Pay Your Bills, Part II

Recently, President Joe Biden and Congress enacted legislation forgiving $10,000 of student loans for certain individuals under certain circumstances.  I’ve paid off all my loans (and wouldn’t qualify anyway, for myriad reasons), but I do have two kids who have grad school loans and who may benefit from this new law.  As usual, there’s been a lot of self-righteous indignation by Republicans (all of whom claim to have pulled themselves up by their bootstraps, paid their own way, having been born in a log cabin they themselves built).  They cry, “this only benefits the rich who take out loans!” (maybe – but not at interest rates that would make doing so advantageous).  The yell, “why should Joe Sixpack be paying off the loans of some loser who majored in Lesbian Dance Theory, who can’t get a job and is living in their parents’ basement?” (even though there are a lot of unemployed kids living in their parents’ basements, some of whom have college degrees and some who don’t).  They yell, “people should pay off their loans, no matter what!” (even though every other kind of debt a person can incur in the US but student loans can be discharged in bankruptcy).

This first argument – that the rich are taking out student loans – is a fallacy that may have had some truth back in the 1980’s, when students could take out nearly limitless amounts of low-interest government loans (as could their parents), making it attractive for the wealthy to apply for such loans at 5% and invest them in financial vehicles making three times that.  These days, there’s a limit to how much students and parents can borrow, and the interest rates aren’t nearly as favorable.  The grad school loans my daughter took out this year are somewhere around 7% (far higher the the current WSJ prime rate).  Not much incentive to take out that kind of debt in the hopes of making a profit in this economy.

Also interesting is the fallacy that people taking out student loans exclusively major in obscure, “worthless” fields, all of which fall within the umbrella of women’s studies (because what value could there possibly be in such work?) and literature (less obviously a waste of time, but still, of no real use in today’s world).

This assumption – which allows naysayers of any discipline not included in the 1963 Penn State Course Catalogue to create ever more silly fields of study they imagine might be offered at those ivy-covered walls of academia where they assume all of those student loan dollars are going – does not withstand the reality that the most popular majors for graduating seniors over the last five years have been business, health professions, social sciences /humanities, engineering, and biology. While the second most popular major (social sciences/humanities) would encompass the ridiculous made up majors that these loan-takers are apparently all studying, most of their peers are obtaining degrees in areas I think we can all agree would have meaningful applications in today’s world.

I don’t think it much matters what people major in, and it is inaccurate to suggest that one’s undergraduate major is determinative of whether or not they will be a productive member of society able to obtain a job with sufficient income to repay their student loans. The larger and more important questions are (1) whether or not everyone needs to or should go to college in the first place, and (2) whether or not college tuition is overpriced – it is.

One can debate whether student loan debt should be repaid by taxpayers. My opinion? Not if the money could have been used to fund universal preschool, after school programs, hot breakfast/lunch programs, after school programs, college counseling programs in underserved school districts, or any other program that would have benefitted the most needy communities’ children in getting a better head start. Will a $10k break make much of a difference for a med school graduate with $300k in loans? Nope. That’s 4 months of loan payments. Drop in the bucket.

Higher education needs to cost less, period. Predatory “for profit” schools (one big reason for high loan balances) need to be better regulated. Kids need to be directed to community college or trade schools instead of college unless they really want or need a four year degree.

But there is a way to avoid taking on too much debt in the first place.  Many schools offer work study and aid, and there are literally thousands of scholarships that go unawarded year after year because no one applies for them. For the neediest students, most schools offer a “sliding scale” based upon the “expected contribution,” which is based upon the family’s economic picture.  Thus, a student accepted to a school that costs $70,000 may only be expected to contribute a fraction of that ($20,000, say, that can be financed by work study, scholarships, and loans).

Students should also consider public universities, which are a much better bargain that private colleges.  Many brilliant young men and women have eschewed the Ivies and places like Stanford or Duke because a public university offered a full ride – and I’m not so sure that the quality of education is any different.  Unless you’ve got your heart set on the Supreme Court (and these days, who would want to be in that club?), it doesn’t matter where you go to college – it matters what you do once you get there.

Life isn’t fair. It would be nice if we were all rich and could have whatever we wanted whenever we wanted it. When our kids were little, everyone we knew had bigger houses and went to Disney ever year. We didn’t. Someone told me I must have a lot of debt because I lived in such a modest house – the same house I still live in. We weren’t poor, we just had different priorities (and $125k in student loans that we paid back). We wanted to be able to pay for our kids to go to college. When they went to college, we were. That was our gift to them. Graduate school is on them.

There has to be a point where you man up and pay your way. The system isn’t, and never has been fair, and the cost of tuition is way out of proportion with other big-ticket items. The result isn’t going to be fewer college graduates, but fewer colleges, as those colleges that really aren’t very special and aren’t offering a quality product for a good price fall by the wayside. And, public universities are always a strong bet.

But if you do take on that debt, it is YOUR debt – and no one else’s, and the only person who should be paying it off is YOU, and here’s why:  The reason most people go to college (or grad school) is because they hope, at least in part, to earn more than they would if they only had a high school diploma, and in most cases, they do – 84% more, in fact, according to recent data.  The cost to earn that college degree, the cost to have an 84% greater earning potential – is an investment in oneself, and I can think of no good reason why, as a general principle, the citizenry as a whole should underwrite the cost of that investment.  It’s true that higher earnings mean higher income taxes, and thus more money flowing back into the public coffers for the benefit of all (hence, the cost of loan forgiveness ultimately inures to the benefit of those who funded loan forgiveness).  It’s also true that taxes are used every day to fund some college tuition for some students – usually those who are economically needy.

But those who take out student loans responsibly – and who are also responsible with their finances in general – will eventually find a way to pay them back, even if it takes time, and even if the interest that accrues on those loans ends up costing as much (if not more) that the principle. The problem is that in today’s society, we have been trained to believe that we deserve to have everything we want – whether we can afford it or not – NOW.  We spend money we don’t have on things we don’t need, or take out other loans for the things we think we’ve “earned” – a new home, a new car – because we have a DEGREE! We’ve made it! We DESERVE to have nice things, and we’re making more money than we ever did before.  Getting a college degree is hard work! We ought to be able to have some nice things! Isn’t that the point of it all?

Maybe, but not if it means begrudging a student loan payment, much in the same way we resent having to pay for a new water heater – and absolute necessity unless you really love cold showers, but not nearly as much fun as buying a new sofa. 

You may be saying to me, Wendy, have you not read about all the college graduates who can’t find jobs in their chosen fields, or who can find jobs, but can’t find affordable housing and pay off their student loans? Yes, reader, I have.  What I have also read is that many of those people are looking for jobs in fields that are already overcrowded, or that they are looking for jobs in areas where housing is notoriously expensive.

And once again, we come back to the idea of sacrifice, which means that sometimes you have to take a job you don’t want in order to pay your rent, or you have to compromise about where you’re going to live in order to work in the field of your dreams.  It’s unusual for all but the all-stars to graduate with the perfect job in the perfect city or town with the perfect paycheck – that’s what your twenties are all about:  Living in a crappy apartment eating ramen noodles, working in a job you hate, shopping at H&M, and figuring out what to do with the rest of your life.

Student loans are the ticket to a better life, and it is fitting that the cost of this ticket be paid by the person taking the journey.

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