Imagine: minimum-wage job, or no job. Tens of thousands in debt. Debt collectors garnishing your wages—and your parents’ wages. Yet you seem to get no closer to paying it off. This is the situation that millions of university students find themselves in danger of.
Total student loan debt in America is now $1 trillion. About two thirds of students graduate with debt. The average student owes more than $25,000. Parents who took out loans to pay for their children’s education owe an average of $34,000.
For the first time ever, American students owe more in student loans than the country owes in credit card debt.
William Brewer, president of the National Association of Consumer Bankruptcy Attorneys, calls this situation “a debt bomb that could cripple our society.” He isn’t exaggerating. Outside of owing that 25 grand to Big Vinny-with-the-brass-knuckles, student loan debt is the most dangerous kind of debt you can have.
If you take out a student loan, you owe it until you pay it back or until you die. There is virtually no other way out. It is a debtor’s prison that sometimes comes with a life sentence. For unsuspecting teenagers and their parents who often co-sign the loans, it has become a painful lesson in indentured servitude.
Besides debts to the Internal Revenue Service, student loans are the only type of debt where lenders can garnish your wages without a court order. And student loans are the only type of debt that cannot be wiped out in bankruptcy.
Yet even this arrangement often produces a lose-lose situation. Lenders can’t garnish wages when students graduate and go ninja—No Income, No Job or Assets. According to the most recent Bureau of Labor Statistics survey, the youth workforce participation rate is the lowest on record. The unemployment rate for white youth is 15.8 percent; for Hispanic youth, 20 percent; among black youth, 31 percent.
Following graduation, a graduate has six months to find a job and start making loan payments. If he doesn’t, the penalties and interest start piling up—and they never stop. As in never, ever.
The student debt problem is enormous, says Ike Shulman, a bankruptcy attorney in California. It’s “basically setting us up for having a large number of fellow citizens become economically non-functional for the rest of their adult lives,” he says.
If you think that’s bad, think about this: What are all these college grads going to do when they can’t get a job? Will they sit quietly unemployed while their debts grow bigger and bigger?
Everardo Gonzalez is a 23-year-old criminal justice graduate of San Francisco State University. As a student, he received federal grants and worked at ikea. But he still graduated owing $26,490 in federal loans and $10,000 in credit card debt. His debt levels are pretty typical.
After graduating, he landed a paid internship and is planning to go back to school to get a master’s degree in political theory. Then he wants to become a teacher. By the time he is done, he will owe thousands more.
Gonzalez is angry. To protest the debt, he and some other angry students staged an “Occupy Graduation” demonstration. Over their graduation robes, they all wore inflatable balls and chains—emblazoned with their student debt amounts.
With so much debt, it is easy to understand his frustration. If, instead of attending college, he got a job and saved up that $36,490 and invested it at a conservative 6 percent (most pension funds assume a long-term average return of 8 percent)—and continued to invest the $400 per month in interest and principle that he would spend paying down his debt over 10 years—he would have $132,000 in his bank account. At that point he wouldn’t have to contribute another dollar, and he would have $800,000 in his investment account by the time he retired.
Granted, once students graduate, they often get better-paying, more-fulfilling jobs. But even this is changing in recession-riddled America.
The idea that college should be “free” for everyone seems to be gaining traction. But as they used to teach at colleges, there is no such thing as a free lunch. If it is free for you, it is costing someone else. However, you can also empathize with people in this predicament. Students just don’t realize what they’re dealing with: an entire system that is built on greed.
A couple of generations ago, if a high school student wanted to go to college, he first had to plan, work, scrimp and save up the money. Sometimes he had to work for a few years after high school graduation before he could save up enough to attend college. Senate Majority Leader Harry Reid was born to a miner and laundress and grew up in poverty. Reid’s boyhood home was built out of old railroad ties, it had no indoor toilet, no hot water and no telephone. He had to work hard to pay his way through college. John Boehner, speaker of the House, was one of 12 children born to a working class family. It took him seven years to work and pay his way through college.
Having to pay for college resulted in students who really valued the college experience, who really wanted to be there for what they could learn, and who were mature enough for it.
Now, the government aggressively encourages all students to attend college. But many students shouldn’t go: Some simply are not academically suited for college; others do not have the work ethic necessary to succeed; others never use what they studied in college for their careers. Yet instead of promoting other types of career development, the government has fixated on colleges, coercing them to lower their academic standards to allow more students in.
The government has also forced colleges to adopt racial profiling in their admission policies. Colleges now admit racial minorities simply to meet federally mandated racial quotas, regardless of the students’ ability to succeed.
The result of the “everybody deserves a degree” policy erodes the value of a college diploma. This forces students to stay even longer in school to get post-graduate degrees in order to make them stand out. These cost additional time and money.
It wasn’t always this way. There was a time when a college education actually became cheaper each year. As recently as the early 1970s, the cost of a degree was falling annually by 17 percent. Then something changed, and the price tag for college hasn’t stopped rising since.
