What’s With Student Loans?

obama state of the union 2013

“It’s a simple fact:  The more education you’ve got,
the more likely you are to have a good job
and work your way into the middle class.”

2013 State of the Union Address

President Obama was repeating an enduring cultural belief. Maybe it was still true when he said it, but not anymore — for a lot of reasons we’ve looked at throughout this series, but especially in light of today’s social and economic calamity of soaring higher education costs and student loans.[1]

student debt graph

Chart from Next Gen Personal Finance (May 30, 2015)

Student debt grew steadily 2000-2014. Toward the end of that period, a revenue provision tacked onto the 2010 Affordable Care Act gave the Federal government a monopoly on the student loan business. Since then, total loans have risen exponentially — by 50%, to $1.52 Trillion.

Nationalizing student debt has been a government money-maker, in terms of both capital and income:

“The trillion plus in student debt that the state holds makes up a plurality of its financial assets — 37 percent, far more than national reserves officially held in gold or foreign currency.

“Because the government’s borrowing costs are so low, student lending is incredibly profitable. The Department of Education expects to reap $18.99 in profit on evert $100 in loans originated in 2014… and we’re talking over $25 billion in projected negative subsidy — that is, profit — off the 2014 cohort alone.”[2]

Kids These Days: The Making Of Millennials, Malcolm Harris (2017)

Meanwhile, educational costs have also soared.

educational costs

Tuition data from National Center for Education Statistics. Inflation data calculated using 1963–1964 tuition and tuition increase at rate of inflation from CPI Inflation Calculator. Graph by Noa Maltzman

Today, average undergraduate loans are $30,000. Paying them off represents a 21-year mortgage. What’s the ROI from the students’ point of view? Answering that question requires examining (1) the loans themselves — how they’re originated, paid off, etc., (2) what higher education is doing with the loan proceeds students are handing over, and (3) the cultural belief Pres. Obama articulated. For all of that, I refer you to the book Kids These Days, cited above, and to a 70-minute film Broke, Busted, and Disgusted, which I just watched.[3]

What’s to be done? The remedies in the film are prospective — they’re too late for the $1.52 Trillion already in place. Going forward? Well, it is an issue in the election coming up — at least for the Democrats — and here are summaries of candidate proposals:

Writing this makes me revisit my own experience with student loans and the cost of higher education.

I went to an expensive private college. My financial aid package included scholarships, work study, and student loans. I paid off the loans in five years. The relief was tangible. I vowed never again.

My financial aid package at DU’s MBA/JD program included scholarships and student loans. I declined the loans and worked a lot, sometimes full time. I made it through the first three years without loans and would have finished that way. An accountant friend told me I was crazy — it was cheap money. I took out a loan my fourth year. I paid it off in six years. The relief was tangible. I vowed never again.

In 2009, just after the Great Recession and an ill-timed, ill-advised, and poorly executed exit from law practice, I was short of funds to pay for two of my kids’ final years at expensive private colleges (they’re two years apart in age, but their final years coincided). I took out $30.000 in “parent plus” loans to make up the difference. I declared bankruptcy the following year, and found out student loans hadn’t been dischargeable since 2005.

In 2013, as part of an attempt at mid-life reinvention, I was accepted into a graduate program in sports psychology at DU. There was no way to pay for it other than student loans. I decided not to attend. The relief was tangible. Lesson learned.

In 2016, I qualified for disability income. I used most of my back-pay award to pay off my parent-plus loans. The relief was tangible. Lesson learned. I vowed never again.

It’s easy for me to feel entirely responsible for my own history. But as for today’s reality, as a young friend said recently, “I’m starting to believe it’s not all my fault.” Coming up, we’ll look at more economic support for that thought.

[1] As I write this, the headlines today show Felicity Huffman entering prison for her role in the college admissions scandal.

[2] Citing Department of Education Student Loans Overview Fiscal Year 2014 Budget Proposal. Click here for the 2020 numbers

[3] Of course the documentary has an agenda, but it’s well-done and worth watching.

Can Capitalism Buy Happiness? [2]

smiley face

We’ve been looking at the zero-sum economy’s winners and losers — the new “meritocracy” vs. the “precariat” and the Millennials.

