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The Subprime Student Loan Crisis

The New York Times’ Ron Lieber has an excellent column on the severe hangover left by the cocktail of cheap credit and spiraling college tuitions: the tens of thousands of young people saddled with tens of thousands of dollars of what is, effectively, subprime student loan debt. In some cases, that student debt is more onerous than mortgage or credit-card debt, since it is difficult to get rid of via bankruptcy.

Lieber elucidates the point by telling the story of Cortney Munna, who lives in pricey San Francisco, makes $22 an hour and owes $97,000 to Citibank and Sallie Mae for her New York University diploma. She is a photographer’s assistant, and has no intention of going into a high-paying career in a field like finance. She is stuck, and her mother might end up selling off her bed and breakfast to rid her of debt.

Lieber’s story is particularly exceptional for making the argument others are loath to make: that Munna’s education was not worth it, and that she would have been better off dropping out and enrolling somewhere cheaper. Of course, on aggregate, people with college diplomas significantly out-earn those without them. And of course, it is impossible to calculate the value of time spent in school or of education for its own sake. But in Munna’s case, where a college diploma makes no difference in her earning potential in her chosen career, remaining in a pricey institution — New York University is the fourth most expensive out of the nation’s 1,800 private colleges — might not have been the right choice.