Is College Becoming a Money-Sucking Debt Trap?

Time Magazine has an article about the money sucking, drastically bad investment that many college degrees are becoming in this country and it’s making me rethink my attitude about my kids getting a college education.

Our parental attitude is this: GET A COLLEGE DEGREE!!!!!

Debt Burden

My student loans are our biggest debt burden. I owe about $60,000, having originally borrowed $15,000. I made a crucial mistake — having fielded repeated, harassing calls from solicitors insisting I consolidate my student loans, I accidentally consolidated one measly $1,000 unsubsidized loan with my subsidized loans, causing them ALL to be unsubsidized at a 9.5 percent interest rate, until they finally put a cap on interest at eight percent (after the scoundrels had already racked up a good $30,000 off me) — which has cost me about $40,000 in interest over the last 15 years. It’s the single, most crucial, dumbest financial mistake of my entire life. Once again, I have to thank College Algebra for being utterly useless and wonder why they don’t require Practical Life Math in universities.

Yet, Time’s article I Owe U made me feel like a lucky freakin’ genius!

Students will take out $1 trillion in debt this year. ONE TRILLION DOLLARS! And many of these college graduates can’t get jobs. Or they are resorting to jobs in the service and hospitality industry that they could have gotten without a college degree.

The article, which obviously cited extreme cases that make for good stories, but still, real stories, mentions liberal arts majors graduating with debts of $125,000. It talks about kids who were awarded full-ride scholarships to state schools and turning them down because they got into Ivy League brand name schools, even though they were out $55,000 a year that they didn’t have and then majoring in philosophy or poetry — it reminds me of high school kids who work at McDonalds buying Gucci purses and Fendi Sunglasses. It sites one dude who got a masters degree in multi-media design for a whopping $120,000 (by the way a friend of mine has his own multi-media design shop, makes a decent living of $60,000 a year and doesn’t even have a degree, thus no college debt at all). It sites bullsh!t degrees like “specialized studies” (try selling that on a resume) for $67,000, history degrees for $50,000, and a “global studies candidate” who is about to spend $112,000 for that degree (don’t do it dude — myself, husband and brother essentially all got this degree 15 years ago and we’re all making under $70,000 after 15 years of hard work and we’re scraping by with no where near this debt burden.)

Predatory Lending & Another Bubble

What possesses a bank to loan a POETRY MAJOR $125,000? 

The same thing that possessed that same bank to loan a dental assistant and a computer technician $500,000 on a home worth $200,000.

They knew they would make more money on the penalties and interest than they ever would on a good loan that could be paid back by a solid candidate. They got greedy. They lost their moral compass. They got predatory. They capitalized on the Mythology of College being the Golden Ticket to the American Dream.

And many economists are predicting another bubble blowing up on our already struggling, shaky economy — how can it not? We have an entire generation of Liberal Arts Majors with what amounts to massive mortgages without homes they can live in or sell. Nor, because of bank lobbies and legislation, can a person ever get out from under a student loan. They are not allowed to be written off in a bankruptcy, unlike a home, which you can walk away from and cut your losses. And this is what they have to bring into their adult lives — into marriages and families, into first jobs with starting salaries. If they are lucky enough to score one, that is.

This is one major issue of the Occupy WallStreet Movement. It’s a legitimate question. It’s a legitimate issue. It’s a protest-worthy complaint.

Mythology of College being the Golden Ticket to American Dream

Maybe it’s time to reexamine the Mythology of a College Degree being the Golden Ticket to the American Dream. It used to be that college was the Golden Ticket and if you got good grades, got into a decent, reputable school and worked hard you were essentially guaranteed a good job and a career path in an upwardly mobile direction. Or at least we believed this to be true.

But, even in my generation this hasn’t turned out to be particularly true. As I’ve approached 40 and looked around, I’ve noticed that my peers without college degrees that are in sales, insurance and for a long time real estate and construction are doing far better than I with my gig as a journalist in a profession struggling to hang onto itself in the face of the digital revolution. My friends who have two-year trade degrees in medical fields are making far more money, with far more job security than I am. My friends who work in industrial fields, electricians, auto mechanics, specialized laborers, tend to get laid off more frequently (which they treat as extended vacations on workman’s compensation), but when they work they make quite a bit more money.