We’ve also seen that winners and losers find common ground in higher education, where students of all stripes are increasingly stressed to the point of mental ill-health  — not by the demands of higher learning, but by the enveloping culture of hyper-competitive capitalism.

One predictable response has been for the established, older, prosperous, and powerful to wag the shame finger and tell the kids to quit whining and buck up:

“Student protests and demands for better mental health services are frequently dismissed in the press. ‘We just can’t cope with essay deadlines, and tests stress us out, moan snowflake students,’ read a headline in the Daily Mail in November 2017. In September 2018, the Times described today’s students as ‘Generation Snowflake’ and suggested that ‘helicopter parents’ had ‘coddled the minds’ of young people.”

The way universities are run is making us ill: inside the student mental health crisis. The Guardian (Sept. 27, 2019).

Truth is, we just don’t like to talk about mental illness, and if we regard it at all, tend to shoo it away as a personal problem or character flaw. Plus, there are enduring cultural myths that capitalism and its marketplace are “free,” and that anyone can make it with enough gumption. Together, these attitudes foster the “snowflake” judgment.

Mental illness is ultimately about a clash between the “reality” of the individual deemed to be mentally ill and the “reality” of the prevailing culture.[i] Conventional thinking sides with the culture, and uses pharmaceutical and other therapeutic interventions to realign the individual. As a result, the list of economic stressors is accepted as part of the culture’s normal life to which individuals are expected to conform,

Meanwhile, viewed on its own terms — outside of its cultural context — the list itself is long and dismaying. For example:

  • There has been a forty-year drought in middle class real income growth, with most households drifting downward while an economic elite soars at the top.
  • The percentage of Americans who are considered to be poor by Federal standards is approaching 50% — meaning they have no or limited access to what were historically considered “public goods” such as shelter and sustenance, education and healthcare, etc.
  • Public support safety nets have been replaced by the privatization of essential services. The social services that remain are expensive for the government to administer and are demeaning and counter-productive for recipients;
  • Soaring educational costs mean soaring and strangling student loans.
  • Runaway housing costs have made conventional home ownership unaffordable for the lower economic classes.
  • Due to the rise of the “rentier” economy, the general public must increasingly pay capital holders for the use and enjoyment of essential resources and intellectual property.
  • Upward mobility for the lower 90% is now a thing of the past (the “glass ceiling”). Meanwhile the top 10% is protected against drifting downward (the “glass floor”).
  • Touted “job creation” is mostly “gig economy” contract work, with no assurances of sustainability and no benefits such as healthcare, retirement, etc.
  • Prospects for sustainable income are bleak, and the new job market requires the “hustle” and the “grind” and the monetization of everything in a state of “total work.”
  • Meanwhile, GDP “growth” is largely due to production increasingly shifted not just off-shore, but to intelligent machines. Benefits accrue to capital holders, not wage-earners.
  • These job trends have increasingly resulted in social isolation and an unfulfilled struggle to find meaning and purpose at work.
  • Meanwhile a new generation of huge and powerful “corporate nation-states” now challenge conventional notions of national sovereignty, democracy, and policy-making.
  • The same is true of “philanthrocapitalism” and “social entrepreneurship.”

And there’s more.

While “snowflake” judgments turn a blind eye, for the past several years there has been a counter commentary that looks at the list systemically:  it examines how the capitalistic over-culture creates social mental ill health which is then transmitted to the individual. I.e., it asks if the culture’s assimilation of contemporary capitalistic belief and practice has become toxic to the point that it is making both society and its individual members sick. This is a huge shift in perspective, which we’ll explore further.

[1] For more on how cultural beliefs create collective reality, you might take a look at this article, which evaluates mental health diagnosis and treatment in light of the Cartesian worldview that still dominates the western world:  i.e.,the dualistic thinking that separates the natural world, which can be known scientifically, from the realm of soul or spirit, which can’t. I have talked about how cultural beliefs created social reality in prior blog series in this forum. I also address it in my other blog.

The Zero Sum Economy

The House Always Wins

“Zero sum” in game theory means somebody wins and somebody loses. Some people think that describes the economy.

This article chronicles current economic trends that only shift dollars from here to there, without adding value to the whole — for example workers job-hopping or companies e automating production. There are as many losers as winners, and nothing is gained.

