Students Are Responsible for the Student Loan Crisis (Part 1 of 3)


But There’s a Lot More to It Than That

With the financial effects of COVID-19 reducing enrollment and increasing college costs, and with a potentially record percentage of students seeking student loans, the information in this series of articles may be even more valuable to students.

This is Part 1 of a three-part series of articles on the student loan crisis. After five months of research, I have been forced to come to some very startling conclusions that are much different than those promoted by government, media, and the education industry. In this series we will identify the forces behind the disaster that has so profoundly affected the lives of students. If we are to truly understand the causes of this crisis, it is necessary to objectively look at all the contributing factors and not just those we are comfortable with that make good talking points.

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Part 1 will provide an introduction to the subject, explore who is to blame, and offer an overview of the process of performing a cost-benefit analysis of college degrees, the jobs they lead to, and the financing of them that every person contemplating attending college should perform before even applying to a college. Part 2 will examine other factors that contributed to the student loan crisis, where we stand now, and what student loans actually accomplished in opposition to what their original purpose was. Part 3 will look at how government is contemplating fixing it and concluding remarks.

Introduction

So let’s jump right in and look at the uncomfortable truth: we need to acknowledge that students are ultimately responsible for the student loan crisis – not to place blame, but to identify the life skills they are lacking that allows them to blindly make terrible decisions regarding their futures. It is inarguable that getting a college degree with government-promoted student loans was not a good idea for the millions upon millions of students living with crippling student loan debt. Yet even today, seeing the results of its policies, the Federal government continues to pitch the idea that college is necessary for success. If students had had certain critical life skills, the student loan crisis would never have happened – despite the efforts of the student loan industry, institutions of higher learning, and government to promote it. We are going to examine all sides of this story.

We should start with the great myth that is repeated like a mantra by all parties involved in higher education: college is necessary for success. Carol Christ, Chancellor, UC Berkley, said in a Berkley Blog post, “Education, in today’s world, is the path to the American dream.” As an unqualified statement, this is the great falsehood upon which federal policy is based. For some, a college degree can indeed be a path to the American dream, but for nearly as many others, it is a path to hell. To treat everyone as if they are on the path to the American dream is to show a callous disregard for the wellbeing of the millions of students on the second path.

In the same post, Christ gave the most commonly cited rationalization for the idea that college is necessary for all: “A college degree increases lifetime earnings substantially — by about $1,000,000.” This too is a falsehood because it suggests that ALL degree holders experience this benefit. The AVERAGE earnings are increased by $1,000,000 over a lifetime (about $25,000 per year). But nearly half of degree holders are still in jobs that do not require a college degree six years after graduating! This means that they see no benefit to their earnings over that of a high school graduate. It also means that the other half of college graduates have their lifetime earnings increased by well over $1,000,000, so while the benefits of the right degrees are very real, the downside of the wrong degrees are devastating. And there are only half as many jobs that require the right college degrees than there are college students.

According to a report by the Center for College Affordability and Productivity, 37% of all students graduating from college are in jobs that only require a high school diploma or less. These college graduates are worse off than the high school graduates in these jobs because they have hundreds of dollars of student loan payments each month for 5 to 20 years – money that would otherwise be going towards improving their standard of living. If a student loan for a college degree leaves you buried with 20 years of crippling debt, not only is that degree not worthwhile, it is an outright detriment to your future that should be avoided. Indiscriminately seeking just any college degree is blindly rolling the dice when your entire future is at stake.

The report also shows that another 11% are in jobs requiring only an associate degree that requires less than half of the student loan dollars required for a bachelor’s degree. That means that a total of 48% of the college students enrolled in a four-year college shouldn’t be if their own best interest was a consideration. If college-bound students had the skills to look out for their own best interest, half of them would not have attended college, would not have incurred student debt, and the decision not to attend college would have increased their take-home pay! Half of all college students are working towards degrees that lead to jobs that neither require the degree in the first place nor can support the loans required to get them. These people should not be in college – they are destroying their future, not building it.

“The Federal student loan program not only fails to convert financially disadvantaged students into financially successful graduates, it succeeds in converting financially solvent students into financially crippled debtors – by the millions!”

We must ask, why is the government student loan program giving these students loans? Why doesn’t the Basic Eligibility Criteria on the Federal Student Aid website require that the job to which the degree leads support repayment of the loan? Why does the government believe that getting as many students a degree for its own sake, regardless of outcome, a worthy and responsible goal? The only explanation is that there must be some benefit to the politicians and the lobby groups, because it is not to the benefit of the students, their families, or the country.

We must consider the fact that if the government hadn’t given out these loans, 42% of the $1.6T in outstanding government guaranteed student loans – $672B – would not have needed service by the student loan service industry that is in bed with the government – an industry that spent $4.4M on campaign contributions in 2017 alone. What consideration does it appear has the greatest influence on the government’s student loan-granting policy: the wellbeing of students, or the profit of the student loan service industry? The answer is self-evident.

The Philadelphia Inquirer in a July 1, 2019 article said:

“The student-loan lobby claims to support students and their families,” said Seth Frotman, executive director of the Student Borrower Protection Center and former top student loan official at the Consumer Financial Protection Bureau. “But the reality is that executives are profiting enormously off of a broken system that leaves so many borrowers crippled in debt. Over the decades, we’ve seen a revolving door of lobbyists peddle policies designed to exploit the pursuit of the American dream.”

