Higher Education Debt: Is It Truly Good Debt?

-- By CharlesRoper - 17 Feb 2016

The Problem

From the very beginning of life for Millennials they have been set on one track, the pursuit of higher education. Always being told and never allowed to question, that higher education is an investment in their future and is good debt. The premise behind good debt is that it is an investment and although you may owe money, at the end of the day it is really putting money back in your pocket, usually through higher returns.

That education is important to living a good life and making something more of oneself than one started with has been mentioned to other, preceding demographic cohorts over the last several thousand years. That one would go into monetary debt for that education requires willingness to loan to young people who have no work experience or present ascertainable independent sources of income. It is evident that under ordinary circumstances there would be insufficient sources of such credit to make the experience of student debt more than exceptional. Government guarantees are what generate the mortgage market. So why are we beginning with what they told you, not what they told the people who put up the money?

Undergraduate Debt

The first step of higher education Millenials are herded into is that of undergraduate university. While attending university the typical student incurs a debt of nearly 30,000 dollars. See Allie Bidwell, Average Student Loan Debt Approaches $30,000, U.S. News and World Report, (Nov. 13, 2014, at 12:01 a.m.), http://www.usnews.com/news/articles/2014/11/13/average-student-loan-debt-hits-30-000. Upon graduation, after the institutions have their money, Millennials soon realize that the job they think or more likely are told they want in order to truly be successful in life requires much more than the typical bachelors degree.

Why not make links? This is web writing.

Graduate Debt

So Millennials are forced

"Forced" to be "truly successful in life"? Do I have that right?

to continue down the only path they have known since birth and seek out even higher education though graduate schools. With one quarter facing “good” debt over 100,000 dollars and one out of ten incurring over 150,000 dollars; all in addition to their undergraduate loans. See Allie Bidwell, How Much Loan Debt is From Grad Students? More Than You Think, U.S. News and World Report, (March 25, 2014, at 11:38 a.m.), http://www.usnews.com/news/articles/2014/03/25/how-much-outstanding-loan-debt-is-from-grad-students-more-than-you-think. The meaninglessly high debt incursion is extremely prevalent for Millennials seeking law and medical degrees.

Is there a reason why one reporter in one magazine is the world's best source for US student loan data?

The Ramifications

Even with the nauseating loan amounts many are quick to rise to defend the concept of higher education being “good” debt. However, there are clear ramifications to incurring this “good” debt, which reveal how devastating it really can be.

Pigeonholed

With the large debt looming over recent graduates, many are desperate to find any job that will provide them with the ability to make the monthly payments. Upon successfully finding a job many soon realize that their debt ball and chains them to the job, through the ever looming monthly payments.

Kills Creativity

The pigeonholing phenomenon that the “good” debt of higher education causes reaps in the death of creativity. While it may easily be argued creativity was dealt a crippling blow years before the Millennials’ debt actualized, the monthly loan payments dealt a final blow to the straw man that was left. Instead of dreaming of what more is to come, Millennials now crave the safe certainty their jobs provide all because of the “good” debt they had graciously accepted just years before.

No Mortgages

Since graduates are crippled with student loans; even if they are able to secure a job, a large percentage of their income goes directly to the monthly loan payments. The loan payments on top of rent and other living expenses and necessities prevent recent graduates the ability to form any type of savings. With out a savings the Millennials have no opportunities to secure a mortgage, an actual good debt, and are forced to continue to throw away their income on rent and loan payments.

Can Only Rent: Economic Strain

The lack of savings kills the economy. Instead of being able to use the potential increase in salary from the “good” debt of student loans to further invest in the economy, either through mortgages and home improvements or savvy stock market investments, the majority is forced to use any gain in paying off the student debt.

The tuition levels, corrected for inflation, of a liberal arts college like Swarthmore, law school and graduate school at a place like Yale, now somewhat exceed the costs that I paid for those places between 1976 and 1985, when I got BA, PhD and JD degrees there (or rather, when I paid the tuition for those degrees: the PhD I didn't get until 1993, after I finished a dissertation interrupted by two clerkships, etc.). Like you, I would have considered the debt incurred by that process to be a serious interference with life. So I didn't borrow any money. I earned the cost of those degrees, programming computers, mostly at Xerox and IBM. My grandmother gave me some help, for which I was very grateful. I didn't ask my parents for a nickel. (I had two younger brothers who also needed college educations—ultimately, as it turned out, at Yale—so I thought they had plenty to do without me on their tab.)

It would be somewhat harder now, as I say, because prices have gone up a little more than inflation (though not than salaries in the trade I was pursuing to pay for it all). If I had it to do over again now, with approximately equal resources in nominal dollars, I would have to incur some debt to get through. And not everyone has a parent or grandparent who can help out at all in that time of one's life. So it is undoubtedly harder to avoid all debt now than it was a generation ago. But the willingness to borrow it all, minus some summer earnings—thus pillaging your practice of future equity in two directions, working for people who are not showing you any better way out of debt than pressing your nose long-term against their grindstone—is a product of your mindset, not a lifting of the economic reality that puts debt and equity on opposite sides of the ledger.

Our segment of society in this school—where talented and mostly advantaged people attend the most influential and perhaps even sophisticated places of higher education—is not where the debt crisis has hurt by "force." You could—as all the other talented people here could— pay for your own educations by earning rather than borrowing, if you were trained to do so and willing to incur the work. The people who are being suckered into debt they cannot repay are far less fortunate in life than you are, without exceptional cognitive endowments and life choices, who are borrowing much larger sums of money relative to their current or future earning power, and whose prospects in life the education they are indebting themselves for will not significantly advance. You are voicing their grievance from a position that most of them would not recognize at all as like their own. To me, on the other hand, you do seem very much like the person I was, except that you aren't willing to back the conclusions you are drawing with the recognition that it's not "the system" determining the results, but you.

When I was a young adult, taking a second mortgage on one's home was a sign of acute financial distress, an obviously unsafe activity to be resorted to in emergency. Later, when it was called a "home equity line of credit," people came to consider it normal. A few thousand households around the US became very much richer, and tens of millions of people lost their homes. Nobody forced them to borrow money. Nobody forces you. The process is more complex, and the nature of power's effort more subtle. The story told is plainly in substantial part a rationalization, a self-deception. It's an effort to renarrate as a conscious choice (even if under some mysterious form of compulsion) a series of very important, perhaps life-defining behaviors that actually came about some other way. The route to the improvement of the draft is to look for what you look at all the time, but which you also always look right through.

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