Thomas Piketty’s classic Capital in the 21st Century extensively detailed how current economic practice is creating economic inequality at a record pace. Inequality means a tiny few at the top are the big winners while everybody else loses.

On the other hand, this explanation from Investopedia asserts that economic transactions are generally “positive sum”:

“When applied specifically to economics, there are multiple factors to consider when understanding a zero-sum game. Zero-sum game assumes a version of perfect competition and perfect information; that is, both opponents in the model have all the relevant information to make an informed decision. To take a step back, most transactions or trades are inherently non zero-sum games because when two parties agree to trade they do so with the understanding that the goods or services they are receiving are more valuable than the goods or services they are trading for it, after transaction costs. This is called positive-sum, and most transactions fall under this category.”

Similarly, this writer has an ideological bone to pick with the zero-summers — he’s frustrated that people just don’t get that every economic transaction is win-win and makes the pie bigger for everybody.

Meanwhile, this article first carefully describes the zero sum concept, then explains why you don’t want to win a zero-sum trade war.

And on it goes.

One thing is evident from all points of view:  there is no such thing as capitalism in the abstract; instead, capitalism is what economic policy makes it. As Investopedia explains:

“Nearly every proponent of capitalism supports some level of government influence in the economy. The only exceptions are anarcho-capitalists, who believe that all of the functions of the state can and should be privatized and exposed to market forces. Classical liberals, libertarians and minarchists argue that capitalism is the best system of distributing resources, but that the government must exist in order to protect private property rights through the military, police and courts.

“In the United States, most economists are identified as Keynesian, Chicago-school or classical liberal. Keynesian economists believe that capitalism largely works, but macroeconomic forces within the business cycle require government intervention to help smooth it out. They support fiscal and monetary policy, as well as other regulations on certain business activities. Chicago-school economists tend to support a mild use of monetary policy and a lower level of regulation.”

What Role Does The Government Play In Capitalism? Investopedia (June 26, 2019)

Therefore if the economy is zero sum, it’s not capitalism’s fault, it’s the capitalists’ fault. And if it’s positive sum, they should get the credit.

This article skips the debate and focuses on what the author sees as today’s biggest economic losers:

“For Millennials and the Gen Z who come after them, there are many disturbing signs of a transition to a new society, one based on wage stagnation, high debt to income levels and rising wealth inequality characterizing a capitalism that’s breaking down social economic mobility and the American dream at its core.

“It could be argued the middle class is being disrupted and the pain points of Millennials mean each subsequent generation of young Americans will feel these pains.

“These are some of the meta-trends that come to mind:

  • Wage stagnation
  • Student debt crisis
  • Part time and gig economy work imprisonment (like a glass ceiling for the lower middle class)
  • Rising costsof housing, healthcare and the affordability of the next milestone (home ownership, marriage, children)
  • Mental health issues surrounding technological addiction
  • Finding the right life-work balance while developing a career path that’s both economically and morally fulfilling
  • Loneliness epidemicwith isolation and unsubstantial support systems in place

“We are living in an era where an entire generation are ‘late bloomers’ by default, in a system that hasn’t just not just protected and empowered young people — but of a generation that suffer major disadvantages the youth of other generations didn’t even experience.

  • The affordability crisis millennials are dealing with is impacting their mental health at a time when they lack social support.
  • The affordability crisis and career uncertainty has made Millennials subject to dangerous combinations of vulnerability.
  • Financial struggles and ruthless capitalism has meant many Millennials have no hope of bettering their circumstances.
  • It’s scary but accurate to say ‘deaths of despair’ are increasing among young Americans.”

The  article has much more to say, and frankly it’s not the most carefully constructed piece of the hundreds (maybe thousands) I’ve reviewed in the past two and a half years, but I cite it because it captures the desperation of the “precariat” — a term economist Guy Standing applies to “millions of people obliged to accept a life of unstable labour and living, without an occupational identity or corporate narrative to give to their lives.”

My kids are members of the precariat, which makes them economic losers. So are their friends.

Never thought I’d see the day.

We’ll look more at the zero sum economy next time.

Ambition: Promised Land or Wasteland?

A heap of broken images, where the sun beats,
And the dead tree gives no shelter, the cricket no relief,
And the dry stone no sound of water. Only
There is shadow under this red rock,
(Come in under the shadow of this red rock),
And I will show you something different from either
Your shadow at morning striding behind you
Or your shadow at evening rising to meet you;
I will show you fear in a handful of dust.”

