Student Debt as a Moral Issue
A few months ago I took several of my students to a conference in Chicago. Many of my students come from small towns in Ohio. Many have never been to a big city. Many have never left Ohio, never been on a plane before. It was thus particularly rewarding to chaperone them and witness their excitement and joy as they experienced the Second City.
One evening, strolling down Michigan Ave, the conversation turned to money. I casually asked my students about their loan burden. One of them, a perky senior psychology major planning to get her Masters and become a social worker, said she had $80,000 in student loan debt. I was shocked.
Now, I am not entirely naïve about the problem of student loan debt. Until this year, I had one myself. A university degree is still—and perhaps more than before—the passport to the American middle class life.
Demand for education is high, classroom seats in good schools are in limited supply, and so prices tend to go up. Tuition rate hikes routinely outpace inflation. Thus, students are pushed into larger debts. According to the NY Times, the average student loan debt in the US topped $23,000 last year. Much has been written recently about the attendant economic and social hazards. A debt of $23,000 is a troubling burden, for students and parents.
But a debt of $80,000 is something else entirely.
It comes down to this:
1) Schools are greedy.
2) Banks are greedy.
3) The government doesn’t care.
4) The students aren’t taught money management in their secondary schools.
I tell every young person heading to college to NEVER borrow money for an education. Work to save the money necessary and strive to get scholarships and grants. To have loan balances when they get out of college leads to debt servitude. However, if the student is close to graduation and they need a little money to get them across the finish line, I tell them not borrow more than 10% of their predicted yearly starting salary in their career field.
And for the case of student loans, banks should not charge any more than 1% annual interest. To charge any more than that is putting them in the role of Shylock since education is an intangible subjective asset that cannot be marked-to-market. And the banks, if they were actually human beings, should be willing to charge even less interest . After all, a well educated student is an asset to the community and to the future bank profits.
But banks don’t think like that. They just want to screw anyone they can at that immediate point in time.