and students preparing for entry to HE.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 

Image Credit: 3D Animation Production Company from Pixabay


Happy New Year – a personal announcement

Published by Anonymous (not verified) on Sat, 18/01/2020 - 2:29am in

Happy New Year!

This blog has now been running for nearly nine years. In recent months, the output has slowed and I see that I haven’t done anything since September.

In the main, this is because work elsewhere is keeping from writing. I think that is likely to continue in the near future: I will mainly be producing private commissioned reports for UCU branches following the publication of the latest round of annual reports.

I will probably fire up this blog again for the budget in March for the budget and later that month, when I should be able to say more about a couple of new initiatives.

In the meantime, here is the latest odd development in the ongoing saga of Reading’s  National Institute for Research in Dairying Trust. The headline captures it: “Dead Radioactive Goats Experimented on Decades Ago Could be Buried in Berkshire”. More precisely, in Shinfield.

Proceeds from that sale of Shinfield land was subsequently passed on by the trust to the university. Reading’s latest accounts tell us that the matter of this multimillion pound loan from the trust to the university is still not resolved:

“”During the year, the University and one of its connected trusts, the National Institute for Research in Dairying Trust (NIRD), have been in discussions to resolve some legacy governance issues that were self-reported to OfS and the Charity Commission. These discussions are progressing well and are still ongoing. To date, they have not raised any issues that would have a material impact on the University. The University is the sole Trustee of NIRD, and NIRD is accounted for as part of the University group.”


At the national level, the announced change to the government’s fiscal rules makes it more likely that the programme of student loan sales will come to an end. The ONS announced that the two sales so far completed have lost £2.7billion and that this will now count as capital expenditure in the national accounts. 

Now that the government has decided to stop targeting Public Sector Net Debt as part of its fiscal mandate, the main aim of the loan sale loses much of its point. As explained here (and elsewhere) over the years, the fiscal illusion embedded in the composition of PSND (not changed by the ONS’s recent accounting overhaul) means that student loans are not counted as an asset in that headline figure. Any sale thereby improves PSND as the cash raised does count: PSND is reduced whatever loss is registered on the loans. What has changed is that the loss now scores as expenditure.

PSND is now sidelined and the losses on sales count as expenditure against the new secondary target of Public Sector Net Investment (3% of GDP per year). That would seem to mean that the sale programme performs badly against what are effectively the government’s chosen performance targets.

That PSNI target already has to accommodate the c. £10bn pa needed to fund estimated write-offs on new loans. For more detail on those impacts, seethe Office for Budget Responsibility’s restated March 2019 forecasts(from which the table below is taken).

impact writeoffs PSNI

Unlike in 2017 and 2018, there was no sale in December. The Budget would be the normal occasion on which the Chancellor would confirm whether or not they are still going ahead.

Now that the accounting more accurately reflects the impact of the decision to sell or not, you would expect reason to prevail and the scheme to be halted.


‘Make No Mistake: Harvard Has the Money to Pay Us Livable Wages’

Harvard graduate students are on strike demanding fairer wages, adequate healthcare, and protections from discrimination.

Student Loans, Meet Greece: Extend and Pretend Bond Maturities

Published by Anonymous (not verified) on Wed, 08/01/2020 - 7:00pm in

Shed a crocodile tear for investors in student loans: they are sometimes discomfited by short-lived downgrades when loan maturities are pushed out.

Sanders Report Shows How Millennial Generation Is ‘Being Punished With Crushing Student Debt and Low-Paying Jobs’

Sanders commissioned a GAO report on how high student debt levels and lousy wages translate into poor economic prospects for young people.

