Wednesday, April 25, 2012

Student Loan Debt - The Millennial Sob Story

Contributed by Katie Foley

Ever since I was "this tall" I have heard that the key to a good future is a good education. Fortunately school was something that came easy to me and I had parents who were willing to parent me by taking an active role in my cognitive and social development. A "good education" in my family meant college, end of story. 

When the time for college came I decided to go to a state school because, as I explained to any who inquired, "the price was right." I knew that college is expensive. My older sister went to a private school and seeing her debt load made me direct my attention to a more publicly funded institution. In addition to choosing an economically sensible institution of higher learning, I also worked 30-40 hours a week in order to minimize my need to borrow money. 

Having been so fiscally responsible during college I should have simply framed my shiny new diploma and entered the working world. Instead I went to law school. I cannot say that I "regret" the decision, but I regret the vast amounts of money that foolishly borrowed at a ridiculously high interest rate. I regret not knowing when I began that the economy was about to collapse under the weight of yet another economic bubble. 

As a teenager I witnessed the burst of the .com bubble and as a young adult I witnessed the burst of the housing bubble and subsequent near-collapse of the global economy. I have come to accept that, to a particular breed of greedy jerks, the threat of national or global economic collapse does not outweigh the promise of a quick buck. I have read about the deterioration of worker benefits. I have heard about the decline in academic achievement as lawmakers demand standardized results instead of allowing for cognitive and social development. I have seen the devastation wrought when intellectual strength gives way to political expediency in judicial appointments. I have watched as politicians consistently fail to address the pressing issues of the present and future because they owe their campaign donors more loyalty than their constituents. I have witnessed  much of the America I grew up expecting to inhabit fall prey to the greed of a chosen few, who were able to manipulate the right assholes at the right period in time.

But soon I’ll have to accept that I was one of the assholes manipulated by those greedy jerks. Today I read this article about how U.S. Bank has decided to pull out of the Student Loan business. J.P. Morgan too, it would seem, has decided to start lending only to their current customers. US Bank is one of the more [little "c"] conservative banks left and J.P. Morgan was badly singed by the sub-prime conflagration. When you add to that this article, which states that the student loan debt burden has now exceeded $1 trillion (yes, with a "t"), a debt burden that outstrips credit card debt it would seem that maybe these two banks see a bubble burst on the horizon.

Discussion of today’s student loan debt burden often produces two main arguments. One side thinks that all student loan debt should be forgiven. As someone who has an upside-down mortgage on her law school diploma I would LOVE to see my loans wiped away. However, this is hardly fair and fails to take into account the economic impact erasing debt would have now that the Department of Education holds much of the debt. The opposing side doesn’t think that those with student loan debt should be given any relief, as they “signed on the dotted line” to borrow the money. This is a fair point, but again it is overly simplistic as it fails to understand that this staggering amount of debt is preventing young people from doing other things that are good for the economy, such as buying homes, getting married and having families.

Now President Obama is touring the country, trying to say we need to keep college affordable. I agree. But let's re-invest in our college system instead of ensuring individuals can borrow vast sums of money at a capped interest rate. Let's stop cutting funding for education. Or, if we're going to cap anything, let's cap the rate at which tuition can increase from year to year. Making the assumption of student loan debt more palatable to America's youth may get you votes, but it's not going to keep this bubble from bursting. And unlike a house, my diploma has very little resale value.