Monday, April 2, 2018

Student Loan Debt: Learn To Be The Consumer, Not The Consumed by Dr. Michael Flanagan and Christine Vaccaro

With the May 1st college commitment deadline fast approaching, high school seniors are currently facing an avalanche of financial aid documentation. While there is much talk on how to to make students “college and career ready”, we as educators must also make students aware of the crushing debt that awaits them at the end of their college education. By coaxing our students to apply to the “best” (i.e. most expensive) colleges, we are actually cultivating a generation of debt slaves.
Our high schools are unintentionally complicit in perpetuating this “educational-industrial complex”. They hang glossy posters of leafy quads and ivy-covered buildings in school offices. They post acceptance letters on bulletin boards, and boast of scholarship money awarded during graduation ceremonies. There is a de facto assumption that high school students are in training for a four-year university path. While it is our job hold these high expectations for our students, it is also our responsibility to explain the current ramifications of obtaining a higher education.
There is more than $1.4 trillion dollars in student loan debt that already exists in this country. The current default rate on those loans is more than 11%, with some colleges seeing rates as high as 40%. In those cases of default, financial hardship must be proven to a judge and it is very difficult to qualify for student loan bankruptcy protections.
The politicians in Washington are standing with the student lenders, not the students. While the Department of Education is currently reviewing policies and asking for public comment on student loan bankruptcy protections, Education Secretary Betsy DeVos is actively fighting a crackdown on student loan collectors. The Trump administration’s focus has been to protect for-profit lenders by making it harder for students to get loan forgiveness. It is clear the student loan bubble will most likely lead to the next economic collapse.
As a microeconomics topic, there is no more pressing issue for our graduating seniors than the cost of a college education and the seemingly insurmountable debt they will face upon graduation. (Or, increasingly more likely, upon dropping out.) As of 2016, the average student loan debt in this country is $37,172. That is not counting the accrued interest over ten or twenty years. It is for this reason that over the past few weeks, my 12th grade economics classes have been analyzing the student loan process.
We began by examining the FAFSA application, federal subsidized and unsubsidized loans, grants and scholarships --  very little of which the students, or many of their families, had any real understanding. We discussed interest rates, tax deductions and work-study programs. Students analyzed actual financial aid packages in order to distinguish between gift aid, loans and expected family contributions. They calculated APR and monthly loan payments. They researched the “best” college majors, estimated salaries of their desired careers and cost of living in the city or state they were planning on living.

I explained to my classes that the bankers and financial aid officers, with whom they are about to engage, are predatory lenders, and the students themselves are the prey. That although seniors, they are still only children (most of whom have never even held a job or paid a bill) and are about to commit themselves for the next few decades to repaying tens of thousands of dollars in loans -- while seeking careers in a depressed job market with stagnant wages. And that their parents, who will be cosigning many of those loans, might very well be dragged down into this slippery well with them.

My students’ reactions were profound. Some had tears in their eyes. Others suddenly showed a clear understanding of what that debt would actually mean to them, and their families. “Thank you for opening my eyes to this student loan stuff, Mister,” I heard more than a few times. And then came the next question, “What should I do?”. The answer is: be the consumer, not the consumed.
How can we as educators help? First, we can begin by creating cracks in the kindergarten-to-college pipeline that enables this college and career ready (or bust) system. Many high school students are not prepared for college, and have no idea what they want to study. They are simply adolescents just trying to sort out life, yet being forced to make high-stakes decisions in between cellphone video games and Snapchat.

What if more of us educators dared to suggest that some of our high school seniors would be better served starting out by attending local community colleges? At fraction of the cost of private schools, students can become better prepared for college, develop more of an understanding of what they want to study in a four-year institution, and what the job market has to offer. In this time, in this economy, it makes sense for many students to start out by getting good grades and good study habits at a community college, rather than floundering at a “name” school and racking up debt. The fact is, you can be successful at any college you attend.  Clearly, this plan must be a threat to the student loan industry because just last week in a speech, Trump maligned community colleges.

Second, we need to acknowledge college is not for everyone. Trade schools and vocational training, once the backbone career paths for the middle class, are looked down upon and rarely discussed. But they are viable and in-demand options for success. Over the past 10-15 years in this country, we have taken away a student’s ability to study a trade. Many jobs that once offered a high school graduate a chance to earn a living have been outsourced to third world countries for maximum corporate profit. Yet, there is still a high demand for skilled tradespeople in this service-oriented country because even though more Americans are receiving college educations than ever before, fewer are able to fix a leaky faucet, replace a light switch or change brake pads.

Not all financial aid news is bad. Some cities like Memphis, TN are instituting student loan debt reduction for city employees. New York State has created the Excelsior program which provides free state college tuition to 950,000 potential students who might be able to meet the requirements. And most importantly, there are billions of dollars in school aid left on the table each year by students who do not take advantage, simply because they do not fill out an application. That is unacceptable.

In order to best support our students, we as educators must familiarize ourselves with the student loan system as well as the higher education alternatives to debt. We must guide our children towards an educational path that best suits them in today’s world. There are other paths besides blindly following the college and career readiness propaganda.

It is time for a reckoning against the banks and universities who have been making billions, all at the expense of our country’s future. In this time of student activists, how long will it be before they turn their attention to the college loan profiteers?

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