The New York Times Magazine this week is dedicated to a discussion of debt in America, the changing force of American economics, and how we are dealing with it. The national debt is over $8.3 trillion, and an alarmingly large portion of that is private debt. There are a lot of excellent articles in there, including one on student loans, which is particular interest to me as a college graduate currently in loan repayment.
The case that the article is making is that debt in general in this country is a big issue, and student loans are part of it. There is an argument that a bachelor’s degree is still a strong investment, but undergraduate students are graduating with an average of $16,000 in debt, and that’s a lot to shoulder. As interviewees in the article point out, it’s difficult to save for a home, new car, or other major expenditure when your money is being funneled into student loan debt. Especially, I might add, if you relied heavily on credit cards to finance your education as well, as a growing number of students are. Indeed, from the perspective of a job requiring minimal intelligence behind a desk, my bachelor’s degree appears monetarily worthless, and the oft-cited additional million dollars in earnings laughable.
With the rising cost of living, it’s virtually impossible to save money as it is–many Americans don’t have contingency plans for retirement, illness, or other catastrophe, and now that bankruptcy laws have been changed even devastating illness will not translate into forgiveness of your debts. We are being screwed by a society that is extremely difficult to live in, and we are also screwing ourselves with our quest for consumer goods and services, things with less tangible value than a house, for example. Several books have recently been published talking about the plight of twenty somethings–we are a generation which may be lost to debt, for whom every decision must be based on money. Some of this situation is of our own making, and we should take responsibility for that, but not all of it is our fault. Some of it is thanks to predatory lending practices, skyrocketing costs of living, unemployment.
The primary question posed by the article is whether or not student loans constitute a crisis. I’m not quite sure that they do yet, but I believe the rising cost of education in this country is a big problem. We are, after all, one of the few first world countries that expects students to pay for their education, although government issues student loans do have a low rate of interest and very forgiving terms. But that fact remains that new graduates entering the job market must always keep the specter of their student loans in mind–I, for example, would love to join the Peace Corps or work in some other branch of public service, but my debt constricts me from doing so. And especially for undergraduates, it’s difficult to understand the “value” of a bachelor’s degree when you are working in retail, food, or some other aspect of public service, as many of my college friends do.
Graduate and professional students are in another boat, one which includes a lot more debt. As Elizabeth Warren points out in the article, though, their degrees have a much higher potential of earning power. However, because of the high amount of their personal debt, most choose to go into the private sector where they can make substantially more money, rather than the public sector. As a result, we are facing shortages of nurses and teachers, government researchers and other vital cogs in the machinery of society. In turn, many organizations and states are setting up debt forgiveness and incentive programs to encourage people to practice medicine in rural areas, teach in inner city New York, or work for the National Institutes of Health. This is a step in the right direction, and a life saver for some graduate students.
A national student loan forgiveness program would be a brilliant thing–I especially like the proposition that in exchange for four years of work in the public sector, all or a large part of your student loans could be forgiven. In my opinion, this is the way it should be. I think it entirely reasonable for the government to ask for some sort of return on its investment, such as work in public service. Students should not be driven to make choices on the basis of money, and I’m always advising the young adults in my life to go for what they want–the money will follow. It’s a belief I’ve always held, and now I find myself up against the wall as a result. I followed my dreams without much regard to money, and now I have no hope of ever advancing myself–I am frozen, forever, in a mire of my own making.
A friend of mine who recently graduated from college received what in my mind is the best graduation gift ever–his parents repaid his student loans for him. The tragedy is that he will never know how valuable that gift was, even though in ten years I’m sure he will own a home while I still struggle to pay the rent, he will have savings if he is sick whereas I will go to work even if I do have a hacking cough, because I can’t afford a lost day. He will never understand the depths of his liberation and personal freedom, because he doesn’t know what the other side of the fence is like (and he shouldn’t have to), and I envy him immensely. No one should be in my position–everyone should be in his.
The crisis, as I mentioned above, is not just with student loans, it’s student loans within the larger framework of personal debt. For example, Peace Corps service can defer and ultimately partially repay student loans, but not other debt, such as that through credit card companies, banks, and other lenders. When serving in the Corps, you are paid at the standard of living for your post of duty, which is entirely reasonable–but does not allow you to manage your other personal debt (even if it was school related and, one argues, a part of the total cost of your education).
The simple solution for students might be “well then don’t get into credit card debt.” But when you are struggling to survive in an expensive urban area like Palo Alto, Boston, or Chicago on minimal financial aid because the resources of the school only stretch so far, and the choice is between credit card debt and not eating–you’re going to fill out that Chase application.
When my father graduated from the University of Chicago in 1969, he had a couple thousand dollars in debt. He’d paid $30 a month for a room in an apartment in Hyde Park during his years of education, and he worked a variety of odd jobs in college to eke his way through. Then he wandered around the country and the world, exploring, and sometimes sending student loan payments back. Did it take him a while to repay his loans? Yes, of course. But he never based any life decisions on money, and I think that’s a splendid thing.
Thirty years later, when I was looking at an undergraduate education at Chicago, I would have graduated with close to $25,000 in student loans, and I would have paid $800 for a room in an apartment in Hyde Park. The cost of living went up, and the amount of debt burden in relationship to my overall education did too. So what did I do? I went to (famous university) where tuition was significantly cheaper and I could get grants from the state thanks to being poor and a California resident–and I still couldn’t afford to live, and had to take on a substantial personal loan to finish out the semester. I’m not sure my father ever forgave me for making a choice purely motivated by economics, but the math to me was simple.
Currently, the repayment amount on my government loans is 13,922.41, and I have been in repayment for over a year. I have no realistic idea of when I will be done paying these loans off, and I try not to think about it. But the sad part of the matter is that I am forced to base every life decision on this money, that after following my ideals through a college education I have been forced to put them aside because student loans cannot be repaid by ideals alone. And it makes me sad to think of how many other American men and women are in the same position, how many potential brilliant public servants, artists, artisans, and individuals have been lost in a sea of debt.
So perhaps yes, student loans are a crisis. Debt in general is a crisis, though. It’s one I’m not entirely sure is soluble, though more government oversight over predatory lending might be a good start. More support of youth struggling to make their way in the world would be a good thing to think about as well. My advice to all the parents in my life, or people thinking about having children, is this: start putting money aside now, so that when your child grows up, ou can make life choices based on dreams and desires, not something mundane as money. If the children are our future, why are we saddling them with inescapable debt?