Debt phobia | Confessions of a dean of a community college


The Boy is well located for a traditional college experience. He has educated parents, including one who works in higher education. He is intelligent, with good grades and a record of academic achievement. He works hard. He has a purpose. He goes to a good high school, where he is enrolled in the IB curriculum. He is surrounded by kids who go to ambitious and selective places, often out of state. (This last clause is a New Jersey-ism. NJ pours money into K-12, then cheap on higher education, which leads to massive exports of talented teens. But that’s another job. .) He really is the kind of kid that traditional college is designed around. Sociologically, he runs with a tailwind.

And yet, even he developed a widespread phobia about student loans.

Like many phobias, this is not so much unfounded or random as it is overdone or inappropriate. A fear of heights is based on something; hitting the ground from a high altitude is unlikely to end well. But when a fear that has some basis extends beyond what makes sense, it can become debilitating. I see part of it with student loans.

Quick quiz: statistically, which of the following students is most likely to have financial problems?

a. I borrowed $ 30,000, got a bachelor’s degree, went to med school

b. Borrowed $ 10,000, I have a partner, I work as a restaurant manager

vs. Borrowed $ 5,000, dropped out in second semester, working minimum wage

D. Didn’t borrow, taking two courses at once, on an associate’s five-year plan.

The correct answer is c, although I also accept d. A and b are likely to be fine.

The “student loan crisis” is generally not a student loan crisis. It is above all a dropout crisis. If you want to avoid having student loan debt that weighs on you for years to come, the most crucial thing you can do is … graduate.

We know that the longer it takes to get a degree, the more likely it is that life gets in the way. But that’s only part of it. The opportunity cost of the extra time is probably worth a lot more than the typical student loan balance. In the example above, Student D is missing out on several years of managerial-level money that Student B is earning. This money should be more than enough to meet the modest loan payments.

This is not to deny that there are cases where student loans are a problem, nor to deny that jumping from tall buildings is unlikely to end well. I wouldn’t advise anyone to take out six figures in student debt, whether it’s for an undergraduate degree or a non-elite graduate degree in a traditional academic field. But a few thousand to speed up getting an associate’s degree in hotel management, automotive technology, or a transfer-focused degree that prepares you for something better? Absoutely.

Certainly there are policy changes that would improve the student loan system. When the next recession comes, as they usually do, I’ll make my Keynesian argument for forgiving the interest on loans. Recessions are not the fault of students, nor the fault of colleges. They are just part of the business cycle. Borrowers would still be forced to pay the principal, but interest forgiveness seems to me to be a reasonable middle ground when recessions strike. Certainly, student loans should be forgivable in the event of bankruptcy or upon the death of the borrower. It’s just common decency. I am in favor of much more operating funding for public colleges and universities so that they do not have to keep raising tuition fees. Also, in the long run, it’s much cheaper than bailing out for-profit organizations that have sprung up to fill gaps that underfunded community colleges have not been able to fill. There is a lot of political work to be done on student loans. And there is still more political work to be done on the economy in general.

But in the meantime, the student loan phobia cuts the pathways to higher incomes that make student loans repayable in the first place. The boy has parents who know it, but not everyone knows it. Fear of heights may have a rational basis, but if you never look down you are much more likely to fall.


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