And these lobby efforts have been successful. For half of college graduates, their degree does not lead to the American Dream, it leads to exploitation. This situation was alluded to by Education Secretary DeVos in a recent speech at the Federal Student Aid Conference when she addressed members of the National Association of Student Financial Aid Administrators in which she said:

“And today, FSA holds more than $1.5 trillion in outstanding loans to 42 million borrowers. That portfolio makes Federal Student Aid bigger than Bank of America, bigger than J.P. Morgan, bigger than Capital One. Indeed, it represents the country’s biggest consumer lender. Now consider this government monopoly was coupled with each new political project of each new Congress. Every couple of years, FSA—and the students it serves—have been pulled in a new political direction.”

Who is responsible?

Yet the myth of the necessity of college, without qualification, is promoted by all those associated with education: colleges, universities, government, the student loan service industry, and financial institutions. It is promoted because of the unbelievable amount of money that is being made at the expense of the students, their families, their communities, and the future of the country itself. So, in light of all this, how can it be said that students are to blame?

College age students not only consider themselves to be adults but believe (as we all did at that age) that they are god’s gift to the world in their level of intelligence, knowledge of the world’s problems, and understanding of the course that should be taken to address those problems. They are, by their own assessment, modern thinkers with modern solutions that older generations have failed to implement. Ask any senior in high school or student in college and they will agree – I am not stating an idea that is new to them or that they would find offensive. It is simply fact in their minds just as it was in ours at their age.

So, for the sake of discussion, let’s accept the status they bestow upon themselves, and take an objective look at who is responsible for the student loan problem.

We’ll begin with an analogy. If a person decides they want an 85″ TV and they buy it on credit, who is responsible for determining that the terms of the agreement are in the best interest of the buyer? The seller? The government? The people that live in the buyer’s neighborhood? The seller has performed due diligence and has determined that the terms of the contract are in their best interest – they drew up the contract. Because the buyer is the only person that determines what is important to them, it is only the buyer that can determine if the terms of the contract are also in their best interest. It is the solely the buyer’s responsibility to see that the contract accomplishes their desires in a manner to which they are willing to comply and that is compatible with their ability to do so. This includes the term, interest rate, repayment schedule, penalties, fees, etc. of the contract, as well as determining if perhaps a smaller, less costly TV or no TV at all might be in their better interest.

It is only by the fact that members of a society can count on the word of another that human beings are able to interact with one another in a peaceful manner. It is therefore every person’s duty to ensure that they are willing and able to live up to their word – particularly when it relies upon future performance. Failure to do this is a failure to contribute to maintaining the social fabric of society and nothing less. A person’s word is, in fact, that important to be upheld. We should not take the giving of our word lightly, because the quality and meaning of the rest of our lives hinges upon it. And it should.

So, let’s now talk about student loans. A loan to buy an education is no different in terms of responsibility than a loan to buy an 85″ TV. However, in terms of the importance of performing due diligence, it couldn’t be more different. Without exaggeration, this could well prove to be the single most important decision of a student’s life. As such, any failure to perform due diligence in analyzing all aspects of this decision would be nothing less than an act of contempt against themselves.

How might due diligence manifest itself in achieving a student’s own best interest with respect to college and student loans? The process by which it is achieved is simple, but completion of it, very difficult: a cost-benefit analysis. The more time spent on it, the better the outcome.

Career Path Cost-Benefit Analysis Overview

Step 1: Choose a field that interests you.

Step 2: Research jobs in that field that call to you and choose one. Identify the pay, benefits, and expenses (union, travel, ongoing training, professional memberships, etc.) of that job.

Step 3: Research where you would need to live in order to find one of those jobs and determine the cost of living there (housing, utilities, food, transportation, medical, etc.).

Step 4: Research the requirements to become qualified for that job. Be objective about your intellectual, emotional, and spiritual abilities to meet the requirements. Do allow the strength of your desire for the job to influence your assessment of your abilities. People can often rise to difficult challenges if they are sufficiently motivated. If it means everything to you to pursue a given career because you love it, but you have concerns whether you could successfully pull it off, you should consider going for it. But you should develop a Plan B for an alternate career that you feel you have a higher chance of succeeding in and towards which your credits for the preferred degree would transfer as electives. In this way, if the preferred degree did not work out, the costs would apply toward the Plan B option and nothing would be lost. Plan B should also have passed this full checklist.

Step 5: If a college degree is required, research the colleges and costs. Few jobs actually require degrees from high cost elite institutions.

Step 6: Explore your options for paying for the degree: cash, pay as you go (work your way through college), scholarships, student loans, etc.

Step 7: If student loans are required, research all aspects of the loans available (amount, term, payments, interest, etc.).

Step 8: From the research of Steps 2, 3, & 7, using the income from the job, the cost of living in the area to which you would relocate, and the repayment schedule of the loan, create a budget to see what lifestyle would be available to you based on your proposed choices. Be sure to include discretionary expenses that are important to what you consider a worthwhile life such as recreation, travel, electronic devices, vehicles, ordinary savings, retirement savings, etc.

Step 9: Determine if the budget offers the lifestyle you desire. If it does not, you must make a new plan for your life by making changes to the preceding steps – including changing how you will pay for the degree or choosing another career. No one gets through life getting everything they want, and some must compromise on just about everything. That’s life. All anyone can do is make the best of the hand Nature dealt them – and that means taking responsibility for your own wellbeing. You must be willing to recognize when college is not in your best interest. If you choose to proceed despite what the analysis indicates, you must accept the loan-burdened life it leads to as your own free choice.

If a student performed due diligence by analyzing their desired career and the means by which they would achieve it, they would not end up in a life overburdened by student debt unless they made the conscious decision to do so. This is the world of adulthood, and there is absolutely no reason that others should be responsible for bailing someone out of the life they freely chose for themselves or ended up in because they failed to research the potential outcomes of their choices. It is the individual’s decision alone, and theirs to enjoy or suffer the results of their decisions. Students have not been taught this reality of life and it has disastrous consequences for them.

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