Obama Can’t Fix Stupid

The U.S. Department of Education gave us a surprise this week, when they announced that after actually reviewing data (as opposed to just guessing it), 34% of student loan borrowers are late in payments. The result has been for the White House to call for reforms in how student loans are serviced. What the White House doesn’t understand is that with a myriad of issues creating the problem, you can’t fix “stupid.”

First is the fact that more people have to take out more money to pay more tuition when they don’t have the means to pay it back. This brings fond memories of Ninja Mortgages, Balloon Mortgages, and other no-doc mortgages, where people borrowed hundreds of thousands of dollars with no means to pay it back. The result is $1.3 Trillion in student loan debt, with no way to pay it back. False equivalency? Not really, when you consider the unemployment rate for people with college degrees is still higher than pre-recessions levels (since 2004 to be specific).

fredgraph

Yes, the unemployment rate for college graduates is coming down, but it’s taken almost 7 years. Also, it’s not like we’re creating a great employment market for recent college grads that are forced into low-wage, part-time work after all those studies.

Looking at the spike in student loan debt near the Great Recession, it’s almost as if tons of people were looking to college to help save them from the recession. What a cruel joke my generation played on the younger one!

Second is the fact that Pell grants for low-income students have been pegged to poverty thresholds since 2007; which poverty thresholds are an unrealistic number to begin with. A single, independent college student has to make less than $11,700 per year in order to get a Pell Grant. In New York State, a student (or their family) literally has to be on welfare before getting state aid for college. Make more than the welfare limits? Then no aid for you!

While the reforms that Obama proposes are needed, fixing anything that’s wrong internally with the student loan system will not fix the fact that poor people cannot afford to go to college, that college grads have low-wage, part-time work to look forward to, or that college tuition has outpaced inflation by 340% over the last decade. As long as there are people who cannot afford to repay their student loans, no amount of “fixing” student loan servicing will enable people to be able to actually pay back their student loans.

The real stupidity is how the United States, once the world leader in public education, has allowed cuts to higher education, cutting off the social mobility of generations to follow. Forcing all poor people into student loans with little hope for the future in mobility is the real “stupid,” and that cannot be fixed.

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