An 18 year-old with no credit history and no job walks into a bank and requests a loan to buy a $100,000 condo. What is the loan officer most likely to say?
A) Sure! Let's get that paperwork started.
B) Actually, why not go for a $150,000 condo?
C) Is this a joke? No way. No how.
I think we can all agree that in most cases the answer would be C. Yet year, after year millions of 18-year-olds essentially do just that -- take out tens of thousands of dollars in debt to buy something that they cannot afford, and will likely be unable to pay off in the near future or, in their lifetimes: an overpriced college degree.
Just to be clear, I am not calling college degrees worthless -- at least not all of them. But I am calling a system that allows people who are not legally old enough to drink, to incur endless amounts of debt on a choice that they may have second thoughts about shortly after making it, questionable, and borderline criminal.
By now we all know that the American student loan crisis is just that: a crisis. It's just a shame that it took those in power so long to wake up to this fact. Days ago President Obama announced executive action to provide relief to more than one million Americans struggling with student loan debt. The so-called "Pay As You Earn" proposal will allow 1.6 million students to cap their student loan payments to ten percent of their discretionary income, and to forgive the balance of their debt after 20 years of payments. This proposal comes on the heel of reports that for the first time ever, Americans owe more on student loans -- nearly 1 trillion dollars -- than they do on credit cards.
As I have written about extensively, I consider education the gateway to the American Dream. I am someone who is far from wealthy, but I've enjoyed greater opportunities for success than my grandparents (whom as I have previously written worked in cotton fields), because I have enjoyed educational opportunities that they did not. But increasingly education is becoming a luxury commodity in this country, much like a summer home or a really great vacation. Those who can afford it, enjoy it. Those who cannot, don't. Only the repercussions for limited educational opportunity are much more dire than going without that summer home. Financial aid, in the form of scholarships, grants and eventually loans, were supposed to even the playing field allowing those of us born without a silver spoon (or a spoon at all) to have a shot at the same American Dream that those born with a full set of silver utensils, were able to enjoy. There's just one problem, of course.
As we've come to learn, student loan debt has essentially insured that the rest of us could only rent the American Dream temporarily, but never really buy it in full. Like credit cards, student loans have allowed many of us to merely look like we were keeping up with the Joneses, but when that bill finally comes, the reality that you weren't ever really keeping up at all but merely pretending that you were, sets in -- often with disastrous results. Nearly a trillion dollars later and that bill is coming in full for our nation as an entire generation struggles to dig out of what's becoming a modern day version of indentured servitude.
So who's to blame? Well much like the mortgage crisis, there's blame to go around. Speaking as someone who has two costly degrees, both of which could be viewed as non-necessity degrees (as in I didn't major in pre-med or some other field of study in which my degree was an absolute prerequisite to pursue my eventual profession) I acknowledge that adults have to take responsibility for the financial choices that we make. Just like a person who buys a house that they know deep down inside they really can't afford, a person who takes out significant debt for a degree they are not sure they plan to use also bears responsibility.
But similarly, if we hold predatory lenders accountable for targeting low-income people for mortgages they cannot afford, then why are we not holding private lenders accountable for targeting students who take out loans that any reasonable person can recognize they cannot afford, and will likely never be able to? For instance, if there are only a handful of jobs nationwide in a field like Medieval Studies, then how is a lender who signs an 18-year-old to a $50,000 loan to pursue a degree in that subject, really any different than a predatory lender who targets a low-income widow? (Click here to see the 5 highest paying college majors.)
I'm not suggesting that no one should be allowed to receive loans to pursue higher education, or even to pursue subjects of their interest. I am, however saying that we have got to reform the system, and put standards in place so that just as not just anyone can walk in and get a loan for a mansion, not everyone can get a loan for any degree.
Perhaps a start would be requiring colleges and universities to be upfront about the job prospects of those who leave their institutions with degrees. There is already growing criticism of how colleges rig alumni employment data, but what if the government required schools to be more transparent? Instead of simply allowing colleges and universities to report general employment statistics on their graduates (which are notoriously deceptive because they rarely reveal whether that graduate with a PhD is waiting tables or that law school graduate is tending bar) what if schools were required to list the statistical likelihood of a new student at that school receiving employment in a particular field of study upon graduation? Think about it. If a potential college student were to go to the homepage of a particular department of a particular college and see that only 1% of graduates are working in his or her chosen field, he might think twice (or three times) before signing his financial future away for that degree. And you know, what? If he pursues that degree anyway? That's on him. At least he will have made a decision with eyes wide open, something too many young people and their families are not doing, because they are not being provided with the information necessary to do so.
To ensure the responsibility is shared equally, what if when signing loan documents the aspiring student was asked to sign a letter of acknowledgment that he or she is aware of the employment prospects related to pursuing this degree with this institution. Might make everyone involved think more carefully before embarking on a potential lifetime of debt.
As wacky as these calls for transparency may sound, just remember. Years ago people thought slapping health warnings on cigarettes sounded wacky too. But something has got to be done to stop the student loan crisis from demolishing the financial health of a generation, and with it the financial future of our nation.
Keli Goff is the author of The GQ Candidate and a Contributing Editor for Loop21.com where this post originally appeared. Visit Keli's website here.
Follow Keli Goff on Twitter: www.twitter.com/keligoff
Why not make debt a criminal offense?
Money.,..it's the new soul.