In 1978, the government started giving out taxpayer-funded student loans to people regardless of their income. From 1978 to 1981, government aid shot up by a whopping 70 percent. As any economics major worth his salt will tell you, the result was inevitable. Tuition started to rise.
The Reagan administration responded by providing even more government aid, including Pell grants and Perkins loans. By the end of the 1980s, tuition had risen a pocket-busting 47 percent. Successive governments continued the policy, and a cycle ensued. More students went to college, costs rose, students complained, the government provided more student loans, grants, subsidies to colleges, and so on.
None of it worked; it just made things worse. Students and the government have played a big part in making this mess, but they are only half the cast in this tragedy.
Monica Johnson is a 35-year-old college graduate who helped organize the “Occupy Graduation” protest at Hunter College in New York. Fifteen years ago, she borrowed $15,000 to pay for college. In 2007, she decided to go back to school for a fine arts degree and took out an additional $60,000 in loans, which shot up to $88,000—after she dropped out of the program.
Johnson is currently working at a non-profit and is struggling under her huge debt burden. “What really [makes me angry] is I should never have been given those loans,” Johnson says. “It honestly was the worst money I ever spent.”
Although Johnson deserves her share of the blame for borrowing ridiculous sums of money and then dropping out of college, she also brings up a great point. Normally it wouldn’t be in a bank’s self-interest to lend such serious money to such students. But thanks to politicians, it is in their self-interest.
In the past, student loans were much harder to come by. They were given out more like mortgages—or how mortgages used to be. If you wanted a loan for a home, you had to have a good job and good credit history, and you had to put down good collateral (the property). Without these things, the bank simply wouldn’t give you a loan. It knew you were more likely to default, and it would not get its money back, much less make a profit off you.
Yet all a student has to do today is get accepted to a college, and he can get hundreds of thousands of dollars in low-interest-rate student loans simply handed to him. Why?
To induce banks to give ever greater loans to virtually all students who go to college, Congress has passed a law saying that students simply can never default. A struggling student can even declare bankruptcy and still not have his debt wiped clean. Another law says that when a student does stop making his payments, his wages can be garnished without even appearing before a judge and justifying a court order.
Of course, banks are happy to lend under that sweetheart deal.
Lenders should be free to give loans to any student, but they should not be able to pin people up against a law that makes it illegal for a judge to wipe out that debt.
Doesn’t it make more sense for banks to lend based upon real-world factors? Things like: what grades did the student get in high school; did the student work a job in high school; does the student have good references; and what degree program does the student want this money to pay for? If a student wants a loan to take courses in Philosophy of Star Trek (no joke), that should be his or her choice. But it is also the bank’s prerogative to charge a higher interest rate, or decline to give that student a loan at all, since the odds of him finding a job afterward and paying back his loan are virtually nil.
This would fix several problems, such as weeding out those students who shouldn’t—or don’t really want to—be there. It would bring accountability and consequences back into the system.
Over the past decade, the cost to go to college has soared an inflation-adjusted 164 percent! Why? Because colleges and universities have found a great way to help themselves to the government’s money and the student’s money—or the bank’s money and the student’s debt. It’s called “tuition adjustment.” Instead of keeping tuition and other charges relatively steady so that the student pays less and the government pays the rest, college administrators have simply raised their prices.
If the government stopped taking ever growing billions of taxpayers’ dollars and loaning or granting them to students, universities would no longer be able to raise tuition prices indiscriminately. Meanwhile, students would have to take degree programs that are worthwhile. Thus universities would have to find cost savings and cut useless and wasteful programs. If universities wanted to offer programs for occupations that paid less, they would have to reduce tuition costs to attract students. In short, universities would have to go back to trying to attract students, as opposed to having an endless supply of students to milk each year.
Thousands of students go to college just because government and university propaganda convinces them to, and give little thought to the realities of finding a job after graduation. They take classes based not on what will prepare them for a career, but on what happens to interest them at the time, or what is easiest. Colleges teeming with these students have broadly responded by dumbing down their curricula to appeal to more students, and so more students can pass.
This system has produced a generation of students taking degree programs that are, essentially, worthless. Some students at Harvard spend $62,000 per year working toward degrees in Folklore and Mythology. Courses include Witchcraft and Charm Magic, Continuing Oral Traditions in Indigenous Communities, Hero and Trickster, and African Women Storytellers. Four-year total cost: $248,000. Job prospect: zero. Probability of debt slavery: Close to 100 percent.
Thousands of students are borrowing bundles to pay for these types of degrees. In 2010, 89,000 students graduated with Fashion Design degrees. Did they know that only 22,000 people in the country actually work in that field? Each year approximately 89,000 students graduate with theater degrees, even though only 155,000 people in the U.S. actually work as actors, directors or producers. About 50,000 American students per year graduate with Art History degrees. But how many art museums are there in America? Approximately 92,000 graduate with Visual and Performing Arts degrees; 55,000 graduate with Literature degrees, while 97,000 graduate with a degree in Psychology.
