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Monday, August 15, 2016

There's something about students and we should all be worried.

This is not directly about older consumers but it does impact their lives and those of their children.

I spend more time than I should wondering what will be the next sub-prime financial disaster that will throw the world's finances into convulsions. Unfortunately, there there is no shortage of candidates for that 'honour'.

The thing they all have in common is the are global issues that revolve around a large pile of debt that financiers and government think will be repaid, but will not. That was the problem with loans on homes that could not be paid and bank loans to companies and government that cannot be serviced. Another instance is the promise to pay unsustainable levels of retirement pensions. All potential financial bombs that might explode.

This blog is about students and their precarious financial position. In 1999  the policy of the UK changed and a target was set that 50% of all young people should attend university. Why 50%? There is no rhyme or reason why this figure was selected other than it sounded like a great policy statement.

The US has always had large numbers of students that were funded by loans. In the UK it is a relatively new development for students, not the state, to pay for their education.

There has recently been some highly disturbing research the puts into doubt the viability of much student debt ever being repaid.

In the US it has been shown that the value of a degree, as far as increasing life-time salary levels, is not as great as once thought and highly skewed to the very best degrees (not surprisingly)

In the UK, a quarter of university students are in low paid employment 10 years after graduating.

Not surprisingly, this low pay results in student debts not being paid. Again, there is recent evident showing this to be the case in the UK and the US.

If anything, the numbers of graduates in low pay work will increase. The continuing affect of off-shoring and substituting technology for people means that what we require are a few, very well qualified graduates in specific subjects, rather than hoards of young people with degrees that are seen of little value.

At some stage, this reality must be faced and at that point a large amount of debt will have to be written off. Dick Stroud

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