If our primary schools were actually functioning, a student who chooses to take up a trade like plumbing and forego college, should still be fully knowledgeable on things like arithmetic/algebraic reasoning, rhetoric, composition, civics, and arts. They had 12+ years to get there after all, which compared to the 4 years of college ought to be enough time. As it stands, college is moving beyond the "liberal arts education --> trade school" shift into an even more base one: "trade school --> remedial basic primary education". JMHO
Second drinking age in some of the provinces is 18 and other provinces it is 19 so they are old enough to drink. This is a small point but the writter should have all their facts correct.
If you choose to take a college loan then you should have to pay it off. The general public is not financially responsible for everybodies or anybodies post secondary education.
We as a society have made it seem that a college or university education is the be all and end all of our next generations future. It is not.
By the way if my spelling is off it is because since I moved to South America my spell check no longer recognizes english and says everything is wrong so it is difficult to see any mistakes....lol
Sorry to burst your fantasy bubble, but in the US and most industrialized countries and post-secondary education is NECESSARY to even get into a halfway decent job. The only thing available for non graduates is service jobs such as retail, food, and cleaning. So if these people "shouldn't be there" what are they to do? Going by your assumption they should just suck it up and live in poverty since they had the bad luck of being born into the wrong social class.
Second there is no fantasy bubble, many young entrepreneurs do not have a post-secondary education. To make blanket statements like "The only thing available for non-graduates is service jobs such as retail, food, and cleaning." would be vastly incorrect. I travel extensively for the last 2 1/2 years I have travelled over 180,000 miles in Canada, the US, Mexico, Ecuador, and I am now living in Perú.
Third I paid for my post-secondary education the same way my daughter is paying for hers. By working and saving. My parents didn't pay for mine; neither are we paying for hers. I have a few 1 year diploma courses and several certificate courses some that I have paid for and some that employers have paid for. Currently my wife and I are three months into a yearlong language school and simultaneously attending Spanish Sign Language School. Again I am paying for it out of my own pockets, no grants, no federal, state or provincial funding is being used. You should never assume because you just made an ass out of you and me.
I do not believe that people have to suck it up but it is not my responsibility to pay for anybody else’s education.
Fourth I never derided and high falutin edumacation. I have two degrees. I believe education can be a very useful tool, but that does not mean that everybody needs it nor wants it. Neither am I excluding any one for going to a trade school which I also did an paid for on my own. I did see however many people who should have taken other avenues, not because they couldn't handle what they were in rather it was beneficial to their pursuits and some were just riding out a BA on mommy & daddy's dime.
Again this is from personal observation not hearsay, CNN MSNBC of Fox news. I also have many friends who started business without any post-secondary at the time of starting their companies and some who went back later in life to improve aspects of their professional & personal life.
As someone who worked for many years in the private sector and now working in a NonGov agency in a very poverty stricken area in South America and previous to that working on a very poverty stricken Indian Reservation in western Canada I have a very well and balanced opinion.
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If you know history that is similar to what happened to Blacks once slavery was over. "The Power in Charge" would take an appliance to the house of a Black and demand they pay for it although they may not even need it, pianos no one ordered nor could play and others. What we have today is none ethnic slavery.
That' ones the way the "rich" makes themselves richer off the poor after getting legislators to endorse "student loans" rights. That is one of the many laws congress passed to increase the riches of the rich off the backs of the poor, "No Shirt, No Shoes, No Service" is another. Just like after slavery, the rich profited from the ignorance of Blacks, today they are profiting off all Americans they have gotten legislation passed requiring a college degree for most jobs, got them to remove "Work Shops" out of high school so students not college prong could obtain a job.
WHAT ARE TIMES WE IN? THE LAST DAYS of this civilization, the beginning of the end.
I wonder who benefits most from an indebted, uneducated populace...? It certainly isn't us...
So to summarize in case you still persist in your little fantasy bubble:
- The US system of unemployment virtually demands a Bachelor's for basic employment, making a lack of a college degree a route to destitution.
- But given the state of the economy and cuts to institutions, tuition costs for students have skyrocketed even as jobs are less available, forcing even many college grads into destitution.
- On top of that, interest compounds on the loans, leading to further destitution.
In other words, to any young American who commits the "crime" of not being born into a rich family, the message is that A. they're virtually guaranteed destitution and unemployability if they don't go to college, and B. there's a very high likelihood of destitution and insolvency even if they do go to college.
Funny, sounds an awful lot like the oligarchical, caste-based feudalism that led to all those guillotines and other nastiness in France in 1789, or Russia in 1917. Maybe it would make sense to learn from history for once, like at least stopping the compounding interest, or more actively helping students get jobs?
Yeah that's why I'm currently a manager at an IT firm with marketing, recruiting, & actual web development experience. Hell even without this job I wouldn't be as bad off as you claim, because unlike some people I know how to swallow my pride and work any job that becomes available to me. Before I landed this office job I worked as a cashier for a coffee shop (America runs on it). Within a six months I was capable of running the entire shop without the manager present. The only thing I couldn't do was handle the financial reports, and that's only because I lacked authority to use the office computer. Had I stayed there, I would be at least a general manager by now.
"And even if you go to a good trade school, you're virtually unemployable if you're laid off without a Bachelor's degree."
You're kidding right? The purpose of learning a trade is to have a marketable skill that's always in demand. There will always be a need for mechanics, electricians and the like. Skilled tradesmen aren't the ones who need to go back and get a bachelors degree. It's quite the opposite in fact, many college graduates are going to trade schools to learn a marketable. Also, look up the data sometime on google. The average college graduate makes around 46K. The average journeyman electrician makes 51K