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KENNEALLY: Young and well-educated, but broke
The first job for today’s college grads is getting out of debt
Question of the Day
In politics, big opportunities are often the offspring of petty disputes. Republicans and Democrats continue to angrily wrestle over the issue of college-loan interest rates, and by extension, the question of tuition inflation. Their only substantive disagreement so far has been over how to pay for the rate freeze they both support, and therefore, concerns regarding mounting student debt remains one about minute detail rather than major principle. Nevertheless, this ersatz quarrel potentially sets the stage for a deeper and more forthcoming public debate about one of the most urgent political issues of our time.
The issue is indeed urgent. With Congress’ failure to reach a deal, the interest rate on new subsidized federal loans doubled on July 1 to 6.8 percent. Cumulative student-loan debt now tops $1 trillion with the rates of default rapidly rising. While the average individual debt load for a 2011 graduate was approximately $23,300, current collegians are more ambitious than their predecessors, piling on about $10,476 per year. If crushing financial liability was itself an academic credential, we would be celebrating the smartest generation of scholars America has ever seen.
Smartest or not, they will certainly be the most debt-laden, and whatever the economic consequences, a whole generation in such arrears could precipitate a tectonic shift in the sociopolitical character of our citizenry. First, it is already the case that recent college graduates are postponing marriage and having children until they can secure firmer financial ground, wherever and whenever that is to be found. Will the weight of financial obligation in the early stages of independent adulthood stymie the formation of families? Will our society, therefore, become increasingly individualistic, and mirror the demographically disastrous birth dearth of Europe? Will precious parenting time continue to lose ground to second jobs, all to appease bill collectors?
According to the Pew Research Center, 40 percent of recent grads return to the nest, moving back in with mom and dad. Will the burden of student loans encourage an extended adolescence even more so than dormitory life? Will this widespread arrested development put further strains on their parents’ retirement plans and the programs designed to assist them? Will the massive shift away from homeownership transform the credit market? It is naive to suppose that making the absorption of substantial financial liability a prerequisite to enter the marketplace won’t have profound social and moral consequences for this guinea-pig generation.
There are also ramifications unique to our increasingly “knowledge-based” economy. If universities have a monopoly on teaching the skill sets — or at least, dispensing the credentials — necessary to compete in this market, will a combination of debt and tuition hyperinflation foreclose access to a significant segment of the population? Does this portend the emergence of a new credentialed aristocracy, anointed by our institutions of higher education? Will it become more unlikely that graduates will choose professions less lucrative but essential to society, like teachers and social workers? According to the Brookings Institute, those with college degrees generally earn 70 percent more than their less erudite peers, so it makes more sense than ever to get a degree and find a job in finance. Problematically, Goldman Sachs can only hire so many.
What about the unintended effects on the character of higher education itself? It will likely become harder to justify the more abstruse disciplines, or even good, old-fashioned liberal arts, as a suitable course of study at such dizzying costs. Even the most ardent supporter of multiculturalism will balk at funding his child’s degree in Chicano Studies, let alone English literature. This will mean that curricula will continue to lean in the direction of vocational training, as employment and marketability trump humane learning and philosophical depth as the overarching goals.
For all their rhetorical flummery about skyrocketing costs, it makes sense that the Democrats have a partisan interest in maintaining the status quo. A generation of college graduates burdened with debt is more likely to see the government as a source of remedial assistance, and seek out its paternalistic intervention. They will be more willing to accept a metastasizing national debt if government prodigality delivers them from their own economic straits. Since the academy is already a fount of leftist indoctrination, liberals are handed a two-for-one: Universities load the next crop of voters with a freight of debt and the notion that only big government can relieve them of it. Institutions of higher education finally complete the transformation begun in the 1960s into a farm league for the Progressive movement.
On the other hand, conservatives now have plenty of incentive and opportunity for candor and maybe even a chance to make some progress with the ever-elusive youth vote. The GOP should explain what a meager consolation the interest-rate freeze is for a future of financially crippled unemployment. They should make clear that the oft-demonized banks are the not the inflation culprits, but rather it is market-distorting government subsidies in tandem with fiscally derelict universities. They should ask them if the prestige of their college degree will offset the despair of a lifetime living in their parents’ basement, picking up weekend shifts at Trader Joe’s. Better to learn young that nothing is for free and some debts last a lifetime.
Of course, it is impossible to predict with any certainty what social transformations will be wrought by the new market demand that everyone who enters the labor force do so with a college degree and a load of debt in tow. However, it is preposterous to suppose these sea changes won’t be numerous and radical. The original rationale for government intrusion into the student-loan market was the radical social engineering of equality through increased educational access. Those who made it happen at least got the radical social-engineering part right.
Just as every economic issue has its moral and social context, there is always a political one as well. For many of today’s young voters, this will be the first real financial dilemma they confront, and the political party that presents them with tough, honest leadership is likely to repaid in loyalty. If the looming crisis of student-loan debt isn’t confronted effectively soon, that might be all this generation has to offer.
Ivan Kenneally is the senior editor of the Sourcing Journal.
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