6% of our national debt is comprised of an ever increasing number that signifies the amount of student loan debt that is owed by the borrowers looking to increase their education, thus giving them a competitive edge in a job market where one job for (let’s say) an intern dentistry position will have upwards of 50-100 applicants. That’s true career competition in a sense, but is it healthy? In an economy where the job market is recovering, though slowly, does it make sense that in order to compete you need to plan for anywhere from the average of 30k to possible six figure amounts of borrowed debt to ensure you even get a chance to compete? By the way dentistry is definitely a six figure education.
My situation is what it is. I owe near 50k on my own (not including the 50k my parents covered), split fairly evenly between federal and private lenders. I like to talk openly about my debt, because there’s no hiding from it. My interest rates were in and around 5% for every loan. Maybe only one fell below that range. I had already completed an associate’s degree from a community college paid entirely by my parents (yes I realize how lucky I am). It was 2005 and I wanted to study Graphic Design and four years later I graduated as the US economy tanked. Fun times. Why did it tank? Well partly because of terrible lending practices and partly for the reason that most Americans aren’t educated enough to really handle home buy decisions outside of high school. Not that predatory lenders help this process. The economy tanked and we were told “Good Luck!” by a generation who had a very different college lending experience in their younger days.
So I defaulted. I went over 90 days without being able to send a single dime to my lender. I applied for a credit card through the same private institution who somehow thought my current situation qualified me for a 5k credit line. A person has to eat. That money quickly went and I cringed every time I had to use it. I had to leave the wonderful city of Philadelphia to find some way to cover my loan payments. I was back in my parents’ home, hoping for a job to come along and save me. Nothing is more degrading to your self-esteem like holding two college degrees and having no option but to live at home again.
I’m extremely lucky that a good job came along not more than two weeks after I got home. This is not the case for many students in the same position. It’s been almost four years and I’m still rebuilding my credit. Bad credit leads to worse lending in situations where you have to borrow. It’s the reverse of the snowball effect that David Ramsey always trumpets (and to which I follow now. Thanks Sis!). And I will be digging myself out of this hole for another 4-5 years. It’s getting better, but not when you’re reaching the age that you hope to own a home, get married, or start a family.
First things first I’m not a sob story. I don’t want sympathy. There are people in this world who have to steal and beg to even afford basic sustenance, if there is even clean water or food around them to begin with. This is very much a first world problem and it’s not about me. But my biggest question after experiencing the American “furthering education” dream that you are taught from day one is necessary for life achievement, is why as Americans do we allow federal and private industry to place an un-questioned price tag upon something that benefits us all as a whole society?
Think about it. Day one in school we are told how important it is to be educated, how important it is for success in life, and not one politician can run without spewing the same lie that they think education is the most important thing in the world. If all this is true, then why the hell does this country hate education? Why do people who try to run for president think that those acquiring a college education are just a bunch of “elitists”? Why is an education program the first thing we cut when the belt needs tightened? If we really believe the best education is found in this country then why the hell does America rate near the bottom of the list? Even better of a question, why do we place the highest price tag on something we are constantly told everyone in this country should have the opportunity to achieve?
I’ll tell you why….. Money. That’s it.
There is great money to be made in preaching the importance of education, requiring it for good career consideration, and then saddling each student with as much borrowed money as possible with a hefty interest rate to make sure you make back sometimes half of what you “invested” into the student. This is our system, whether you borrow federally or privately. Both institutions profit greatly off the backs of the average American high school student who just graduated from a high school that doesn’t require basic accounting as part of its curriculum. Why would they require that? It would only damage their returns. Whether you are a homeschooled, private, or public school kid, you will face this same trap come age 17-18.
Borrowing federally is much safer for the student, but defaulting hurts the tax payers and there are limits, thus stunting the economy of which you hope to find a job within. Remember we’re talking about over 1.2 trillion dollars (probably more since you just read that) right now that make up the remaining student loan debt to be repaid. Borrowing privately is essentially taking out a mortgage, except that there is almost no situation where you can ever relieve yourself of this debt if you fall upon hard times. That’s right, you owe till it’s paid or you die. That’s the honest truth of the American dream that no one talks about. In order to participate you had either hope your parents are well off enough so that you can leave college with a fresh financial slate and a degree in hand, or be ready to have a job lined up six months after you leave college knowing that as soon as those required payments start, they don’t ever stop. And remember, in this economy, employers don’t have to pay top dollar because they know supply is low and demand is high.
So what do you do? Well I’d say if you want to play in this system (assuming your parents aren’t fitting the bill) then you need to be ready to ignore distractions within high school that don’t add value to your life after high school. Find an interest you’re good at and develop it. Something you love and figure out whether or not there is any money to be made in it. Design always fascinated me and thus my electives in college were geared towards developing my skills in design. Eh it’s a livin’. I signed up for yearbook, journalism, and any other class that got me in front of the programs and concepts that relate to good design. Along with those courses I can’t stress enough how important it is for you to attend every single elective that relates to accounting or personal finance. Most likely your school won’t require it, because …America! Accounting should be the number one required course, but hey it’s less money in someone else’s pocket if you know what you’re doing, so don’t expect encouragement from the outside world.
