america pretends it does not see the student debt crisis

and many many many other crises!

There is nothing simple or easy about weighty financial decisions, especially when they're made by a teenager with the sole purpose of attending college. Even the best economical modeling cannot concretely predict a person's future employment prospects or the state of the economy, provided that the borrower even finishes college. Student loans often come hand-in-hand with sky-high interest rates, which can trap borrowers in a vicious cycle of debt repayment, especially if they fall behind or simply do not earn enough to out-pay the accumulating interest.

In spite of the many ways Things Can Go Wrong, taking on student debt is perceived as a rite of passage. It's something "everybody does" to experience the mythical "best four years of their life." A college diploma is a pipeline to American adulthood, where debt repayment is an expected responsibility. But the cost of higher education has steadily increased — more than 500 percent since 1985 — and most borrowers are stuck paying six-figure student loan debt well into their 30s and 40s. 

Millions of Americans are collectively carrying more than $1.6 trillion in student debt — more than triple the amount in 2005. I am one of these borrowers, and chances are, you are too.

This week's gen yeet is on student loan forgiveness and the discourse around the metrics of debt cancellation: How will it change the financial habits of young people? Is it possible for higher education to become more equitable and less profit-driven? Why are we finally reckoning with forgiveness as a possibility in the midst of a life-altering pandemic? 

🎶 Forgiveness. Can you imagine? 🎶

Yes, this is a Hamilton lyric. 

Borrowers' monthly payments to federal loan services like Sallie Mae, Navient, and Nelnet are expected to resume after December 31, when Trump's moratorium on student loan payment relief expires. That is, unless President-elect Joe Biden chooses to extend this grace period, or in a more radical move, to directly forgive millions of borrowers. 

Considering the beleaguered state of the U.S. economy, an extension seems likely. Biden has also flirted with the promise of forgiveness. He campaigned on a pledge to cancel $10,000 of student loan debt, although it’s uncertain whether Biden plans to pursue this via executive order or through Congress. It's also similarly unclear what this clemency will apply to (federal or private loans, or both). 

In September, Sens. Elizabeth Warren and Chuck Schumer introduced a resolution that urged the next president to cancel up to $50,000 in federal student loan debt for borrowers. They claimed the move would help stimulate the economy and close the racial wealth gap. However, Biden seems to be taking a more incrementalist measure: He recently backed a provision of the HEROES Act, which calls for $10,000 in private, non-federal loans to be paid off.

I'm not here to argue about the larger financial implications of debt cancellation on the US economy, or how this policy is “unfair” to those who’ve paid their dues or exclusionary to non-college graduates, who generally earn less than college-educated Americans. Borrowers like me don’t really think about debt on a large-scale. Debts are individualized burdens — some heavier than others — that we’re accustomed to carrying on our own. Most people (myself included) would clamor for any amount of cancellation, although there is a world of difference in forgiving $10,000 and $50,000. 

To those with six-figure debts, $10,000 is a drop in the bucket. "That won't make a dent in my monstrous debt," a fellow USC graduate who paid full tuition told me. But even cancelling a small amount could significantly help debtors "who struggle with repayment despite owing relatively small amounts, often after dropping out of college," according to the New York Times. For those in their early 20s working entry-level gigs, $50,000 could be a game-changer when it comes to altering their budgeting, savings, and future career decisions. 

"$50K would erase all my debt, so my decision-making wouldn't have to be so closely tied to making enough money to cover expenses and loan payments," one friend texted me, who is paid minimum-wage as a fellow in New York. "I could take on work that was fulfilling in other ways and save my money toward something fun. Of course, I say this all with a very high level of skepticism that I'll ever see that happen." 

"I'd actually like to see interest rate reductions as well," a grad school student, who owes a six-figure debt, told me. "I agreed to the loans that I've taken on, but it's stressful having to work towards paying for almost double the amount because of high interest rates. I have friends who've put in all this money, but they haven't even touched their principal balance because of interest rates."

The prospect of a debt jubilee sounds liberating, but it won't solve everything. So long as colleges raise their tuition ceilings and young adults are duped into believing a degree is worth the financial risk, the debt machine keeps spinning its wheels. It could, though, make certain materialist milestones — like home and car ownership — a feasible possibility for a subset of adults, who’re used to putting down a sizable portion of their paycheck on monthly payments. It might mean not having to move home to make ends meet, during a time when a majority of young adults in the US are living with their parents to survive in an uncertain job market.

