A hole in the American Dream

I am fortunate to have met many intelligent and well-educated young people. Some are friends of my own children. Others I have met in other ways. I am impressed with the thoughtfulness and commitment of these 20- and 30-year-olds. When I was their age, the  opportunities before me seemed endless. We all assumed that our lives would be better, economically and socially, than our parents’ lives. My parents got to go to school until they finished the eighth grade. My sisters and I went to college. Life, we thought, would always be better for the next generation.

When I finished college, I had a few thousand dollars in student debt. I had worked part time, applied for scholarships and had some help from my parents. My husband got some of his loans forgiven after a few years of teaching. We paid mine off at about ten dollars a month. The debt we incurred was an inconvenience.

There still are some students who finish their undergraduate degree with no debt. Often they are students whose parents have been able to save money for their education throughout the young person’s childhood or have enough income to pay for their children’s tuition and living costs. There are a few highly talented and gifted young people who are able to access scholarships and grants to fund their education. Two-thirds of all students, however, borrow money to go to school.

Student debt in this country has now topped $1.1 trillion. This amount is the actual principle of the loans and does not include any unpaid interest that may have been added to the loan since it was incurred. Student debt is reality for more than 38 million Americans. The average debt is more than $24,000. For the first time ever, Americans owe more money on their education than they owe their credit card companies or on car loans.

Everyone knows some foolish young person who lived high with their student loans. There are examples of students who drive new cars, live in fancy apartments, vacation in exotic resorts. They must be hanging around with someone else’s kids, because these are not the young people I have met. Most of the young people I know work from 20 to 40 hours a week even while they attend school full time. Many live in the same kind of run-down, low rent housing that I lived in while going to school. They own cars, but usually not new ones. They live frugally and work hard.

Because tuition increases at private and even state-run colleges has far outpaced inflation, what worked to pay the bill when I was a student in 1970, no longer comes close.

Young people face a dilemma. They are told that the only way to have a career that pays a middle class wage is to get a college degree. They then spend the next twenty years paying for that degree. Still, many occupations which require a degree, such as teaching or the ministry, don’t start at salaries high enough to make payments on the education required.

The cost of education and the resulting burden of debt have an impact on our communities and on our economy.

When young people are paying on their debt, (most of them do not default on their loans) they cannot buy a new car or invest in a house. They feel pressured to work at the job with the highest salary, not the one best suited to their interests or talents. They can’t take a lower paying job in a small town. They cannot start a new business. They have to think twice about having children. This debt is stifling our country’s creativity, innovation and slowing our economic recovery.

Student debt, in most cases, cannot be discharged through bankruptcy. While there are income based payment deferments and limited pay down options for some kinds of service, the debt remains a long-term burden.

On July 1, the interest rate on new subsidized student loans will double from 3.4 percent to 6.8 percent unless Congress acts to change it. Extending the cap on new borrowing is important, but will have little effect on those who already owe part of the current $1 trillion in unpaid debt. It will have no effect on students seeking a graduate degree since those interest rates are currently 6.8 percent. We must find a different way of funding education and new and creative ways for young people to have that debt forgiven.

If the lives of our children are going to be as good as or better than ours, they must have access to an education and better jobs. The American dream isn’t possible if our brightest and best start out in a hole.

Copyright © 2013 Janet Jacobson and Sustaining the Northern Plains