T.S. Eliot, The Wasteland

We’re exploring how inspiration, motivation, and ambition can help create meaningful work. We found that inspiration is essential, but has a dark side that includes mania and delusional risk taking, and that motivation is a ManagementSpeak relic and a brain stressor.  As for ambition, much current commentary focuses on my kids’ generation, but there’s plenty here for the rest of us if we view it in the larger economic context.

Here’s a quick summary:  Our parents came of age in the glory years of The Job and a Fair Income for the Middle Class. We Baby Boomers were born into that economic model, customized with our own iconoclastic and utopian social visions. The model weakened in the 70’s and 80’s, but we were too busy with kids and careers to notice. The Gen Xers got in early enough to ride the upward mobility escalator, but now that the Millennials are  young adults the model is bankrupt, leaving them to face a whole new gig — as in “gig economy.”

All that happened while most of us didn’t know it. Along with our policymakers, we were and still are stuck in the cognitive and cultural bias of the jobs heyday. Back in the day, we showered the Millennials with self-esteem-building, be-all-you-can-be positive thinking, and told them to follow their dreams. But when they came of age the economy wasn’t set up to support them. Maybe that’s why some parents habitually hedged their advice, urging the kids to have a Plan B and for crying out loud quit with all the cold filtering and get a real job.

(For a remarkable look at the current state of economic opportunity, see “I’m a Millionaire Who Creates Zero Jobs. Why Do I Pay Less Tax Than You?” by Morris Pearl, a career Wall Street One Percenter who is now chairman of the Patriotic Millionaires.)

No wonder people write books like Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled–and More Miserable Than Ever Before , by psychology professor Jean M. Twenge. This is from the flyleaf:

Generation Me“In this provocative and newly revised book, headline-making psychologist Dr. Jean Twenge explores why the young people she calls “Generation Me” are tolerant, confident, open-minded, and ambitious but also disengaged, narcissistic, distrustful, and anxious.

“Born in the ’80s, and ’90s… the children of the Baby Boomers are … feeling the effects of the recession and the changing job market.

“Her often humorous, eyebrow-raising stories about real people vividly bring to life the hopes, disappointments, and challenges of Generation Me.  Engaging, controversial, prescriptive, and funny, Generation Me gives Boomers and GenX’ers new and fascinating insights into their offspring, and helps those in their teens, twenties, and thirties find their road to happiness.”

I was okay with the blurb until it got to “happiness.” I’m more in tune with the article we looked at last time — You Can Do It, Baby! Our Culture Is Rich With Esteem-Boosting Platitudes For Young Dreamers, But The Assurances Are Dishonest And Dangerous,” Aeon Magazine (July 17, 2015):

“Roman Krznaric, founding faculty member of The School of Life in London, says that .. we’ve seen ‘rising expectations among everybody for work that’s more than just a salary… You see this among people who are highly educated… and that helps explain why job dissatisfaction tends to rise over the past couple of decades, because people are asking … to use their talents or passions in their work.’

“The shift in expectation has resulted in tremendous anxiety over achieving these goals and, paradoxically, sheer delusion. Point out to parents or teens just how difficult it can be to achieve such a high-level career and you’ll likely be treated to a catalogue of all the people who bucked the odds. Not just the Oprahs or the Steve Jobses who achieved super-status but the friend of a friend who just bought a modern all-glass home overlooking San Francisco Bay with his signing bonus, or the daughter of a work colleague who was cast in a new TV show, or the neighbour’s son who got a scholarship to Harvard.

“If it’s possible for them, we want to believe that it’s possible for our children too. Besides, who wants to be the killjoy who has to remind the struggling math student that medicine likely isn’t an option? … Besides, technically it is possible. At what point do we abandon possible for probable, and encourage our children to do the same?

“‘This links to the cult of positive thinking,’ says Krznaric, ‘where we’re always wanting to feel up and good and send positive messages… and so we feel that we should only be sending good messages and positive messages to our children and to young people. That it’s somehow wrong or bad or inappropriate to tell them: actually, it isn’t possible.’”

Ambition says it’s possible. Current economics says it’s not. Now what? Back for more next week.