Tuesday, January 31, 2012

Student Loan Crisis in 5 steps

1.  Manufacturing jobs disappear in the United States, leaving only very low-wage service jobs or more technical and skilled careers.  But instead of investing in manufacturing in the US, the country makes a tacit decision that everyone should go to college and get one of these higher-skill, higher-paying jobs. It's the free market solution.

2.  Everybody, as a result of Free Market decision #1,  needs a college education.  But instead of making college education more plentiful and more affordable (investing more in community colleges, lowering fees and tuition, or even making it free, like Norway), the country adopts another  'Free Market" solution.   We decide to finance higher education by student debt.  

3. As an unintended consequence, college costs soar, for-profit colleges multiply and prestigious universities acquire endowments the size of small countries.  Banks make fortunes handling student debt.  Why shouldn't they?  It's a free market solution.  

4. However, the underlying problem remains: the economy still does not produce the jobs needed to pay off the student debts that have been incurred.  Young adults face the beginning of their careers with debts that are crushing them.  This is will affect their ability to take on mortgages, make consumer purchases and save for retirement.  Student debt becomes a drag on the whole economy.  

5.  If these young adults were airlines, chain stores, or automakers, our system would allow them to shed their unpayable debts through some sort of bankruptcy proceeding.  However, since they are young adults of the middle or working classes who have aspired beyond their station, they need to be taught the hard lesson of proper debt management.  No relief is possible.  After all, it's a free market.

One solution proposed has been to allow student loans to be discharged through bankruptcy proceedings.


Joel Monka said...

I don't believe you grasp the purpose of requiring college degrees in the modern workforce. 99% of the jobs that state a requirement for a bachelor's do not in fact need one- this is proven by the number of jobs in which your major didn't matter! Seriously, a great many corporations- and government agencies as well- actually state that any degree at all is acceptable, it need not be in their field. There are two reasons for this.

The first- one that I learned when I was doing the hiring- is that modern public schools are so worthless that a high school diploma- even with honors- is NO guarantee that the person holding it can read, write, or do sums at an eighth grade level. Any employer can tell you horror stories of how an employee even with advanced degrees screwed up something one would have thought a bright eight year old could have handled.

The second reason is that it's a handy coarse filter. There are literally more people today than there are jobs- according to the US Bureau of Labor Statistics, there are fewer people holding full time jobs today than in 2000, despite the population having grown by 30 million since then. If you don't want 5000 people applying for every job you post- something that saps HR and costs you money- make the standards impossibly high... you'll still get plenty of applicants- there are masters and doctorate holders managing parking lots.

Tom Schade said...

Thanks for the amplification, Joel. You, however, do not need to start a comment with such a negative assessment of the writer. You don't know what I grasp or don't grasp -- and more importantly, you are not arguing with me, but adding a further perspective.

It's called "making a space for yourself in the conversation with a hand grenade." It's unnecessarily adversarial.

Unknown said...

I agree that there needs to be better ways for handling student debt. But as someone about to have a Master's degree and $40,000 in debt (on top of the $20,000 left from undergrad) and looking for barely-above minimum wage jobs, I see this is a cultural problem as much as a financial one.

A college degree (and increasingly, a post-graduate degree) is essential simply because we as a society have decided to value a university education and the white-collar jobs associated with one, above all other sources of experience. We also treat university education (and all education leading to it) as for the purpose of preparing students for the job market. This is not what universities do well (universities are great venues for learning for the sake of learning, gaining new ideas, furthering understanding in students and the larger culture). Vocational education does this very well, but a vocational education (in high school or beyond) is not "as good as" a university degree, because vocational training and its associated job markets have long been the realm of lower-class and minority people, so holds less cultural value than that associated with the university.

The problem is not that so many people want to get university degrees, or that people who previously would have been prevented from access to that higher learning are now able to finance such a degree. It is that everyone feels they MUST get a university degree, whether they want one or not, because that degree holds such high cultural value.

A friend's brother wants to work with cars - repair, but also custom modification and all that cool stuff you see on TV these days. Did he get a vocational degree and apprentice with a car builder, allowing him to learn on the job and have little to no debt? No. He got a 4-year degree in mechanical engineering with the accompanying debt load, because it was not culturally acceptable for him (white male, middle class family, scholastically adept)to get anything less than a 4-year degree from a decent school.

My point is this: A university education should be available and affordable for anyone who wants one. But we need to place higher value on those other forms of education and training, and on non-white collar or academic jobs, so that those people who are drawn to them can pursue them with the same pride as those who go to university.

In a race to the top, there are always losers.