Millions of grads are saddled with unpayable student loans, yet colleges still say they're a sound investment. NYU professor Andrew Ross asks if it's time to stop repaying the loans.
Straight talk about the crushing burden of student debt is everywhere—except the one place it should be: on college campuses themselves. Students, professors, and college administrators seem to be in denial. For students who have never managed their own finances before—certainly the vast majority of undergraduates—the silence isn’t so surprising. After all, they’re not required to pay a penny on their loans until they graduate, so they coast along, often blind to the consequences of their ballooning debts. And our college presidents and senior administrators have good reason to duck any responsibility for the gathering crisis: all the evidence shows that they’ve gotten steadily richer from the proceeds of the higher-education bubble.
Students at the UCLA campus in Los Angeles, Calif. (Kevork Djansezian / Getty Images)
As for professors, I have known for several years that my paycheck depends on my students going deeply into debt, often for decades to come. But like my colleagues, I chose not to dwell on it, a decision that seemed justifiable given that faculty salaries have been stagnant as a whole for some time now. We are hardly to blame for skyrocketing college costs.
At NYU, where I teach, students graduate with 40 percent more debt than the national average. One alumnus told me that he and his peers had formed a “hundred club” for those in the six-figure debt bracket. So it felt long overdue when I finally began to wrestle with the problem personally. Knowing that they were trading a large chunk of their future wages for the right to walk into my classroom, did I have additional moral duties toward my students? Did I share any of the responsibility, or blame, for their decision to pile on loan after loan? Was I obliged to speak out against the profiteers who were plying them with high-interest credit?
When I raised the matter in class, no one wanted to talk. When I quizzed them privately, two students explained that the volume of their loans was a source of profound shame. At a pricey college, they were surrounded by peers from well-heeled families, and they feared the stigma if they spoke about their own straitened circumstances. One of them apologized for falling asleep in class: he had taken on a second job—not uncommon these days—to avoid the burden of even more loans. The other confessed that she did not want to feed any inner doubts about whether her dream education would be a career stepping stone or a financial millstone; as long as she was still studying, she wanted to stave off such thoughts.
If enrolled students had reasons to hold back, their older brethren were shattering the silence. Some of the loudest voices at Occupy locations around the country were underemployed graduates with crushing debt, finding solace in pungent slogans like “Banks got bailed out, we got sold out!” It dawned on me that all of their testifying about the personal agony of debt in public squares was a kind of “coming out” moment for a new political movement.
Despite my own ambivalence, I felt compelled to respond. Last November I helped to launch the Occupy Student Debt Campaign, which invited debtors to pledge to refuse payments after 1 million others had signed up. Since millions are already defaulting in private, our pledge simply offered a more self-empowering way of taking action and focusing public attention on the issue.
'Are Millenials 'Generation Screwed'?'
I went to college for a chance to move up in the world. But the debt I incurred in order to pay for it is holding me down.
This is the story of my education and my debt—a paradoxical combination. Ten years after college, I find myself wonderfully well educated and woefully burdened by payments that threaten many of the possibilities my schooling promised.
Graduates listen to President Obama as he delivers the commencement address at Barnard College’s graduation ceremony in May. (Timothy A. Clary / AFP / Getty Images)
I grew up in a very small town in rural Massachusetts consisting mostly of lower-middle-class families, some of whom had been there for generations. We had cows, corn, and about 3,000 people. The public schools were not great. There was a lot of racism and sexism. There was also a great sense of community and a respect for the earth. People there are born, go to school, get married, grow old, and die within a 50-mile radius. The poor stay poor.
My parents were both from the area and had met at a nearby state college, which they both attended part time while working full time. Both financed their own educations with a combination of wages, loans, and credit cards. We had a small house, a big backyard, and good food from our garden. I always had music lessons, food in my stomach, and clothes on my back. I recognize in retrospect that providing this was no easy task.
