When I went to college in the UK in the early 2000s my tuition fees were roughly $2500/year. Fortunately my parents could afford the fees and made sure I didn’t have to take out a loan or work while I was there. While university used to be free in the UK, $2500 isn’t an insane amount of money and most people who wanted to get an education could find a way of financing it without going into serious debt. While fees are higher in the UK now, they are still not prohibitive and allow students to pay off debt conveniently by having a fixed proportion of their salary designated to paying it back to the government.
In America, an affordable education is now exclusively a concept for the rich. If you’re making over $250,000/year you could comfortably put two children through college without risk of financial collapse. For everyone else though (and that’s roughly 98% of the population), college is a massive financial burden that can erode decades of savings and put students into a lifetime worth of debt. Harvard now costs almost $60,000 per year (for room and board), meaning a student without very wealthy parents would be almost $250,000 in debt after graduating. This level of debt can take literally decades to pay off.
The statistics are horrifying – Americans currently owe $1.6 trillion in student debt and that figure is expected to rise t0 $2 trillion in 2022. Study after study has shown that this debt is not only unsustainable, but a severe drag on the economy. People in severe debt don’t spend money, don’t start business and are always looking at ways to cut costs – in other words, the exact behavior that leads to recession. So what is the purpose of this insane system?
As is always the case in America, you can achieve the illusion of success if you are willing to go into huge amounts of debt to get it. Want that fancy house with a enormous garden? Just take out a loan for 90% of the value of the house and it’s all yours. Need that Mercedes Benz to look good in front of the neighbors? Just get financing and it is (superficially) affordable. Likewise with education, you can go to an ivy league school and mix with the upper class elites, just as long as you are willing to go into a lifetimes worth of debt to do it.
So who exactly benefits from this madness? Firstly, banks are in the business of debt, and they are deeply entrenched in the student loans business. In the UK, the government is almost exclusively responsible for lending money to students, and its primary objective is to get students into universities, not to make money. In America, while the majority of student loans come from the federal government, private sector lending is a huge industry offering easy loans to students at extortionate rates. Secondly, the federal government also makes a large profit on student loans, generating roughly $149 billion a year from students who don’t have rich parents. Thirdly, universities are reaping the rewards of all this money doled out to unsuspecting students. Harvard, despite technically being a non profit, is so wealthy that it has made the Fortune 500 list. As The American Conservative’s Ron Unz describes it, Harvard is “One of the world’s largest hedge funds, with some sort of school or college or something attached off to one side for tax reasons.”
This means the government is indirectly profiting from, and funding an education system that benefits private institutions, all at the expense of the actual students.
Other intended consequences of this mountainous debt means millions of students are going into careers they don’t particularly want, making many see their education as a complete waste of money. I have several friends who went to college with the aim of becoming architects, doctors and engineers who had to give up on their dreams to work in finance just so they could pay off their debt and live in decent accommodation. “I’m working as a doctor right now,” one friend told me. “But I can’t keep it up given the debt I’m in so I’m looking at working in finance”.
While you might think my friend was being a little dramatic, it is worth bearing in mind that student loans are the only type of loan in American history to be nondischargable in bankruptcy. That means it is your debt for life, and should you miss a payment, you can end up paying extortionate penalty fees and have your credit wrecked. So sure, doing a noble profession is great, but not if you can’t afford to house yourself while doing it.
If the goal of education in America is to turn a short term profit and put students into a lifetime of debt, it is doing a fantastic job. While other countries are concerned with the actual education of its citizens, America seems more concerned with allowing traders to treat debt from education as a commodity to be bought and sold on Wall Street. This is obviously great for people on Wall Street, and pretty much no one else. The future does not look good on the current trajectory. As student debt increases, so will loan defaults. These defaults have serious knock on effects, ruining revenue projections and destroying debt trading. Of course, we’ve seen this before. When millions of people are unable to make payments on a large purchase we know exactly what happens.
But of course doing something about it would annoy the rich (and 2008 was an awfully long time ago!), so get ready for a whole lot of inaction followed by an epic meltdown.
Sadly, we should be used to it by now.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.