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

Published by Anonymous (not verified) on Fri, 13/12/2019 - 11:00pm in

Anna Snider

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

With each new Liberty Street Economics post, we aim to build familiarity with New York Fed research and policy analysis, and to share the expertise of our staff when it is relevant to the issues of the day. More than sixty economists contribute, and we tap coauthors from other central banks and academia as well, so the topics vary widely, covering the alphabet of “JEL Codes” in the economics literature plus numerous policy themes. Judging from our internet traffic, we have a core group that checks in to read nearly everything. Some posts break out to a wider public, prompted by news articles that cite our findings and even a mention in a presidential candidate’s tweet. Take a look at our top five most-read posts of 2019.

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

The authors of this post inferred the likely cost to U.S. consumers of a 2019 trade policy action that increased the tariff rate on $200 billion of U.S. imports from China from 10 percent to 25 percent. The analysis was nuanced, including estimates of the degree to which import taxes would pass through into domestic prices, the deadweight losses that would result as U.S. importers were forced to reorganize their international supply chains, and the loss of U.S. tariff revenues as goods were sourced from countries other than China. In sum, the cost to the average U.S. household of the new and standing China tariffs would be $831 per year, the authors estimated. (May 23)

By Mary Amiti, Stephen J. Redding, and David E. Weinstein

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

The publication of the New York Fed’s Quarterly Report on Household Debt and Credit offers our researchers the chance to delve into a special topic to illuminate credit conditions experienced by U.S. households. The analysis tied to the 2018:Q4 report focused on the growth in and performance of auto loans. Data for 2018 as a whole showed the highest level of newly originated auto loans in the nineteen-year history of the data, as well as a loan-quality shift to more creditworthy borrowers. Nonetheless, the analysis revealed a substantial and growing number of distressed borrowers, with more than 7 million Americans 90 days delinquent on their auto loans at the end of 2018, up by 1 million from the end of 2010. Age-based flows into serious delinquency also depicted a sharp worsening in the performance of loans held by borrowers under 30 years old between 2014 and 2016—a group challenged also by rising student debt. (Feb 12)

By Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

The steep increase in the cost of college continued to prompt dialogue about whether higher education is “worth it.” In this widely read analysis, two of our economists weighed the benefits of a bachelor’s degree against the cost, estimating an average rate of return of 14 percent on the investment. They found that although the rising price—in terms of both tuition and opportunity costs—appears to have eroded the return on a degree by roughly 2 percentage points in recent years, college remains a good investment for most people. (June 5)

By Jaison R. Abel and Richard Deitz

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

Further analysis of the impact of higher tariffs on goods from China ranked as the fourth most popular post of the year. Data examined here provided evidence that the new levies were effectively passing through to U.S. buyers, since import prices dropped just 2 percent between June 2018 and September 2019, a small fraction of the amount required to offset the steep increases in tariff rates. The authors considered why import prices might not be falling. Potential explanations include narrow profit margins (with little room to cut prices, Chinese firms are dropping out of the U.S. market), lack of competition (with few non-Chinese rivals, some Chinese firms feel little pressure to adjust), and fear of price contagion (with Chinese firms wanting to avoid a situation in which lowering U.S. prices would prompt customers in other countries to demand similar discounts). (November 25)

By Matthew Higgins, Thomas Klitgaard, and Michael Nattinger

Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019

Corporate debt held by nonfinancial companies has been growing at a rapid pace since the Great Recession. This post reviewed various aggregate and firm-level measures of debt growth, finding some metrics of concern (such as a ratio of corporate debt to GDP at a fifty-year high) and others mitigating (like a lower share of debt-to-profits since 2012). The authors also looked at how corporations have been using the new debt. While some of the increase has funded capital expenditures, the change in debt is associated with more acquisitions, stock buybacks, and dividends, they found. (May 29)

By Anna Kovner and Brandon Zborowski

Anna SniderAnna Snider is a senior editor in the Federal Reserve Bank of New York's Research and Statistics Group.

How to cite this post:

Anna Snider, “Tariffs, Auto Loans, Rising College Costs, and Other Top LSE Posts of 2019,” Federal Reserve Bank of New York Liberty Street Economics, December 13, 2019,


The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.