My parents finished paying off their college debt just as I was finishing high school. They told me I could go anywhere—but I would have to pay for it. I didn’t want to go anywhere. I got into Columbia, and I wanted to go there. I was one of four students in the 30-year history of my high school ever to be admitted to an Ivy League school. After years of subpar schooling, I would really, finally, properly learn how to read closely, think critically, and write well. I was thrilled.
I knew it was expensive, but I had no concept of such a sum of money. I just assumed it would become manageable once I held my degree in hand and entered the workforce. So, at age 17, I took out loans. Columbia has need-blind admissions, meaning that it makes admissions decisions without having access to the students’ financial profiles. Many students without the means to pay tuition are admitted. These students are offered financial-aid packages like the one I had, a combination of loans, grants, and work-study. Columbia also expected my parents to help with tuition, something they neither could afford nor had planned to do. By moving some of the burden to the parents, the school claims it is protecting the student. In the end, this meant more debt for my parents, whom I may end up supporting in their old age anyway. But, we all agreed that this was a great opportunity, my chance to “get out” of the small town and to “move up” in the world.
At Columbia, I studied the arts and writing and worked a mélange of work-study and summer jobs. When my classmates went to their summer homes in the Hamptons, I got a job answering phones in the chemistry department. During the winter I worked as a security guard, I sorted mail in a mailroom, and I catalogued music in a library. When things got slow at work, I read. I had a lot of reading to do.
When we graduated in 2001, I wanted to continue my schooling and become a professor. Some of my friends, who were carrying debt, made more “responsible” decisions. My roommate, a talented musician and mathematician, gave up the cello and took a job as an investment banker. The guy I was dating, a political-science major and the son of a single, immigrant mother, also went to Wall Street. Both said they took such jobs to be free of their loans.
Mythomania about college has turned getting a degree into an American neurosis. It's sending parents to the poorhouse and saddling students with a backpack full of debt that doesn't even guarantee a good job in the end.
Why are we spending so much money on college?
And why are we so unhappy about it? We all seem to agree that a college education is wonderful, and yet strangely we worry when we see families investing so much in this supposedly essential good. Maybe it’s time to ask a question that seems almost sacrilegious: is all this investment in college education really worth it?
The answer, I fear, is that it’s not. For an increasing number of kids, the extra time and money spent pursuing a college diploma will leave them worse off than they were before they set foot on campus.
Is college a bum deal? Megan McArdle, author of this week’s ‘Newsweek’ cover story, talks about the diminishing value—for some—of a college degree.
For my entire adult life, an education has been the most important thing for middle-class households. My parents spent more educating my sister and me than they spent on their house, and they’re not the only ones ... and, of course, for an increasing number of families, most of the cost of their house is actually the cost of living in a good school district. Questioning the value of a college education seems a bit like questioning the value of happiness, or fun.
Donald Marron, a private-equity investor whose portfolio companies have included a student-loan firm and an educational-technology startup, says, “If you’re in a position to be able to pay for education, it’s a bargain.” Those who can afford a degree from an elite institution are still in an enviable position. “You’ve got that with you for your whole life,” Marron pointed out. “It’s a real imprimatur that’s with you, as well as access to all these relationships.”
That’s true. I have certainly benefited greatly from the education my parents sacrificed to give me. On the other hand, that kind of education has gotten a whole lot more expensive since I was in school, and jobs seem to be getting scarcer, not more plentiful. These days an increasing number of commentators are nervously noting the uncomfortable similarities to the housing bubble, which started with parents telling their children that “renting is throwing your money away,” and ended in mass foreclosures.
An education can’t be repossessed, of course, but neither can the debt that financed it be shed, not even, in most cases, in bankruptcy. And it’s hard to ignore the similarities: the rapid run-up in prices, at rates much higher than inflation; the increasingly frenetic recruitment of new buyers, borrowing increasingly hefty sums; the sense that you are somehow saving for the future while enjoying an enhanced lifestyle right now, and of course, the mountain of debt.
