I'm of those who believe that excesses in all matters are not a good idea, whether it's formation of bubbles, whether it's excess in the financial market, whether it's excess of inequality, it has to be watched, it has to be measured, and it has to be anticipated in terms of consequences. -Christine Lagarde
In my opinion—and this is only my opinion—we’ve had a general (but profound) shift in how we view college.
I believe the average person now sees college as the only way to get a good life. The only way to get an increased income. We don’t talk about the trades, or working your way up, or adding more unique skills. We don’t talk about entrepreneurship. You’ve got to go to college to get the life that you want. Right?
If you go to most high schools today, the people in charge of educating—counselors, principles, teachers—are all academics. They all went through college. You have to have a degree or several to get into teaching. So the people who run the schools are very biased: you’ve got to go to college!
That’s my opinion, of course. I have nothing against teachers or educators in general. In fact, they are some of my favorite people to work with, because they usually have a lot of debt, and they qualify for the best programs available. Plus, I was an amazing student, so I got plenty of praise, and I hold teachers in high regard.
But anyway, before I get off on a tangent… the big point is that, in my opinion, there has been this shift. Most kids today (along with their parents) believe that the path to good life leads through college. I’m not saying they are wrong and I am right. I’m just saying we didn’t always look at college this way. More to the point: people hold this belief even though the data do not clearly back it up.
I think it’s because we want to believe it. Human beings in general do not respond too well to change, at least not to rapid change. Our parents’ generation went to college. They came out with a degree, and that degree set them up with a good job—a stable job they were able to work for 30 plus years. So, logically, they taught the next generation what had worked for them.
But that path simply does not work today for the average person. 73% of college graduates today do not go into their field of study. We have to realize that what worked before isn’t working now. Change has happened, and we need to change with it. On top of that, when we find what does work today, we need to realize that it might not work for the next generation or even 10 years from now.
The broader point to understand is that college is a business.
College is a business. Colleges are in the business of selling information. They’re selling higher education. And it’s the same education and information you can get from any other source.
So what are they really selling? It is an important question to ask, because as a country, we are heavily investing in this project. We’ve plunked down $1.4 trillion dollars as well as our time, energy, focus, and hope for the future.
What are they selling, and what are we buying? To use the language of business: what’s the ROI?
What they are really selling is a degree, a magical piece of paper that is supposed to work like skeleton key to opens all the locked doors of life. And they’re using all the sales and marketing tactics that big businesses do in order to sell it to us all. Branding, networking, exclusivity, value based selling, even word of mouth from parent to child. Anything and everything to get people to buy into seeing the college product as a must-have.
This shift in the common perspective—cultivated very deliberately by colleges and their boosters—has also contributed to the perfect storm we’ve been discussing. It helped to swell the balloon of student debt.
Now before I go any further, I know the statistics that say “people who get a higher education make more money over their lifetime.” I also know that many professions require the credentials of higher education—law, science, anything in the medical field, etc.
What I am asking is: are we really paying attention to what we are paying for? Do we actually know why this education costs so much? Why tuitions keep going up and up and up, way outpacing inflation? What does it really cost to put a person in the same room as you to soak up knowledge? Aren’t we in the information age? Why is information that is so readily available so expensive?
Okay, let me get off my soap box and take a step back. All I’m saying is that steadily increasing cost—with a steadily increasing demand for higher education—is another factor leading to the student debt crisis we find ourselves in.
Let me refocus on the student loan debt bubble. Let’s take a look at the bigger picture.
So many factors have clearly contributed to the 400% increase—creating this “student loan bubble.” Today, around 70% to 75% of all college students have some sort of debt. That’s shocking. And Parent Plus loans are starting to become more and more prevalent. They are another dangerous mess all on their own, because more parents are taking them on—sacrificing their future for their kids. These Baby Boomers are trying to retire, but they’re taking on more and more debt. They’re delaying and, in some cases, stopping their retirement in its tracks. Ask any economist in America today (well, okay, almost any), and they’ll tell you the next bubble to burst is going to be student loans. Hopefully, you can now see a little more clearly how this “student loan bubble” came to be: it’s actually a ripple effect from the mortgage bubble. The more you understand what you have been thrust into, the more we can look at how to right the ship.
Anyway, so now we have this “bubble” of student loans. But here’s the thing. It’s not going to just burst like the mortgage bubble did, where suddenly, we lost money, pensions, savings, and retirements got cut in half, and the sky fell overnight. It’s not like that, because it’s not securitized. These loans are not sold on the open market. They are not invested in. They can’t be shorted or over inflated.
But the popping of this bubble could in the long term prove even more devastating than the 2008 explosion. The catastrophe will look different and feel different because it will not be sudden but slow. This bubble is more like a wall stopping people from living freely. It is sucking the life blood from them, draining their livelihood, and adding an unnecessary weight to their shoulders. Ironically, this is exactly what their college education was supposed to alleviate and free them from.
Here are some of the major effects of this bubble (or, rather, this wall):
There has been a 30% drop in entrepreneurship, directly correlated with the student loan debt in the Millennial generation. That means fewer young people are taking the leap of faith to create, innovate, and explore new possibilities for our collective future because of this debt.
The median age for buying a home has shifted from early thirties to late thirties, with many economists pointing directly to student loans for this shift. People are scared to buy homes, and they are scared to start families because of this debt.
More people are not in relationships or are delaying marriage because of their massive student debt. Every day, I hear heartbreaking stories of people limiting themselves romantically because they don’t want to burden future partners with debt. Student loans are weighing heavy on many minds and hearts.
A drop in parents being able to retire. We went over this a little already, but did you know that nearly 50% of all Americans have nothing saved for retirement. How’s that going to play out in the next 20-30 years, do you think? (Now that statistic is not directly due to student debt, but student loans sure as hell aren’t helping that situation.)
Lastly, I just want you to imagine what will happen in our not so distant future if the well-educated portion of an entire generation doesn’t buy homes, start businesses, or start families because of their debt. What if those same people had to take care of their parents because they had no money to retire? Our society will grind to halt because of fucking student loans. It is ridiculous to think something so small could bring the whole thing crumbling down—our noble intentions of educating ourselves tragically undoing the entire American experiment.
Depending on how you look at it—the pessimist’s perspective—we may have already crossed the threshold, and we’re hurtling towards something bad at an unstoppable pace. But I am not a pessimist. Quite the opposite. I believe that the awareness of a problem would be pointless without the ability to stop it. We can right this ship. We can change the outcome. And it starts with some solutions that I use every day to help people. With simple knowledge and information spread to the masses like a virus, we can turn things around. There are solutions that exist right now to stop it, and that is just what we are going to do—deflate the bubble!
We’ll dive into the solutions in our next post…