On the fairness of the “debt bargain”

I attended the University of Southern California where the cost of attendance crossed the $50,000 line my freshman year. (Tuition is currently about $58,000 for the 2019-20 school year, and I enrolled there in 2016.) While I qualified for financial aid that covered roughly half of the annual cost, the remainder was still an overwhelming amount for a 17-year-old to co-sign onto. I recall my dad, who has spent years budgeting for my college expenses, reminding me that I only had to fulfill three things for my end of our debt bargain: Finish my degree, secure a job, and begin my repayment journey. 

It was a simple ask. I entered the labor market in 2019. Unemployment numbers were at an all-time low and meant that I had better job prospects than the Class of 2008. But the Class of 2020 and those graduating in the aftermath of this pandemic-induced recession weren’t so lucky. There are also stark racial disparities in student loan borrowing and the financial risks involved, as well as how the racial debt gap substantially grows years after graduation.

The debt bargain was never fairly applied in the first place. Regardless, borrowers are expected to “make it work,” no matter how overwhelming the amount is. On r/StudentLoans, a 22-year-old bemoaned paying off $110,000 in loans on a $50,000 salary. The advice they received — even those from users with the best intentions — was simply “make it work”: by cutting back on unnecessary expenses and housing costs, altering your career path, applying for Public Service Loan Forgiveness, or refinancing loans. There’s really no way out. (Student loans are nearly impossible to discharge even in bankruptcy, unlike credit card or mortgage debt.)

It’s a common line of thinking I've seen on personal finance and student loan forums; borrowers realize they’ve "made a choice to live with debt," although most are not particularly thrilled or even mentally capable of managing that debt. Career decisions early on can be “financial suicide” for some borrowers if interest builds up on hefty loans, and many are forsaking saving for retirement or home ownership to aggressively make a dent in their debt.

Without the prospect of cancellation (or at the very least, modified interest rates), generation after generation of young adults are perpetually forced to “make it work” — no matter how soul-crushing the sacrifices can be.

In an essay for The New Yorker, Astra Taylor, a member of the Debt Collective, argued that America needs "a sort of moral audit to separate the odious from the upright." The collective is leading a student loan strike when Biden takes office to demand that he immediately abolish all federal student loan debt. Of course, this request is unlikely to be given, but the premise of Taylor's essay is worthwhile.

"Debt is a power relationship built on the pretense of equality," Taylor writes. "In theory, a debtor and creditor enter into a contract on a level playing field and with fair terms; in reality, debts are often incurred under conditions of duress ... In countries with universal health care, individual medical debt is rare; in the US, it is a leading cause of poverty and the main catalyst for bankruptcy."

During times of crisis, we should be moved to rethink debt beyond the paradigm of personal sin. (The Debt Collective believes the phrase "debt forgiveness" imposes the idea of "a blameworthy borrower and a beneficent creditor.") And while Taylor agrees that certain debts are legitimate, we should question why 18-year-olds with little to no credit are allowed to sign onto loans the equivalent of small mortgages. Loans that, even in bankruptcy, are unlikely to be discharged.

In addition to loan payments, young adults are expected to pay for health care, save for retirement, and general living expenses. This can be manageable. But is it possible for a person with six-figure debt to earn, say, $60,0000 and have a dignified existence, while feeling pressured to chip away at their accumulating interest? Is it even socially beneficial for the pursuit of higher education to come with decades of debt?

I don't have a clear solution, besides recognizing that the cost of public college must be dramatically lowered (which, ideally, would prompt private colleges to also lower their prices). That — and the debate over free college — is another can of worms I won't get into, but if you're interested in further reading, I have some recommendations:

  • Avi Asher-Schapiro in Harper's on the dangers of income-share agreements, and how unlike traditional student loans, ISAs are tied to students' performance in the labor market. It sounds like a simple idea, one that's promoted by tech boot camps and other for-profit educational enterprises geared towards older, debt-averse students: "As the pandemic stretches on, a number of ISA providers are positioning themselves as low-risk opportunities for students who are worried about an unsteady job market." 

  • Amanda Ripley in The Atlantic on why college in America is so expensive: "The more I studied America's baffling higher education system, the more it reminded me of health care. In both spaces, Americans pay twice as much as people in other developed countries — and get very uneven results."

some good stuff, according to me

I just finished reading The English Patient by Michael Ondaatje, and am watching Season 2 of Girls.

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