Let me reiterate that this is my personal blog, and that I don’t speak for my employer here. This is a personal statement.
I do work in the student loan industry and I want to defend it. I think student loans in general are getting a bad rap. Groups like the Edu Debtors Union have a lot of really valuable things to say, but they’re also part of a backlash against something that has a lot of real utility.
Even my mother recently confessed to me that she had initially thought my job was specifically to turn the misery of young debtors into profit. That’s not what I do. That’s not what my company does (for the record, it’s a nonprofit that helps students manage education debt). That’s not what my industry does. Lord knows I’ve worked for companies that have no redeeming social value. My current employer is one of the good guys.
I’m not claiming the industry is perfect. I’m not claiming that student loans are always a great thing for everyone. But I do believe that debt, and education debt in particular, is underrated. I think it can be a great thing.
That sounds heretical, like being in favor of bullying or starvation. But hear me out.
Why Education Debt Exists
For most people, most of the time, higher education is a good thing. It’s good for society as a whole, but it’s especially good for the people who get the education.
Because society as a whole is better off with educated citizens, it makes sense that we should all chip in to subsidize and promote education, even if not all of us are students right now. That’s the reason we have public universities and federal student loans and the Department of Education.
Even so, the major beneficiaries are the educated citizens themselves. Since they benefit the most, they should shoulder a substantial portion of the cost of providing it. Since they don’t often have the ability to pay in advance, so it’s reasonable to study now and pay later.
Groups like Occupy Student Debt are opposed to all education borrowing, and want all education to be free. But remember, not everyone benefits equally from education. If there’s no tuition, then society at large pays for it, including people who don’t benefit at all from its existence. Look at Georgia’s HOPE scholarships, which largely go to middle-class white kids and are financed largely by poor people of color buying lottery tickets. Student loans are, frankly, a fairer way of addressing the cost of providing education.
Debt is a Tool
Debt isn’t bad. Not always. Even personal finance gurus like Dave Ramsay will tell you that borrowing money has its place. Think of it as a tool, maybe a circular saw. Used carefully, it cuts things down to size quickly and easily. Used alone or for the wrong tasks, it’ll just give you a pile splinters and sawdust. Used carelessly, it’ll cut your hand off.
I don’t mean to deny that over-borrowing, and borrowing to buy the wrong things, are real problems. You shouldn’t generally borrow to buy a car, and definitely not to take a vacation or buy a jet-ski. But financing an education can increase your earning potential and the quality of your life in a lot of ways. Not for everyone, not for every course of study, not for every school, not for every loan. But it’s not as bad as some people think.
The Trillion-Dollar Headline
The headlines are all screaming about the fact that there are now over $1 trillion worth of student loans outstanding. That’s a big scary number, but to me it’s mostly a good sign. Yes, college costs too much, and people are borrowing too much. But that worry is obscuring the fact that more people are going to college, and borrowing to do it. In particular, people who haven’t had the money or the opportunity in the past. I’d much rather see a trillion dollars borrowed to pay for education than a trillion dollars borrowed to pay for skinny jeans and smartphones.
Nothing is perfect, and borrowing is not risk-free. I know that. Debt-financed post-secondary education is going to backfire for a significant number of people, and we as a society need to find better ways to help those people. I also think that tuition is too high and that public universities and community colleges are under-funded, but that’s all a topic for another time.
But can tell you this much: For most people, a Stafford or PLUS loan is a good deal and helps them undertake a worthwhile endeavor. And that’s why I’m proud to work in the student loan industry.