A recent article in the New York Times brings a lot of solid information together related to the College Debt Crisis we have been hearing about for some time now. The article has the wrong title (It’s Official: The Boomerang Kids Won’t Leave) but the facts the writer lays out are pretty grim and have some serious implications for the future of Income Inequality in this country.
The bottom line is that tens of millions of young adults have taken on over $1.2 Trillion (yes, that’s with a “T”) in debt and they just don’t have the jobs to pay that debt off in any reasonable number of years. Some of these people owe over $100,000 and are earning barely a minimum wage.
Somewhere someone got this rumor started that people with a college degree are guaranteed a future of high paying jobs.
Well… They, and by “they” I mean probably the colleges and universities that have profited the most from that false rumor, left out an important little caveat to that secure future myth of nice paychecks. While you are at college you need to pick up some skills that companies find valuable.
So here’s the basic scenario…
1) An eighteen-year-old kid itching to move out of the house gets accepted to the college of his/her choice.
2) This newly accepted kid has no idea what to major in so picks something fun like English, Latin, Physiology, Political Sciense, Art History, Communications, etc…
3) The kid finds out that it will cost $100,000 for four years and since mom and dad are struggling to save for retirement they can’t write a $100,000 check right now.
4) The college has a nice office where kids sign on the dotted line and get a loan. Boom! Four years of freedom, parties, casual sex, and even a little learning. What kid wouldn’t sign up for that package?
The biggest problem here is that the college gets their money no matter if the kid even graduates and the funny thing about student loans is that the only way to get out of the payments is to die. Bankruptcy will not wash this debt away.
So you’ve been hearing about this College Debt Crisis for a while now. Smart people even say it is affecting the housing market since this generation of kids have to pay this debt off before they get on the home buying ladder.
Then Obama gets up there and in his smooth fashion throws an “executive order” out to allow these borrowers to cap their payments at 10% of their income and he is supporting a plan to refinance the loans at a lower interest rate.
Very nice indeed but that is what I would call “lip service”. They still have to pay off the huge debt while working at a minimum wage job.
These people are in a hopeless situation and over the next few weeks the next wave of college freshmen will be signing their lives away on the dotted line adding to the huge problem.
This needs to stop now!
And here’s a simple way to actually stop this College Debt problem from getting even worse.
When you take out a consumer loan for house, car, boat, computer or what ever, the lender is obligated to show you a truth in lending form that spells out clearly how much you are borrowing and what it will cost you to pay the loan back.
Why not an Obama “executive order” that forces the colleges to include a paragraph in the loan paperwork to be signed by the new student that clearly shows them their future income potential. These statistics are easily available for each possible major a student might select.
Here’s an example college loan full disclosure paragraph….
I, Joe College, has elected to attend Party University and major in Political Science at a cost of $98,252 for four years. After graduating I will be paying approximately $1,042 per month for 10 years to repay this loan. The latest statistics show that those students who major in Political Science have a 2% chance of getting a job in their area of interest at an average after tax monthly income of $2,983 so if I am one of the lucky 2% to land a job I will be spending over on third of my take home pay to retire this F#&@ing loan. and if I end up in the 98% of people who do not get a job in Political Science I will probably be in a minimum wage job that did not even need a college degree. In that case I will not even have enough take home pay to make this monthly loan payment and provide for a basic life style even close to what I have living at home with my parents right now.
Of course the “College Loan Full Disclosure” paragraph would read differently for Accountants, Finance Majors, any of the many variety of Engineers, or other majors that deliver people to employers hungry for people with real skills.
And what about the tens of millions of people already caught up in crushing student loans?
They better treat their parents well or find somewhere else to live.