Why College Debt Is Lower Class.
This was posted yesterday.
future orientation - If you make a mistake and take out a $250k loan at age 19 that cannot be discharged in bankruptcy court, you cannot be rationally future oriented, perhaps with the exception of figuring out a way to evade paying the loan if that is possible. Social Security will be garnished to pay the loan.
A student who goes to college to earn a degree is future-oriented. A student who uses extensive debt to finance this project is unbelievably present-oriented. He has not counted the cost of years of debt in the early stage of his career. Instead of building capital in his early years, and letting it compound, he gets in debt, and winds up paying bankers for the privilege. There's no way to describe this except present-oriented. I follow Edward Banfield, who 45 years ago described such an attitude as lower class. It may seem upper-class, but it isn't. It has not factored in the long-term cost of student debt.
There are endless horror stories about naïve students whose parents did not warn them not to take out any debt to go to college, and they loaded up massively on debt. The average amount of debt is about $26,000 these days, but the median may not be this high. I don't know. I never see a report on the median figure.
I do know that we keep hearing stories about people who borrow over $100,000 to try to get a college degree in the liberal arts, which gets them a college degree that is not worth enough in the job market to earn a salary high enough to repay the loan and also get married. The same people who did this could have gotten the college degree in about two years for about $13,000. Nobody tells them. The parents don't know any better. The students don't know any better. Nobody ever sits down to warn them about the devastating effects of this much debt early in their lives.
What we don't read about is the student who borrows $90,000, and then drops out in the senior year.
You cannot keep people from doing foolish things. I realize that this is a pessimistic way of looking at things, but it is reality. There is nothing that the state can do or anybody else can do to lighten the load. If anything, the state increases the load. It promotes the idea of borrowing to go to college. The result is close to $1 trillion of student debt, most of which is not going to be repaid. Nobody says this, but that is reality.
The federal government is going to wind up with an empty bag. It will owe the money to the banks, and the banks are going to demand payment. Sooner or later, the federal government will step in and pay off the banks. The government never lets the big banks go under. The big banks have cooperated with the government in promoting rotten loans with high interest rates, from which there is no legal way to escape. The government closed the door on escaping by means of bankruptcy. It is a program that has been designed by the bankers, funded with the promise of federal bailouts by the politicians, and the bankruptcy law was changed to make certain that these pathetic students cannot escape.
People think they are future-oriented when they go into debt for what they think is going to be a productive asset. Buying a house on a short sale is probably a decent debt. But not many investment avenues are available to the general public that involve debt, and which are also likely to produce a profit over a period of 30 years. In this case, the debt is productive. The interest rate is fixed. The individual knows what he is getting into. He knows what it will take to pay off the loan. He buys the property on the assumption that the renters will pay off the loan. It is a business decision.
These poor kids at age 17 have no clue about future-orientation, good investments, or the terrible burden of debt. They are simply chickens to be plucked. People sound amazed when they find out that their children have been plucked. What did they think was happening? What did they think when the kid took out $90,000 worth of loans? Didn't the parent ever sit down and tell the kid not to do anything this stupid? No, the parent didn't. The parent is just so pleased that Jenny Sue or Billy Bob has gone off to Podunk University, that the parent is bubbling over with excitement to share the good news with other parents, who have done the same thing to their kids.
It is like a gigantic conspiracy. The parents, the bankers, the politicians, and the administrators of the overpriced schools all join together with this goal: to place a young person in a web of debt from which that victim will probably never escape. It is all unnecessary, and it is almost universal.
The stories about these terrible debt cases have been floating around the media for at least five years. The media are filled with these stories. The parents don't care. The government doesn't care. The bankers surely don't care. The students don't care. The college administrators love it. Even the media like it, because this will provide an endless stream of horror stories which readers will read, and virtually none of them will actually believe enough to implement in their own families' decision-making.
How can you expect anybody this shortsighted, meaning a parent who does this to his child, to be able to give that child the kind of guidance the child needs?
All I can do is warn parents not to do it. The parents usually find out after they have already done it. They initially seemed incapable of looking four or five years into the future, and now they will spend the next 20 years looking at what they did to their children, and will lament that they did it. But that doesn't do anybody any good. The bankers still win.
I have made it clear to parents who sign up their children for the Ron Paul Curriculum that there is a better way to go. I have made it clear to people on this website that there is a better way to go. I have written a manual to show people that it is not that difficult to pursue a liberal arts bachelor's degree program the costs less than $15,000. Some people listen. Most people don't.