Higher education is becoming the new caste system.
School is in the air. It is the time of year when millions of apprehensive young people are crammed into their parents’ cars along with all their worldly gadgets and driven off to college.
The rest of the world looks on with envy. American universities are the best in the world—22 out of the world’s top 30, according to the Graduate School of Education at Shanghai Jiao Tong University. Once it was Oxford or Cambridge that bright young Indians dreamed of attending; now it is Harvard or Stanford. Admission to a top U.S. college is the ultimate fast track to the top.
Little do the foreigners know that all is far from well in the groves of American academe.
Let’s start with the cost. According to the College Board, average tuition and fees for in-state residents at a sample of public colleges have soared by 25 percent since 2008–09. A key driver has been the reduction in funding as states have been forced to adopt austerity measures. In the same time frame, tuition and fees at private universities rose by less (13 percent), but still by a lot more than inflation.
According to the Consumer Financial Protection Bureau, total student debt (which includes private loans and federal loans) climbed to more than $1 trillion. It is the only form of consumer debt that has continued to grow even as households pay off mortgages, credit cards, and auto loans. In real terms, students are borrowing twice what they did a decade ago.
It’s not only Facebook stock that Silicon Valley superstar Peter Thiel is selling. He’s shorting higher education, too, arguing that college is the new asset bubble—the natural successor to subprime. Remember when we all believed that a home was an investment that would never lose money? Now, Thiel argues, exactly the same thing is being said about a degree. To back up his point, Thiel is paying 20 of the country’s most promising students $100,000 to walk away from their studies and become entrepreneurs.
"Newsweek editors discuss the magazine's latest college rankings."
‘Boomer America’ never had it so good. As a result, today’s young Americans have never had it so bad.
Today’s youth, both here and abroad, have been screwed by their parents’ fiscal profligacy and economic mismanagement. Neil Howe, a leading generational theorist, cites the “greed, shortsightedness, and blind partisanship” of the boomers, of whom he is one, for having “brought the global economy to its knees.”
What does 'generation screwed' think? Millenials weigh in.
How has this generation been screwed? Let’s count the ways, starting with the economy. No generation has suffered more from the Great Recession than the young. Median net worth of people under 35, according to the U.S. Census, fell 37 percent between 2005 and 2010; those over 65 took only a 13 percent hit.
The wealth gap today between younger and older Americans now stands as the widest on record. The median net worth of households headed by someone 65 or older is $170,494, 42 percent higher than in 1984, while the median net worth for younger-age households is $3,662, down 68 percent from a quarter century ago, according to an analysis by the Pew Research Center.
The older generation, notes Pew, were “the beneficiaries of good timing” in everything from a strong economy to a long rise in housing prices. In contrast, quick prospects for improvement are dismal for the younger generation.
One key reason: their indebted parents are not leaving their jobs, forcing younger people to put careers on hold. Since 2008 the percentage of the workforce under 25 has dropped 13.2 percent, according to the Bureau of Labor Statistics, while that of people over 55 has risen by 7.6 percent.
“Employers are often replacing entry-level positions meant for graduates with people who have more experience because the pool of applicants is so much larger. Basically when unemployment goes up, it disenfranchises the younger generation because they are the least qualified,” observes Kyle Storms, a recent graduate from Chapman University in California.
Overall the young suffer stubbornly high unemployment rates—and an even higher incidence of underemployment. The unemployment rate for people between 18 and 29 is 12 percent in the U.S., nearly 50 percent above the national average. That’s a far cry from the fearsome 50 percent rate seen in Spain or Greece, or the 35 percent in Italy and 22 percent in France and the U.K., but well above the 8 percent rate in Germany.
Americans under 35 are suffering the biggest wealth gap between younger and older Americans on record. So what does 'generation screwed' think? Millenials weigh in.
Higher education is becoming the new caste system.