STUDENT LOAN DEBT: THE NEXT BUBBLE ABOUT TO BURST
Student loan debt has recently reached over 1 trillion dollars, more than both auto loan debt and credit card debt combined. Stories on student loan debt usually focus on current college students or upcoming students, and discuss ways to keep the cost of college down. I want to talk about the other group of debt holders whose plight is often little-discussed but in need of arguably even more help than the current students: the late 20 and 30-something college and graduate school grads who already have their degrees but have little promising job prospects and sometimes over 6 figures of student loan debt.
The average student loan debt is $23,000 but when I cite this figure amongst my group of friend and peers, I always get the same response: they look at me with incredulous eyes and say “Is that all?” Their reaction is understandable for in my group of peers it is very rare to find someone who doesn’t have at least $50,000 or more of debt, and several, who attended both college and graduate school, have over $100,000. Furthermore, as we are now facing the lowest job market in recent history, almost all of them are unemployed or underemployed, with no possible foreseeable way to pay off this obscene amount of debt. When you have over $100,000 in student loan debt and can’t get a full-time job that will pay enough to even make the interest payments, that $100,000 might as well be a million, and you see a very bleak future ahead of you.
There’s some cause for concern hidden beneath the skeptical responses to the $23,000 figure. After all, 23k is a lot to handle but it’s manageable. If it is believed that everyone has an average of 25k to pay off over time, the popular opinion is going to be that’s a problem, but it’s hardly a crisis, and little is going to be done to fix it. However, if a significant percentage of the population is carrying over 6 figures of student loan debt, that’s a national emergency that demands to be addressed. You might as well have people walk around with flashing alarms over their heads and a sign around their neck that says: “HELP ME! I’m drowning in debt!”
If you’re ever amongst a group of people under the age of 40, a popular party game that will eventually be played is “How Much Student Debt Do You Have? “ The numbers are astronomical, the stories heartbreaking. A 34-year old woman with a Master’s degree in education has over $100,000 in debt, unable to find a teaching job, works for little pay as a lifeguard, and has just moved in with family when she was no longer able to pay the rent on her apartment. Another 30-something woman with a Master’s degree in education who also has over $100,000 in student loan debt and who also can’t find a full-time teaching job, works 4 different part-time jobs just to pay rent and make ends meet. The loans? They’ve been in deferment for years, and the interest keeps climbing higher and higher. A 28-year-old man with $60,000 in student debt has a graduate degree in graphic design, works temporary contract jobs for whatever money he can get, and has just applied for food stamps. Every young person with a degree you meet will have a similar story. Some of them are unemployed, some of them can only find part-time work (because finding a good-paying full-time job with benefits in this economy is a little bit like striking gold in the middle of the desert), some of them are working unpaid internships or internships with a small living stipend, hoping it will give them the foot in the door needed to get an actual salaried job someday, some of them have been lucky enough to find these fabled full-time jobs with benefits, and are earning a small entry level salary while trying to stay afloat, some of them have moved back in with parents and family because they can’t afford rent on an apartment, some have given up altogether and are spiraling into a vast pit of hopelessness and depression. All of them are in desperate need of help.
Go back to that same gathering of young people and after the debt figures are compared, discussion usually turns to all the milestone markers and achievements of adulthood that were once taken for granted as realistic goals for people our age in yesteryears, but have now turned to whimsical fantasies for our generation. Buying a car? Most likely not when you have to choose between that or continuing to pay rent. Buying a house? That’s hilarious. We already have an enormous mortgage with no house to show for it, you want us to get a second one? Some people are even deciding not to have children, realizing they can’t afford to care for a child when they can barely afford to take care of themselves. Saving for retirement? Hahahahaha! Are you kidding?! Just mentioning the word retirement amongst this crowd is a joke that will often result in fits of maniacal laughter. We laugh to hide the tears of desperation. If you think a whole generation of people who can’t afford to make these major life-purchases isn’t going to have disastrous ripple-effect on the economy, you are fooling yourself.
Because so many people can’t afford to make the monthly loan payments, and because many of us are fully recognizant of the fact that since we don’t have a hope or a prayer of ever fully paying the loan off in our lifetime, making the payments is literally like taking your money each month and throwing it into the bottomless abyss, we have come up with a 3-step-system for dealing with student debt: Defer. Defer. Defer. Increasingly many people are adding a 4th step: Go back to school, take out more loans, and defer some more. And the vicious, self-eating circle spins round and round. Some people have told me that they plan to be a perpetual student the rest of their lives, so the loans will always be in deferment. They were only half kidding. It’s for this reason that I foresaw the coming student loan crisis years before anyone was talking about it, and why when the housing bubble burst, I knew student loan debt would eventually be the next bursting bubble unless something is done to fix it fast.
There is now a growing mobilization in the country to have student loan debt forgiven to stimulate the economy. In fact, an online petition to support H.R. 4170, the Student Loan Forgiveness Act of 2012, recently reached over 1 million signatures. The only question is if the politicians will take action in time before the bubble pops and wreaks havoc on the already fragile economy. The clock ticks.
I don’t even worry much about student loan payments anymore because I know this is not just my problem, it is a nationwide problem that has reached crisis proportions, and one way or another the problem is going to solve itself, it’s just a matter of whether that is going to be done wisely through a major intervention plan or catastrophically through ignoring the issue until it blows up in our faces. So in the meantime I take up a Zen countenance of resigned acceptance, following the 3-step-system and just wait, wait, patiently wait for the inevitable day when the bubble finally bursts.
To sign the petition in support of the Student Loan Forgiveness Act, visit www.forgivestudentloandebt.com