Then there are all the students who graduate with majors that end in “studies”: Gay and Lesbian Studies, African American Studies, Women’s Studies, Medieval Studies. These degrees should be marketed, “Studies in how to make yourself obnoxious to a potential employer and never get a job.”
Students then spend much of the rest of their lives paying for these degrees on salaries not much better than minimum wage.
And sometimes they don’t even get the degree. Each year around 2.3 million hopefuls enroll in college. Over half of them drop out before finishing.
In all of these cases, their debt still needs to be paid.
The End Result
Even the many students who take worthwhile subjects are not getting a quality education. The fruits of this education system gone wrong are becoming increasingly evident. To take one shocking example, in 2005, over 100 applicants were caught hacking into a website that stored Harvard’s admissions information. When the breach was revealed, the school administration retracted acceptance offers made to students involved in what Harvard labeled a “serious breach of trust.” This seems like a reasonable and just course of action—but an astounding 75 percent of Harvard’s “corporate accountability” class sided with the hackers. These were students in a class on corporate ethics—at Harvard, one of America’s most prestigious universities! They saw nothing wrong with breaking into the school’s website.
The problem is that so many students are graduating without a moral compass. Although this is not an entirely new trend, like student debt, the effects of generational compounding are now being felt.
More than half a century ago, a popular magazine asked, “Is honesty the best policy?” The question was put to 103 top business executives. An overwhelming majority doubted whether a strictly honest policy would enable a man to rise to the top in the business world. Only two answered “yes,” and one of these said he knew he was being naive. One executive surveyed said: “People who don’t get dirty don’t make it.” Another said, “In 30 years I’ve known of only three men who’ve reached executive positions cleanly, and I admit I’m not one of them.” A third responded: “The higher the executive is in the management ladder, the more likely he is to do some dirty work.”
These were the leaders of America’s most prestigious businesses. They were the products of America’s most prestigious colleges. And that was more than 50 years ago.
They are the ones who taught the people teaching our college students today.
An appraisal of modern society reveals selfish motivation, disregard for public good, mean practices, dishonesty, dog-eat-dog competition and unbridled greed! This world is increasingly lacking the true values and the outgoing concern for others that would bring happiness.
If colleges required an exit exam upon graduation, it should ask: Can any society that values money and power over honesty and morals continue to prosper? This is the crux of the problem: moral breakdown.
There has always been greed and selfishness. But it is hard to deny that the bad fruits are multiplying: Enron, Arthur Andersen, Global Crossing, WorldCom, Long-Term Capital Management, Countrywide Financial, Bear Stearns, General Motors, aig, Fannie Mae, Freddie Mac, Lehman Brothers, Bernie Madoff, Jerome Kerviel, Medicare, Medicaid, Social Security, and the list goes on.
It’s simply a case of cause and effect. The numerous failed and fraudulent financiers, brokers, bankers and politicians of the day are simply the products of their education.
Most of society’s greatest problems—in leadership, government, economics, science, international relations, and education itself—trace back to the fundamental failure of our education system.
An Example for the Future
This broad failure is part of the reason Herbert W. Armstrong College was founded.
Herbert W. Armstrong College is partially sponsored by the Trumpet’s publisher, the Philadelphia Church of God. It is based on a different model. It is free from the system of greed. This college cares about its students and wants them to be prepared for the future when they graduate—not dreading it. This world needs a living example of the college’s motto: “Education with vision.” It needs people who graduate knowing how to live, and how to be a true success—not just having textbook recipes to give them a better shot at making money.
At Herbert W. Armstrong College, students pay about $6,000 per year. They enroll with $4,000 up front, which offsets much of the cost for freshman year. Thereafter, all students pay for the rest of their room, board, supplies and tuition through a 20-hour-per-week student work program. About half of their student salary is withheld to pay for ongoing college expenses—enabling all of them to graduate from college debt-free.
Besides helping to pay off college fees, the student work program offers valuable on-the-job training that prepares students for their careers and teaches work ethic, integrity, dependability, responsibility, creativity, resourcefulness, ingenuity, and other valuable life skills.
But Armstrong College offers much more than job training for our students. Here, students learn about the real purpose for human life; they learn true values.
Armstrong College takes its name from Herbert W. Armstrong, who raised up three liberal arts colleges. The philosophy of this college is based, as Mr. Armstrong wrote, on the recognition that “true education is not of the intellect alone, but of the whole personality—not alone of technologies, sciences and arts, but an understanding of the purpose of life, a knowledge of the spiritual laws which govern our lives, our God-relationship and human relationships; not a memorizing of knowledge alone but a thorough training in self-discipline, self-expression, cultural and character development; not book learning only, but broadening travel and experience; not only hearing and learning, but doing.”
At Armstrong College, the emphasis is on building character, developing a sound mind, becoming emotionally mature and socially balanced, cultivating a well-rounded and service-oriented personality, and learning to appreciate the finer things in life. Here students learn how to apply the more specific, job-oriented, specialized skills that they will obtain throughout a lifetime of ongoing education.