Most importantly, ask why. What do I mean? If a counselor tells you that you “have” to go to the best college you can afford, ask them why. For example being from Maryland, University of Maryland was shoved down our throats. They even came in and advertised by talking to our class. Well, for the field I wanted to pursue, that college doesn’t really satisfy a high standard of design education that would help give me any edge in my field. University of Maryland is now on track towards trying to be at the level of IV leagues while remaining a state school. So that means the tuition rates are rising to match the institutions it wants to mirror.
University of Maryland tuition rates for a four year education are around $29,560 for an in-state student (some would say that’s reasonable… I disagree), and $106,304 for an out-of-state student (totally reasonable right?). How does this make sense? It’s the same education set at a difference of 76,744 dollars?! In-state is meant to attract local students and offer a high education at a lower rate, but that means a kid from the District of Columbia will pay over two and a half times the tuition to get the same education. Room, board, and tech fees are exactly the same price for both students but the tuition is completely at the opposite ends of the spectrum. So how much does University of Maryland really cost compared to what they charge? Who knows?
Let’s consider the following. Bloomberg has reported based off statistics kept since 1978 that college tuition in this country has risen by a total of 1,120%. That’s about an increase of 32.94% each year for 34 years. Now to put that into perspective let’s say your company gives you a raise annually at an increase of 2%, meaning every year your income raises by 2% of what you made the previous year. Let’s say starting in 1978, your income as well as the cost of tuition per year matched at $100.
TUITION MATH:
$100 then x 11.20% total increase = $1,120 now. $1120 / 34 years = $32.94 increase per year.
INCOME MATH:
$100 then x .02% increase annually over 34 years = $196.07
This shows us that in the same amount of time (34 yrs.) your income has increased by $96.07. What this means in comparison to the raise in tuition price is that tuition has increased by $1020.00. Now this assumes we start both at $100, but it does the job of pointing out the percentage increase in comparison to the average income increase. Most could say their annual raise is usually in step with the US inflation increase per year, but it’s safe to say that tuition greatly exceeds inflation and it begs the question of how sustainable is this if the goal is to educate as many of our citizens efficiently?
The worst part is that since the economic recession in 2009, I know many people who have been frozen at a set income due to “insert reason from employer”. I’m lucky to work for a great company that rewards success, but many don’t. Meanwhile tuition rates have not stopped their increase. My first year of school in 2005 cost me around 23k, year two was 24k, year three was 28k, and year four was 31k. They have not stopped increasing and I feel bad for anyone who started in 2008-2009 and are either stuck or have had to drop out.
I love my country, but this type of profiting off the backs of students regardless of the productivity or strength of the economy is exactly why we will fall behind other countries (and already have) in educating our population. Education brings innovation, makes us attractive, and strengthens the ability for recent graduates to contribute to the economy by freeing up their income to invest in housing, start a new business, and create jobs (not the empty promise that those higher up will provide jobs while stashing revenue offshore, but actual employment). But none of this is possible if we strap the cost onto the students back from the start and tell them to spend, spend, spend that borrowed money.
School needs to be cheaper (or free?…oh god socialism! the horror!), more accessible to everyone, and with common sense we can see the benefits of investing in early education and reform. A high school education basically leads to poverty, with very rare exceptions, and poverty means welfare, unemployment, food stamps, and all the social safety nets that we have (and pay for), but many think we don’t need. Well it’s possible we wouldn’t need as much of them if we provided the education and resources to put more kids on the path to the middle class. That’s the real American dream. To not starve, to have a shelter, to be able to provide for your family while not having to work 3 jobs with no days off. How the shit do we not consider this top priority. Free community college is being offered and voted upon on many states today and the idea is noble. Even MIT is offering free courses of their top fields. If we give Johnny high school the tools to achieve while he’s young, he’s less likely to need us when he’s older. And education investment is literally billions of dollars cheaper than the many billions we give away in corporate welfare to companies that don’t even qualify as small businesses, which Johnny could one day start with proper investment by the generation before him.
This country is backwards on education. I can think of 1,000 things to cut before education, and yet almost every state immediately downsizes classrooms, teachers, learning materials, and even closes schools (See my dear city of Philadelphia) at the mere mention of budget cuts. How can anyone pull themselves up with their bootstraps if they have to buy the boots on credit? I could go on for hours about how many of the top countries outside of the US (yes other countries exist and many have solved this problem decades ago) have greatly reduced costs and some have offered free college education and continue to rate better than the US. It’s sad, but true.
You don’t create better citizens in the latter end of their educational conquest. You start in the beginning and invest in their early education where it doesn’t straddle them with what equates to a mortgage payment. Money should be flowing into public school education starting from the first day these children hang up their backpacks and sit in front of a willing, but publicly demonized former student looking to pass on their knowledge to the next generation. If you think education is broken, then I’d be willing to agree, but it’s not beneficial to gut it but rather re-define and re-invest in a system that will set children from age 5 to age 18 with the skills that allow them to manage a bank account, understand bad lending, navigate further education, understanding the financial repercussions of buying a home, car, and starting a family. I was a kid stuck in a system where I learned little and then straddled myself with debt to compete. I can’t start a business, I can’t afford a home, I don’t have children, and I’, one of the lucky ones with help from my parents. This country is in love with itself but it hasn’t evaluated itself in a very long time. Stop just waving the flag, and lets start backing it up. Sorry for the length. I know many of us Americans hate reading.