Idiocracy

Today, The New York Times published an article about the $1 trillion of student loan debt and the long-term economic drag that this creates as people put off buying homes, cars, and having children (children who lead to a lot of economic purchases).

http://www.nytimes.com/2013/05/11/business/economy/student-loan-debt-weighing-down-younger-us-workers.html?hp

The article also mentions the long-term psychological impact of huge debt as a normal factor in life for the “millennial” generation, not just the anxiety/depression but economic cautiousness that has changed the behavior patters of this generation, causing even more economic slump when these people actually start to make some extra money.  Essentially, they may end up saving it instead of blowing it on material stuff, which hurts the economy.  The psychological impact also creates permanent emotional damage for people who put off normal youthful activities and responsibilities like marriage and children due to worries about supporting loved ones.

As usual, the article leaves out the most important questions and tries to paint a rosy picture about how college graduates make substantially more income over their lifetimes than their non-college counterparts.  Yet, this claim is based on past data and predictions of future salaries, and it is entirely plausible that the college-educated of this generation will continue to remain in the same types of jobs with the same types of salaries for the foreseeable future.  Also, the higher employment rate that the newspapers always tout does not calculate the salary to debt ratio.

The key question that the article also blows past without investigating: what happens when young people just stop paying for higher education?  The article acknowledges what many of us know from personal experience when we see our non-college educated friends buying homes and going on vacations.  Two non-college educated people making $35,000 and having no student debt can live a comfortable life, one unknown to those of us who spent most of our 20s in school and only working part-time gigs.  Surely, many of us have wondered whether it was worth going to school.  And surely, many of the smart people of the coming generations will evaluate their options by looking at our generation and seeing that it makes little financial sense to get educated.

This problem applies with more force to many professional degrees, whether it be veterinarians, people in most health-related fields, pharmacy techs, Ph.D-academics, or lawyers.  Many people with these credentials end up with incomes that match (for the most part) the incomes of their counterparts with four-year degrees, but they have much higher debt and opportunity costs.

Essentially, our country is creating a huge disincentive for getting educated.  Even if salaries for the college-educated are $10,000 a year higher on average, the payment of perpetual debt cancels out this benefit.  As many of us know, debt and taxes makes our incomes much lower than many of our friends working in $12/hour receptionist jobs.

In the name of “access,” the government allowed an infinite spigot of student loan money.  This lead our “free market” academies to price gouge, exercise regulatory capture, and shamelessly promote their defective products with a government seal of approval and a bunch of propaganda about good debt and the inherent value of education.  In response, young people may start to act rationally by making one of two choices: 1) not going to school or 2) not living a normal life complete with expenses like houses, cars, and children (the next generation of consumers)!  We will become a generation of the dumb or the childless.