STUDENT LOAN CRISIS

What do you suppose is the most serious threat to the US at the present time? What problem could potentially undermine our entire society and way of life? Is it terrorism? Border security? Russia? China? Racism? Healthcare? Income inequality? Climate change? Each of these poses a serious threat, and depending on one’s political orientation and economic and social status, one could make a strong case for any of them as the primary threat. But, there is one problem missing from the above list, and I can make a case that it has the potential to pose at least as big a threat as any of the others. And, that my friends, is the proliferation of student debt (“SD”.

What, you say? SD? How can that be? Well, read on.

Student loan programs originated in 1958 when the National Defense Education Act established financial aid programs, including grants, scholarships and loans, for students majoring in certain disciplines, such as teaching and foreign languages. In 1965 the program was extended to include any students who could demonstrate a financial need. Over the years the program’s criteria and the sheer volume of debt have expanded exponentially. Even members of Congress are not immune. According to “Roll Call” 68 Congresspersons either owe SD, themselves, or have family members who do.

The two major reasons for this astounding growth are the exploding cost of college and the high interest rates on the loans, themselves. According to a report issued by the “American Center for Progress” over the past three decades the cost of a typical college has increased by some 1,000%. Depending on the type of student loan the current interest rate can be as high as 10%. By comparison, currently, typical rates on a 30-year fixed mortgage and a new car are 3 5/8% and 4 3/4%, respectively.

Moreover, according to Lenore Hawkins of Tematica Research Corp, SD loans CANNOT be forgiven, even in bankruptcy. (It would be interesting to ascertain how that came to pass. Most likely, some really heavy-duty lobbying.)

According to “Forbes Magazine” in 2018 total SD amounted to $1.5 trillion. (That’s trillion with a “T.”) To put that amount in perspective it is more than the GDP of several European countries, such as Spain and Sweden. Furthermore, it exceeds the total amount of car loans and credit card debt. The “Forbes” report added that the average college grad owes approximately $38,000; two percent owe in excess of $100,000. The average law school graduate owes some $110,000. The average doctor owes about $200,000.

Those are daunting amounts. Remember, few lawyers work on Wall Street, where one starts with a six figure salary and can become very rich. According to Wikipedia, most earn far less, and many never even practice law at all. Similarly, the average doctor, may be in his 30s before he or she begins to earn any significant money, and with the recent changes in the healthcare system their earnings prospects are generally far less than they used to be. Meanwhile, in contrast, the average tradesman may top out in the low six figures, but he will have started earning money at 18 or so and not have any SD to pay off.

The total SD outstanding in the US is second only to mortgage debt. Any way you slice it, the total SD is massive. Most likely, an entire generation will spend their entire lifetime paying off their SD (or trying to). And, those are the people who actually earn a degree. Many don’t for various reasons, and they still have SD to pay off. They end up living with their parents, broke, angry and frustrated.

A recent Gallup poll estimated that 35% of young adults do so, compared to 25% in 1990. The poll found that they want to marry and have kids, but just can’t afford to do so. This is one reason why the middle class is shrinking.

Along the same lines, in January, 2019 the Federal Reserve reported that the precipitous rise in SD has been responsible for many millennials (those born in the early 1980s to mid-1990s) delaying certain life milestones, such as marrying, purchasing homes, having children, and saving for retirement.

So, what does all this have to do with Socialism?

1. As I said, many millennials are disillusioned, frustrated, and angry. They are saddled with massive student debt that they cannot see themselves ever being able to repay. In the words of Bernie Sanders, they feel the system is “rigged” and “corrupt.”

This attitude is bolstered by reports of favoritism, particularly for children of influential politicians, who manage to gain admission to elite colleges, such as Harvard, Yale or Stanford, despite average credentials. Examples abound, such as Dante Di Blasio, Chris Cuomo, Chelsea Clinton, and the children of Chuck Schumer and Michael Bennett. Then, there is my personal favorite, Al Gore, who has sent four children to Harvard. Four! I’m no statistician, but it strikes me as a statistical impossibility that four children from the same family could meet Harvard’s exacting admissions criteria legitimately.

