A Van Down by the River
Chris Farley invented the Matt Foley character for Saturday Night Live, the motivational speaker who lives in a van down by the river. In this SNL skit, parents invite Matt Foley to come speak to their shiftless teenagers. The outrageous routine has become a tagline for many a conversation, usually the one involving college or other big life decisions.
The student loan crisis has many young people on the brink of living in a van down by the river. Crushing loans are preventing the younger generation from moving forward with their lives. That is an economic statement. It thwarts financial independence, undermines one’s standard of living and it also determines what career path is chosen.
Interest accrual on student loans has been halted during the pandemic, helping many young people pay other bills. There is a push for cancelling student debt altogether. While the amount of student loan relief differs, the concept is the same. It puts more money into the pockets of the people who would be spending the most in our economy. It makes sense. In their late 20’s and early 30’s people want to live the American ideal, buying cars, and their first homes and starting families. Instead, their college debt, which has often been described as ‘honorable debt,’ because it pays off big over a lifetime is strangling them in the present.
As a high school teacher, I saw the college illusion morph over time from an attitude of “going to the best college I can get into, no matter the cost” to “this is going to cost how much?” High school guidance departments were unhappy with this evolution because the definition of a good school system is perceived as the number of students that get into the best colleges. Parents also enjoyed the best college motif evidenced by the car bumper stickers proclaiming: All my money goes to ________University.
Unlike the current debate that wants to narrowly define infrastructure student loans cover both tuition and room and board. Interestingly, no one every considered college dorms as federally subsidized housing.
Many famous people including Barack and Michelle Obama, Kerry Washington, and Ted Cruz have acknowledged finally paying off their student loans in their 40’s. This is not unusual but it worked out better for them than most.
Student loans often carry interest rates that are higher than the best rate a corporation could get from a bank. However, a corporation can declare bankruptcy and debt disappears. Student loan debt can’t be discharged in a bankruptcy.
Engineers and accountants have as much difficulty starting a career with debt payments as does the liberal arts majors. For good measure let me add that a recent report on workplace success finds that employers believe in a liberal arts education because it provides knowledge and proficiencies beyond a specific job skill set that are important for overall career success.
So, what to do? The recommendation is that the total student loan debt should not exceed more than the graduate’s first year salary or about $55,000 which would be a Rutgers education without room and board. It would give an NJ student a very competitive education. There’s still a disconnect when college seniors expect their first jobs to garner $85,000. Our society has created a spin-off of the American Dream where everything works out and there are plenty of scholarships for both athletes and brainiacs leading to lucrative careers. There is little realism in any of this.
While there is much to fix in society’s attitudes about education, the debt situation needs to be addressed now. The Biden administration seems to be providing some relief. Two groups have benefitted thus far students of institutions that acted in bad faith and public service workers and teachers who were always promised loan forgiveness but until now the path was impossibly convoluted. For the millions of graduates that still need help let’s get $10,000 done with a stroke of the Executive pen. It would be enough to gauge the economic impact for many young families.
It would crack open the door for the younger segment of the workforce to make bigger career choices, start families and buy homes rather than choosing to live with their parents or in a van down by the river.