“Back when I was in school . . .”
This is a tired-old phrase, usually followed by tales of hardship.
The Olden Days
But here’s an opposite twist: Back when I was in college (during the 1970s), you could actually pay your way through, with little-to-no debt, by working part-time jobs and summers and getting grants and scholarships; or by taking a semester (or two or three) off from school to make money for finishing. “Cramming four years into six,” is the common (but not very funny) joke from back then about paying for school.
–For professional schools back then, add in (as in my case) a working spouse to make ends meet: we say that, while I earned my J.D. (“Juris Doctor” degree), she earned her P.H.T. (“Put Hubby Thru” degree).
Those days are gone!
The Student Loan Problem
Because I live in the professional world of bankruptcy, I see every now-and-then the fallout from student loans. And the fallout is ugly. It’s a picture of highly-educated people (mostly young) buried under a burden of student loans. And in many cases it’s a debt they will never be able to repay — ever. Heck . . . many can’t even keep pace with interest accruals, let alone make a dent in the principal balance!
And student loan debts can’t be discharged in bankruptcy, except for the most difficult of all hardship cases.
What is the culprit causing all this? It’s the easy availability of student loans for the benefit of high-priced colleges.
Student loan programs developed over time with the best of intentions. Who can argue with the benefits of making a college education at the best-of-all institutions available to everyone, regardless of financial means? “No one!” is the unfortunate answer.
But the best of intentions can (and often do) go awry and produce unintended consequences.
Here’s what’s gone awry with student loan programs: the true beneficiaries are high-priced colleges, not students.
The high-priced colleges, who revel in beautiful campuses and other luxuries, create a demand from tuition-paying students for luxuries. And other colleges must-keep-pace or die. Who wants to go to a college with low-quality facilities when luxuries can be enjoyed elsewhere?
And then there is the marketing-genius deception. It seems, in many situations, that neither young college-bound students nor their parents can discern the difference between, (i) a college charging low-prices and offering limited scholarships, and (ii) a college charging outrageously-high prices but giving huge-percentage scholarships that result in a still-outrageously-high actual cost. Student loans enable students to choose the still-outrageously-high-cost college. Unfortunately, this marketing-genius deception merely feeds the beast and magnifies the problem.
An Ancient Proverb
Moreover, the following ancient proverb applies in full-force to the student loan crisis: “The borrower is servant to the lender.” Here are some real-life examples of how the proverb works for student loan debts:
–How about the young couple who met at a high-priced professional school and have been in the working world for several years. Both are buried under a mountain of student loans. One of them really, really wants to pursue a coaching career, instead of the schooled profession—but that’s not possible because student loans require continuation in the higher-paying career.
–How about the graduate from a high-priced school who works at a high-end salary in his/her schooled profession; but even with the high-end salary, the young professional is unable to pay accruing interest on student loans and can’t even begin to pay on principal.
–Or how about the older person who, feeling trapped in a dead-end job, is persuaded to spend large amounts on additional education at a high-priced college, only to learn the hard-way that this additional education provides little-or-no actual improvement in the student’s marketability.
–And what about the graduate who earns a sufficiently-high income to cover monthly student loan obligations but pines: “If I had known what my high-priced education would actually require in servicing student debt, I would never have taken that path!”
An Escalating Problem
But the high-priced schools from which these people graduated continue to charge their students outrageously-high amounts, continue to build gorgeous buildings and provide other luxuries, continue to invest huge sums into athletic teams, scholarships and facilities, and adamantly refuse to pursue an affordable-cost education model.
The upshot is that even traditionally-low-cost colleges (e.g., community colleges) are forced to compete in the luxury realm: are building fabulous campuses, are increasing their visibility, and are raising their tuition. And the student loan crisis is hitting students even there. This is a shame!
Have you read the book, “The Millionaire Next Door”? This book argues that adult children need to be economically self-sufficient, and it decries economic dependence of adult children on their parents. In the student loan crisis, this argument is commonly applied to students and their parents.
I contend, however, that this argument is most-directly applicable to colleges and the providers of student loans. Student loans have enabled a bent-toward-luxury among colleges—especially among high-priced colleges—and a related dependence of colleges on this economic support. Most high-priced colleges (and now even low-cost colleges) are utterly dependent on the continued flow of easily-obtained student loans. Such dependence always has prevented, and continues to impede, the development of affordability-based education models.
Easy student loans have enabled and entrenched today’s unaffordable model of higher education. And today’s higher education schools are dependent on such loans continuing.
Unfortunately, the ones who pay the ultimate price for such dependence are the loan-incurring students—not the dependent colleges.