Student debt in the United States has already surpassed the country's auto loans and consumer credit card debt. A student loan bubble looms on America's horizon, and promises dark times should it ever burst.
And earlier this month, the student loan problem worsened.
Federally subsidized Stafford loan interest rates doubled from 3.4% to 6.8% after Congress missed the July 1st 2013 deadline, and instead recessed for the Independence Day holiday.
The failure sparked frustration amongst student advocates nationwide.
However, Congress is able to retroactively "fix" the damage done by the soaring rate increase - that is, if Democrats and Republicans can come to an agreement on the matter.
So far, no dice: an emerging bipartisan Senate deal hit a stumbling block last week.
Even though the House was able to pass its own plan in May, the Senate is still at an impasse.
Democratic senators are avoiding the prospect of trying to "balance the budget on the backs of students."
On the other hand, Republican senators want a plan that doesn't risk adding huge sums to the deficit.
Here's what we've got so far:
The tentative deal ties Stafford loan interest rates with rates on the 10-year U.S. Treasury note.
Additionally, there would be a capped interest rate of 8.25% for undergraduates and 9.25% for all other loans.
Republicans would get a link between the financial markets and borrowing terms through this proposal.
Democrats would get a guarantee that interest rates would not reach 10%, their proverbial line in the sand.
Today (Monday) federally subsidized Stafford student loan interest rates doubled from 3.4% to 6.8% after Congress failed to reach that would've maintained lower rates by the July 1st deadline.
Monday also marks the beginning of the Independence Day congressional recess, sparking outrage among student advocates as Congress goes on recess without resolving this important issue.
Congress could retroactively "fix" the damage done by the soaring rate increase, but so far no deal is in sight.
The House has already passed a student loan proposal, but the Senate remains divided.
Particularly, Senate Democrats are divided amongst themselves over two different plans, and cannot yet present a strong front on the issue.
Sens. Kay Hagan (D-NC) and Jack Reed (D-RI) have a plan that would extend the 3.4% rate for another year, while also retroactively reducing the rate.
But a bipartisan group of Senators has a different, more long-term solution. They want to permanently tie student loan interest rates to the 10-year Treasury note borrowing rate.
I know a lot of you out there don't have sympathy for student loan debtors who complain about their debt.
You see it as a matter of personal responsibility - they chose to sign a contract and so should suck it up and uphold their end of the deal.
Money Morning's Capital Wave Strategist Shah Gilani says it best, though:
"You're not wrong. But there are other forces exerting outside influence on the inner intentions of a lot of 'students' susceptible to being sold a bill of goods. Sometimes we're stupid for being conned, and sometimes the con is just so cleverly concealed."
Think of all the branding, marketing, and pressure swirling around the heads of these young folks.
And many don't have parents or educators taking the time to sit down and weigh the options with them.
They are being deceived into paying up to $1,600 in initial fees, and monthly fees as high as $50, to private "debt relief firms" for help that they could otherwise get for free.
Anyone wondering how to get out of student loan debt - or wondering if a slew of student debtors could try to do so - needs to read this.
Yesterday, I wrote about the case of Michael Hedlund, the failed law student who was able to discharge $58,000 of his student loans in a 10-year bankruptcy action.
Before Hedlund's case, it was widely accepted that there were only two ways to get out of student debt: pay it off, or die.
But the Ninth Circuit took a long, hard look at Hedlund's circumstances. It found that he'd acted in good faith to repay his loans, and that paying the full amount would be an undue hardship for Hedlund and his family.
The court viewed Hedlund as an "ideal debtor," and so it excused a large portion of his debt.
If you are a student debtor, you too could have a decent shot at discharging your student debt in bankruptcy, but only if you are an ideal student debtor.
But what makes an ideal debtor?
Accepted wisdom says that there are only two (rather sobering) ways to relieve the burden of student debt: either pay it off, or depart from this earthly world.
On May 22 the Ninth Circuit Court of Appeals wiped out $58,000 in student loan debt for a former law student in bankruptcy proceedings, sending shockwaves through the formerly impervious facade of student loan debt performance.
Ten years in the making, the ruling could burst the trillion dollar student loan bubble.
Business has been good for the federal government when it comes to student loans.
Over the past five years, student loans have generated profits of $120 billion for the Department of Education.
And the latest projections from the Congressional Budget Office (CBO) put the take from student loans for the 2013 fiscal year at $48.6 billion - helped along by a change in 2010 that eliminated the middleman and made the Education Department the direct lender for all government-backed loans.
It means the government will reap more in profits from student loans this year than any of the nation's largest corporations. Last year, for example, the most profitable company was ExxonMobil (NYSE: XOM), which reported income of $44.9 billion.
The money is rolling in partly because the Education Department has stepped up efforts to collect on delinquent loans, but mostly because the U.S. government can borrow money far more cheaply than the students to whom it is giving the loans.
The government's student loans now carry an interest rate of 3.4%, which has proved plenty lucrative.
But unless Congress acts soon, the interest rate on government student loans will double to 6.8% as of July 1. (The temporary 3.4% rate was supposed to expire last July, but last year Congress extended it for one year.)
Meanwhile, 10-year Treasuries go for about 2%, and 30-year Treasuries for about 3%.
That widening gap in rates could drive government profits even higher, but at the risk of appearing to exploit a struggling and vulnerable segment of the population.
"As the pomp of graduation fades, many college graduates become keenly aware of their financial circumstance: in debt," Ernie Almonte, chairman of the National CPA Financial Literacy Commission of the American Institute of CPAs, said in a statement. "They start out with an anchor that slows their progression toward future goals. It's a difficult reality confronting a growing number of people."
"And the strong to seem to get more
While the weak ones slave
Empty pockets don't ever make the grade
Mama may have, and Papa may have
But God bless the child that's got his own
That's got his own."
Some debt, that is.
Students, many of them adults looking to gain new skills, are being systematically ripped off and enslaved by schools and lenders, blinding them with hope about what a higher education can do for them while bilking them for billions in the process.
It's a dirty game, and a big one at that. You probably know, because you probably owe.
First, let me offer some insights on the market before I get to my indictments...
Why the Doom and Gloom?So far, so good...as far as earnings season, that is. Three quarters of companies reporting, so far, have beaten Street expectations. And 81% have offered up better than expected revenue forecasts for the future.
So... why all the doom and gloom?