Many people view the student loan issue with trepidation – will the crash of ’08 make a reappearance in our still-struggling economy? Will the 2013/2014 school year mark the fall of the student market?
Not so fast…
To be sure, there’s plenty of comparisons to be made with the housing market bursting in 2008 and the currently burgeoning student debt. The housing market was growing and growing and growing without an end in sight. And then, just like the naysayers predicted, the growth was shot dead center and plummeted to a destructive demise, and the American people are continually battling to rise up from the devastation. But that won’t – can’t – happen under the ballooning prices of student debts and loans. History may generally repeat itself, but today we’re heading towards something different.
The Student Market vs the Housing Market
The biggest reason we know that the economy won’t collapse under higher student loans is very simple. The government doesn’t insure student loans – if banks want their money back, they have to get it straight from the students; they can’t default and receive a paycheck from the government. Compare this to the housing market, where banks whose loans defaulted received houses and direct financial compensation from the government.
The Real Crisis
There is an economic danger in having such huge student debt. People with debt, especially debt as large as that accrued from college loans, are far less likely to spend money unless they have to. With less spending money going into the economy, fewer new or local businesses can afford to stay afloat. With fewer businesses offering jobs, there’s no way for people to earn the money they need to pay back their debt.
Another problem that we’re seeing is in the stringent payback that banks are asking of students. The contract has no leniency – you’d better be able to make your payments when you said you would, or else the loaners can take it straight from your paycheck, leaving you liked a beached financial whale. Students have to head back into their parent’s homes to avoid taxing expenses such as rent, food, and utilities. All this, just so they can pay off their student debt.
So what can we do?
As selfish and narcissistic as the Millennials seem to be, we need them to become productive members of society. Economically, they need to be buying things, and to do that, they need to be earning money. Intellectually, they need a college education so that they can better our world. Culturally, they need to be engaged; they need to play an active role. All of this is stinted when graduates return to the nest.
There’s two things our society can do without suing colleges or involving the feds.
1) Prevent Overwhelming Student Debt
If we can prevent college students from taking on too much debt, they’ll be able to pay it back and find their own niche in the world without taking a trip back to Mom’s. The earlier they (and their parents!) start saving, the easier it will be to finance their college education. If they (and their parents!) are more educated on how loans and debts work, then they can make better and smarter financial choices.
2) Be a Friendly Neighbor
Little things add up over time. If you can do anything for your struggling neighborhood graduate – small things, such as paying them to mow your lawn, clean your house, or dogshit, they’ll have an easier time paying back their debt and they can finally start functioning as a fiscally independent adult. And as you can, teach the neighborhood youngsters smart financial management. Kids are clueless about things like saving, investing, gaining credit, and working hard. When it’s their turn to go to college, it would behoove them if they’re not as hopelessly uneducated as their predecessors about loans and debt.
Perhaps increased debate and compromise between generations, corporations, and the institutions is all we need to stop this crisis before the class of 2014 graduates. Then again, maybe we just need to demonstrate a little bit more wisdom and compassion towards our fellow man. With that in mind, maybe (just maybe!) the student debt problem isn’t a financial crisis waiting to topple our economy, but rather is an opportunity for growth that’s just begging to be utilized.