To be sure, this is nothing new, and we all know why colleges do it, but the brilliant student from an average family sees it as confirmation that the current system is broken, corrupt and rigged.

2. All too often, college graduates discover that their hard-earned, prohibitively expensive degree does not lead to a meaningful job and career. Often, they cannot find a job at all, or if they can it is a dead-end job, such as waiting on tables, driving a taxi or slicing meat in a deli. Moreover, they find themselves saddled with a debt load they probably will never be able to repay. They feel the current system has failed them. It can be argued that in return for the exorbitant tuition they charge colleges have at least a moral duty to prepare students for the real world, and this would include career advice. But, alas, they have no incentive to do so, and frequently don’t.

3. Most millennials do not have the foggiest idea of what Socialism is. They are not cognizant of its disadvantages and failings. All they know is it is different from the current capitalist system, which has not worked for them, and they are not adverse to trying it.

4. They are attracted by the prospect of free “stuff.” Who doesn’t like free “stuff.” They don’t realize that there is no such thing as “free.” Someone, somehow, has to pay for it. Guess who that “someone” will be.

5. In many cases, millennials, in the words of Justin Hawkins of the Hartland Institute have been indoctrinated in socialist ideas and ideals since kindergarten. He characterizes America’s schools as “socialist indoctrination factories.” That opinion may be a little extreme, but many Americans have grown to wonder just what colleges are teaching their kids. What benefits are their kids getting for the $50,000 plus a year they are paying. How come they graduate, if they do, being ill-prepared to make their way in the real world.

They are fed up with left wing dogma, which extolls the so-called “virtues” of socialism and ignores the fact that it has failed everywhere it has been tried (Russia, Cuba, Venezuela). They wonder why students need “quiet rooms.” They are opposed to over-the-top “political correctness.” Now, some schools, notably the University of Michigan, have gone further. They have promulgated “Bias Response Teams.” I could write an entire blog on this, but, in a nutshell, this policy encourages a student who hears or sees anything that he or she deems to be biased or makes them “uncomfortable” (even if they were only a bystander) to report it to the BRT. The BRT will then investigate with the assistance of the campus police. Penalties could be as severe as expulsion. Informing on others to the authorities? Does anyone else think this conjures up life in the old Soviet Union, and don’t we still have free speech in this country?

CONCLUSION

So, what is the solution? Personally, I don’t know, but I do know it is NOT to make college free for everyone. Like a lot of left wing ideas, it sounds good, but it is impractical for many reasons, such as:

1. It would be prohibitively expensive, particularly in conjunction with open/relaxed borders. The Dems will throw out many estimates, but the truth is no one has the faintest idea of how much it would cost.
2. Who would be eligible?
3. What would the limits be in terms of years and costs.
4. There would be no incentive to control costs, such as tuition, books, and staffing, which are out of control as it is.
5. Those who didn’t go to college at all or who attended a reasonably-priced college would balk at paying for others who attended expensive schools and for more than four years.
6. It would be run by the federal government, which has demonstrated repeatedly that it cannot run anything efficiently.

There is no panacea, but I would like to offer some possible suggestions.

1. Recognize that the main objective should be to prepare our kids to deal with the real world and learn a skill that translates to a job and a career.
2. Some would benefit more from a trade school or work experience.
3. Some would be better off attending a community college for two years before enrolling in a classic four-year university. That would keep costs down and ensure that the student is more mature and experienced when entering four-year school.
4. Make universities more accountable for their failure to prepare students
adequately. They have a moral duty to do so but not the incentive.
5. Find a way for the feds to exert more influence on the college community.
6. Like most college graduates, I look back very fondly on those years. For many, it was the best time of their lives, a last fling at good times before facing the real world. But, I fear those days are gone.

This is a very complex issue with no easy solution. I welcome your comments. For all of the above reasons, it has the potential to tear this country apart. An entire generation of young adults has become extremely disaffected. They are angry and frustrated. They feel the system is corrupt, rigged and not working for them. They are ready to embrace socialism, despite its warts. If nothing is done I fear socialism will gain a foothold in this country, and, over time, our whole way of life will be changed radically and irrevocably. We, as a nation, cannot let that happen. It would be the end of America as we know it.