The U.S. has 1.4 trillion dollars worth of student loan debt spread amongst 44 million borrowers – 70% of college graduates – averaging around $28,000 per borrower. The default rate is near 11%. On paper these statistics are alarming enough, but they pale in comparison to the psychological and social effects that can be harder to measure. For example a student graduating from college may desire to become a teacher, doctor, or entrepreneur. All of which either requires more schooling and more money, or time without a steady paycheck. Within 6 months of college graduation, those bills start rolling in from the loan company. Graduate school, medical school, or starting a business all takes a backseat to the security of a steady paycheck.
What is the societal cost of losing the next brilliant mind to a 9-5 cubicle job? Of course we’ll never know, but one can only wonder if the next Einstein or Fermi is currently creating ads for Coca Cola, or selling insurance, trying to pay off his or her student loan tab.
In terms of correlations we can safely make, home ownership among millennials is much lower than that of previous generations at the same age. Student loan debt holds back new business creation and reduces consumer spending. Instead of money being put into the economy, young Americans hoard it to pay off debt and feel more secure.
This problem isn’t just an American one; it is a worldwide problem for countries with rising tuition costs. Chile, in the last few months, has seen wide scale student protests. Students are protesting the same problem of student loan debt and education reform we have in the United States. Student social movements are not as robust and organized in the United States as they are in Chile, or even as they were in the U.S. only fifty years ago. In countries with free college tuition, like Germany and Slovenia for example, this was not just freely given, but rather the fruits of laborious struggle by organized student movements.
Somewhat relieving is the attention this issue has received in recent years. This past presidential campaign was an indicator of that. Bernie Sanders put the idea of free college tuition into the mainstream, and to the surprise of many Americans – at least to my surprise – it was a popular idea. In a country where anything that remotely smells like socialism is considered heresy (except for roads, farm subsidies, bank subsidies, police departments, fire departments, grammar, middle and high schools…) a significant portion of mainstream Americans, mostly young people, supported the idea.
Even more shocking is the fact that free college tuition has already been passed in at least two U.S. states – New York and Tennessee. The state legislature in New York approved a bill that will provide free college and university tuitions for students from families making under $100,000 a year, and Tennessee passed free community college for it’s citizens.
During the 2016 campaign, even Donald Trump gave his critique of student loan debt and a promise to reform policy on it. The Washington Post reported on it and quoted him saying, “Students should not be asked to pay more on the debt than they can afford,” Trump said. “And the debt should not be an albatross around their necks for the rest of their lives.”
I won’t hold my breath for a revolutionary policy benefitting young, working class Americans anytime soon, but the conversation has been brought to the public arena and will surely be debated in the future – it has to be. The millennial generation is currently the largest living generation in America and with 70% of our college graduates carrying a large amount of debt; we have nothing more than a recipe for long-term economic stagnation and instability.
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