Wednesday, March 21, 2007

3602

How to deal with college debt

At a time when fewer, not more, young adults should be considering college, law makers are scrambling to find more ways to loan more money--long proven to be the road to more debt. How will the student loan industry be fixed? By you and me picking up the debt, betcha?

What do students with $20-60,000 debt do when they graduate with an almost worthless B.A. that will get them a $30,000 a year job? They go to graduate school and take on more debt, of course. And why shouldn't they when the federal government subsidizes the poor decisions they made when they started college?

The federal government gave out $12.7 billion in Pell grants, and Bush, the education president, is promising $15 billion. Students take on almost $70 billion a year in debt. Education, even learning to read, can dramatically improve living standards in 2nd and 3rd world countries. In the U.S. it has become a status thing, especially which college or university. The actual monetary return for a Harvard or Yale education is less, if compared with other investments--stock or real estate or just going to work after high school--over forty years. The push to get into college, particularly high profile, prestige schools, does little except keep faculty, staff, and administrators employed. The return on a public school education is 4.2%, and on a private school 1.9% (statistics here).

Senator Kennedy and President Bush both have grandiose ideas on how to increase debt for students by making it less painful to repay (it's called making it more affordable, but the real word is debt). If this were one of these payday loan companies in the inner city, we'd call it a scam and there would be congressional hearings. Both men inherited wealth. Bush actually was a business man, so I give him a bit of credit for economics 101 (and his wife was a librarian), but Kennedy has never held a "real" job in his life. He's gotten fat, literally and figuratively, at the public trough. They both need to take a second look at why and how people sign on for debt. The ordinary American, even one with an income of $100,000, is not just drawing on a trust fund set up on grandpa's wealth.

I graduated from college in the 1960s with no debt. I paid for two years, and my parents paid for two years. There were government programs then for indigent and special cases. But most of the people I knew--didn't spend years paying off debt. In the 1930s, my father received a small scholarship from the Polo, IL women's club, for "the worthy poor" (his words, not theirs), and he spent a number of years paying it back in full, and the college gave him a scholarship to play football. Repaying debt is always difficult. Rather than just prolonging the pain, shifting the blame, and doing the same, let's do some review and see why during an era when everyone had less, we had more for our future.

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