Then we have the reality that President Obama is challenging America to produce more college graduates. But, we don’t have enough jobs, as the Time article points out, for the college graduates we currently have. The article then states that what we’re really flooded with is a bunch of unemployable Liberal Arts majors and we’re sorely lacking in Science, Technology, Information and Medical graduates and we’re forced to hire immigrants or outsource these jobs. We’re not being competitive in the right fields.

The question then becomes, why is the US Government continuing to back Liberal Arts Degrees? Evidently, having a college degree itself is a meaningless debt burden. Having a practical degree with an actual career plan and a real job available at graduation is what’s going to make a student a reasonable candidate to pay back student loans. Why is the Federal Government backing loans it can’t reasonably expect students to be able to pay back?

Reduction in Interest Rates Could Help

The Federal Housing Finance Agency  recently announced that it will allow underwater homeowners to refinance their homes, allowing them to reduce their interest rates from over 6 percent to around 4.1 percent. This could put up to $200 a month back in their pockets, which one hopes will stimulate the economy. (There is a fair bit of skepticism about this, though the idea is a good one and I intend to apply.)

The Obama Administration recently signed a student loan reform bill as part of the Health Care and Education Reconciliation Act, which is supposed to help students of the future avoid some of the problems current and former students are making. But it’s not retroactive and won’t help students who have already taken out a loan, are already in repayment or are delinquent on their loans. This does nothing to help the millions of students who are now walking into their lives burdened with enormous debt, caused in part, by the government giving cart blanche access to students and subsidizing banks while they issue predatory loans to naive teenagers and young adults with no real world experience to enable them to fend of or resist these loan sharks.

The U.S government should seriously consider enacting an interest rate reduction for current loan holders, as they are in the mortgage situation. Student loans are under much stricter regulation than mortgages and can never be written off in a bankruptcy. An entire generation of college graduates are burdened by enormous debt, the likes of which this country has never seen. I can’t see how they’ll ever be able to pay it off and become upwardly mobile. And if student loans really are another economic bubble that’s about to burst, well, one has to wonder just now much our stumbling economy can bare at the moment.

A reduction in interest is the least we can do for perpetuating the myth that college was a sure thing that would ensure their futures. A dream that is quickly turning into a pretty fairytale or an ugly farce.

Tracee Sioux is a freelance writer, the creator of The Girl Revolution and author of Love Distortion: Belle, Battered Codependent and Other Love Stories. Love letters from editors and clients can be found on her Linked In page, like her on on Facebook and follow her onTwitter

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7 comments ↓

#1 Corey on 10.25.11 at 1:36 pm

Nicely summarized, Tracee. This is the ugly truth about the BS dream we were all sold on. It makes me hope that 2 year community college degrees will loose the bad wrap they currently have.

#2 Tracee on 10.25.11 at 2:24 pm

I have many times seriously considered going back to school and getting a physical therapy assistant 2 year degree and pulling in $50,000 a year Corey.

If only I weren’t burdened with a compulsive need to write and if only not writing didn’t cause me to be so depressed as to be suicidal.

Still, I have greatly wished I would have had the forethought to have double-majored in Business Marketing, which would have come in handy about a million times over during this digital revolution. As it is, I’m just winging it.

#3 Alyssa on 10.26.11 at 8:29 am

Time Magazine really has a great article that you can learn form.. Thanks for sharing your thoughts!
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#4 Steven on 10.31.11 at 8:53 am

There is a lot of work where we can earn that doesn’t require a college degree. I am impressed with people going into insurance and real estate businesses. These jobs require sacrifices and time but when done right the rewards are great.
Steven recently posted..how to get a girl to like you

#5 Heather on 11.01.11 at 1:34 pm

We are participating in the refinancing program and it is a bill help to us here in CA. Certainly try it. The president is in a real conundrum…he has to placate the financiers who contributed financially to his presidency to say that Americans should be getting paid more money. Our capitalist system has become so corrupt and backwards. Thanks to the student loan problem, young people are basically paying a capitalist for the opportunity to work!

#6 Maverick on 11.02.11 at 3:42 am

College degree is very important because that will be the stepping stone to your success… Finishing the college degree is the best achievement you can have in anyone’s educational journey.
Maverick recently posted..How To Get Rid of Cellulite On Back of Thighs

#7 Yumigee on 11.08.11 at 10:01 am

Yeah. Some say that. Especially when the kid you a re sending to college take for granted it … It is such a waste then .
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