Response to The Cost of College in the New Yorker Magazine

An old post meant for May, but posted in December, in response to Nick Lemann’s New Yorker article on the cost of college :

It’s common knowledge these days that student loan debt has soared past credit card debt in the United States, and Romney and Obama have drawn their lines in the sand about the cost of college and each man’s plan to fix it. The problem is that Mr Lemann’s argument –  government should continue to “pump” money into the system to “spread opportunity more widely”, a “small price to pay” for long term gains in society – implies that the system will figure itself out as if it has two eyes and a head. Those running elite institutions (like the ones Mr Obama and Romney attended) will continue to function as elite, with endowments and governmental grants that have protected nonprofit schools from faltering along with their moneyed, status-driven alumni and celebrity rankings. But he mentions that “the system is built to take in just about all high school graduates” , which is a false assumption. Harvard and all want-to-be Harvards vie for top spots in the national rankings which are geared towards exclusivity and unattainable statuses. State colleges are no better- the CSU system has failed to accommodate its rise in yearly applications and has cut funding so much that it will deny more students than ever. And what about all the high school graduates who are well beyond college years who seek an education? There’s community college, which is also plagued by capacity problems. Any hard look at the current system will reveal that it is not focused educating the masses, but rather those with deep pockets, or in recent years, international students with even deeper pockets. Democracy in education is not a dream for the incumbent institutions, indeed, but rather a nightmare.

“Higher Education Should Not Be a Luxury”

These words, just recently emitted by President Obama, sum up the problem with the higher education system in America these days. He’s responding to the crisis in student loan debt (over $1 trillion) and specifically to the fact that now, effective this year, interest rates are doubling for all loans – from 3.4% to 6.8%. This is catastrophic for any student who relies on loans (most do). To raise awareness, Obama is touring around the country for the next week to enforce the message that this increase is unacceptable, and that the Republican-majority Congress must lobby for students – not against them – by finding an alternative way to shore up cash. Let’s not “cut our future off at the knees”, he says, by making our students unable to afford higher education, the link to America’s future prosperity.

I agree, and think it’s great that he’s campaigning for an alternative. The irony, however, is that the 2007 bill that extended the 3.4% rate until this year was signed into law during the Bush administration, and was widely accepted by Republicans. So Congress had, at one point, been looking out for students. At present, I don’t think this is a political issue, but, rather, a forecasting issue. You see, in 2007, when the bill was passed, the recession had not yet started. The recession came a year later, and jobs were obliterated. With fewer jobs, people began enrolling in post-secondary education in droves, taking out more loans in order to pay for their schooling. Politicians in 2007 lacked the foresight to anticipate the highest rate of enrollment in the nation’s history, along with the rise in for-profit colleges and increased student loan disbursements. It’s a supply and demand narrative – when the economy turns down, society looks to other ways to recover – and one of the commonest ways to pull oneself out of the proverbial hole is the pursuit of advanced knowledge. Just as the sub-prime mortgage rate turned homeowners into debt-addled foreclosers, the student loan crisis is turning students into unemployed drop-outs…

With all this being said, let’s not look to partisan rhetoric when doling out criticism about the crisis in higher ed (its return or its affordability). After all, Obama signed the Budget Control Act of 2011 which essentially wiped out all Subsidized Direct Stafford Loans as of this year, upon which I have solely relied on to pay for college in order to remain debt-free. Subsidized loans come interest-free – as long as you remain a part-time student – and the interest doesn’t kick in until six months after you graduate.  The news came to me this week after I got my financial award for 2012-3 school year – a heaping $20,000, to the tune of 6.8% interest, which begins to accrue immediately upon enrollment in the Fall. Are you kidding me? I had no clue this was in store – my university informed me in a single paragraph in my reward notice – and this has not been acknowledged in any of the recent publicity around the student loans crisis. Without the Subsidized loan, I will need to pony up a cool $3 – 6,000 in tuition each semester, all at once, lest I incur the horrible 6.8% interest rate that I cannot afford. A double in rate doesn’t matter to me – what matters is that I have no buffer, at all, to pay it off. Until recently, I was excited about going back in the Fall, knowing that I can pay off my loans as I work full-time, at peace with the fact that I will not become another poor graduate student living hand-to-mouth. My last post reeks of gullibility. How could I have been so sure I wasn’t going to be affected sooner or later?

Things have changed. I will have to consider the consequences of this law and decide whether or not I will be able to 1) finish my program on-time, due to huge lump payments I will have to make every 4 months; or, 2) actually enjoy my program with the added layer of stress that comes along with #1. I welcome Obama’s fine oration on the merits of higher education and its importance in developing a stronger nation, but in order for education not to be a luxury, we need reform, not just another bill extension or stump speech.

The Student Loan Bubble

While the shadow of Occupy has receded, the 99-percent-ers’ voices linger, their hand-painted messages strewn about in pieces on the street,  their stories memed across the blogosphere: remnants of a collective sigh of resignation after a long, arduous fight. Although the initial movement has ebbed, I am confident it will rise again, replicated and remixed – like everything else this day and age, a fresh, new image is just around the corner.

The reason why Occupy is part of this post is that it, as a movement, gave a voice to those who felt cheated, who were denied their right to succeed and prosper in the land of plenty. Many were doing everything they were told to do – and still got screwed. And many were college students, now saddled by debt that they will be forever shackled to, with little else left to support themselves.

Student loans have overtaken credit cards as the largest form of debt in America. The next anticipated market bubble will most certainly be student loans; with the rising number of students enrolling in and departing each year (either by graduating or dropping out), multiplied by a recession job market, tuition the highest its ever been and student loan rates hovering at 8% (at least mine are), it’s a recipe for disaster.  It’d lessen the burn if graduating students could at least feel somewhat confident that they’ll get a job afterwards. (They don’t.)

With debt collectors coming after grads full-force – an aggressive attempt to puncture the $67 billion in defaulted loans  – what choice would one have but to give in, move home, crawl under the covers and wish it all away?

I’m fortunate that I didn’t take out loans for my bachelor’s degree, but I have for my graduate degree. I graduated from college more than six years ago and have had steady work ever since, so I’m in a good place (after one year of grad school, I have already paid off my loans). Others (most) are not so lucky, and yet they were sold the idea that college equals freedom, the discovery of your passions, enlightenment: a better future. Now, all they can see is a dollar sign stamped to their forehead, and a narrowing tunnel of opportunity. Innovators like to throw around the phrase “scarcity brings clarity”, and while I like that idea when it comes to business, knowledge should not contract simply because the economy does, and its pursuit should not limit our potential. In reality, that’s just not what we’ve been told.