Fixing the problem of student loan debt

I spend way too much time on social media. It’s not good. It doesn’t bring out the best in us. It certainly doesn’t bring out the best in me, but it is an interesting gauge of public opinion.

In the past several months, friends of mine have been passing along memes about the student loan debt crisis and discussions of a possible government bailout. Over time, these have become a frustration to me. By “friends,” I mean genuinely good friends: nice, bright, responsible people. The talk of relief emits mostly from the left, and I tend to lean right, but I’m not sure if my right-leaning friends are getting the whole story.

The pre-packaged memes include messages addressing issues of personal responsibility (which are irrefutable), but they also include messages about the transfer of wealth from hard-working folks to snot-nosed college kids. Some urge respect for vocational training (again, no argument here) but some go so far as to suggest that seeking a college degree is just plain stupid. At that point, it begins to feel like class warfare, and as a guy with a good amount of formal education under my belt, I begin to take offense.

Here are the facts of the matter: During the Obama administration, Congress passed the “Health Care and Education Reconciliation Act of 2010.” The health care portion was an amendment to that lovely Affordable Care Act (ACA) and the Education portion forced the banks out of the student loan process. The rationale for eliminating the banks was to help pay for the additional goodies in the health bill.

When I was publishing, I once went to a banker for a business loan and he pulled out a book (we had books back then) that said a town of 8,000 people couldn’t support two newspapers. I was discouraged from applying for the loan. Likewise, if I had gone to that same banker and said that I wanted an education loan to major in art history or gender studies, he would probably have had the same response. Medical School or Law School would have been a different answer. Bankers want performing notes and are often sources of good advice.

When the government took over the system, those filters were removed. Our benevolent, all-inclusive government extends the same rights to all people. That’s what nice governments do. There is little or no guidance and young people, often in their teens with yet-undeveloped minds can rack up debt for any academic major, however esoteric.

The results are two-fold. First, we have a lot of people with degrees in areas with no prospects and jobs that can’t possibly support repayment of the debt. The bigger problem is the massive inflation that it has triggered. Like the housing crisis that blew up in 2008, too much easy money in the system creates inflationary pressures. Average tuition rates have increased more than 25% since that legislation was enacted in 2010.

Consequently, additional layers of middle management were added to Universities (in the interest of disclosure, I sent them a few resumes myself), but the on-campus amenities have changed substantially as well. When I went to school in the 1980s, I shared a dorm room that was not much bigger than a walk-in closet and ate my meals in a cafeteria that was straight out of “Cool Hand Luke.” We had showers and toilets at the end of the hall that looked like any high school locker room that served an entire floor. My son’s university experience is quite different. He stays in a four-bedroom, two-bath suite and eats in a food court that would be the envy of any suburban shopping mall.

Ultimately, my position is this: I’m all for personal responsibility by the borrower, and fiscal responsibility by the government. There’s no question about that, but I firmly believe that we failed our students when we took the banker out of the process. Nationally, the total student debt is over $1.5 trillion. I don’t mind us shaving a bit off the debt because let’s face it, the money is already spent and after all, we have bailed out banks and auto manufacturers in the past (and this week we will begin handing out $1,400 checks). I don’t, however, believe it’s correct to provide education debt relief until the system is fixed.

Let’s either bring the bankers back in or provide more guidance within the Federal process.