Thursday, April 16, 2009

Student Loans

I can't get behind the notion that the student loan process needs to be reformed. Essentially, the way it breaks down is this: kid DECIDES to go to school, borrows money from lender, goes to school, gets out, repays money over a long term. Reads kind of like a home loan, car loan, or any other kind of loan. Credit card debt plays out similarly: you decide you want something you can't afford, and you simply defer payment.

How, then, does the process need to be "reformed"? How is it perceived that these kids are being screwed? Nobody put a gun to their heads and compelled them to borrow money. Why should I be expected to pony up for some other jackass's education that he couldn't afford in the first place? Maybe I should buy a Ferrari and go whining to the government that I can't make the payments.

But therein lies the principal difference between loans for items and loans for services: items can be seized, returned, or sold to recoup portions of the investment. The loan can be repaid or absolved by default.

An education cannot be returned. But there's still no arguing that it was a choice.

Perhaps what is needed is not reform within the lending industry, but reform in financial education in the primary schools. I don't know about you, but once I got out of middle school, all my math classes focused on every element of mathematics EXCEPT economics. I did trig, geometry, and calculus. No economics there.

I suppose I got lucky in that my family had been saving for years in the hopes of sending me to college. I am doing the same for my son. But if he decides to go to Brown, Princeton, or Yale, and I can't afford that crap, he's going to get a big discourse in the far-reaching implications of accepting money from lending institutions.

The other element of this that I just don't get is why everyone feels like college is mandatory. It isn't. I read a series of articles about 6 months ago that cast the decision to go to college in something of a different light. Prior to Gen X, some people went to college and others took up trades. Those who took up trades were not necessarily any worse off than those who went through 4 years of college, and many of them became quite wealthy. At the very least, they had 4 more years to spend toward mastering their chosen trade.

But somewhere along the line this new notion developed that going to college was the only way to achieve anything in life. It's a strange notion, because most of the highly-skilled people I've met in IT over the years didn't go to college, and most made far more than I ever have. But this insistence on going to college created two serious problems within our culture:
  1. Fewer people were willing to take up trades, believing their educations made them better than their parents (which, in turn, partially explains the immigrant influx to take jobs that Americans just won't do).
  2. Significantly increased depression in American teens. The stress of going through the application process, and the horror of rejection, have been tied to depression and suicide rates. One girl from my high school blew her brains out after getting caught cheating on a test. It was only a week from graduation, and she feared she'd lose her scholarship.
Supposedly college applications are down this year. Some see that as bad, but I think maybe, just maybe, it reflects a return to sound decision-making within the American family. Instead of just getting whooped up about racing off to college, families are trying to come up with financially feasible plans. Yippee!

But if the Feds step in and "reform" the industry, they're just shifting the burden of fiscal responsibility off the starry-eyed 17 year-olds and putting it onto us. Direct lending from the US Gov't? That's nuts. From whom will the US Gov't be borrowing that money? And at what rate? Didn't Obama promise to reduce the deficit?

I'm sorry, but I just don't have any pity for this tripe. If you borrow money, pay it back.

When I'm king, we will revisit this issue when we open the debtors prisons.


Karen said...

My line of thinking is the same. Especially now that I'm on the paying back end of the loan, with $27,000 still to go. Ugh. I knew what I signed up for when I did it though. And I also knew my parents weren't going to foot the bill - I've inherited the loans that were in their name in addition to my own. I also have a husband who has not completed even an associates degree, but who has taken some classes on a pay as you go basis, yet works and makes decent money in a career that required nothing more than a "life experience" education.
Do I think this needs to be reformed? No. Even more so because it deals with the teenagers I work with on a daily basis who believe they are entitled to ANYTHING they want without working for it. Hell no. You want to go to college? Then work your butt off while you're there and understand that you're going to be working your butt off to pay for that "party time."
Reform needs to start at home with parents who teach their kids that wants and desires, and hell, even needs, must be worked for.

JamieSmitten said...

When you are king, will there be a speed lane for racecars along every highway with no speed limit but a test you have to pass to gain access? Because that would be fun. Then everyone would be practicing their driving instead of borrowing money for university. Win/Win.

ahamos said...

Yay, Jamie! You will now be our new Minister of the Interior!

Maria said...

I agree with you. Also, I think that education is not what it used to be - from my experience, colleges and universities have "dumbed down" their programs to accept more and more people, and their money, however they are paying for it.

Stella said...

I had a similar discussion with my husband the other night. I finished college, he didn't. He is a born leader, people flock to him, they defer to him, and after only being at his current job for about a year, he's running the place. I told him, you didn't need college to be as successful as you are.
The old adage of college being the only way to succeed in life is a load of crap. And this from someone who still has $8k left on her loans from 10+yrs ago!