On an otherwise ordinary afternoon in the mid 1990’s, I walk into a small office near work. I have never been here before, though I’ve driven past many times. We will meet for about 30 minutes. First, they escort me into a small room with a table surrounded by a handful of chairs. I sit on one side and a professionally dressed woman sits on the other. Next, she places a thick document on the table, more accurately measured in inches than pages. Finally, we start the process of signing these documents, as she points to specific places and instructs to sign, initial, or date. Meanwhile, she assures me that I’ll have an opportunity to read through everything, but we didn’t schedule nearly enough time.
During that meeting, a voice silently screamed in my head, “You should not sign anything you that have not read or fully understand.” This voice didn’t stop me from signing page after page, legally committing myself to a contract. For all I knew, I might’ve legally committed to donating a kidney. The only thought that alleviated my anxiety was simply, “Millions of people have gone through this before. This is very normal; you’ll be fine.”
Days later, I closed on my first home. I got the keys, unlocked my front door, and walked into what is now my space.
There was also the issue of the loan
I purchased that condo only a couple of years after I started my professional career. As part of buying that condo, I applied for a mortgage and talked details with the loan officer. In addition to getting all sorts of documents about employment and net worth, I pondered through different options for the loan that would put me in debt for literally decades. She asked the question of a fixed rate versus an APR loan; the latter would be fixed for the first few years and may fluctuate after, depending on market conditions.
I asked her to give me the figure for the worst-case scenario after about ten years. She punched numbers into the calculator and responded with a number. While I don’t remember that precise number, it fell well within my budget, especially taking into account that I’d be making more money in ten years. I selected the loan with the APR and lower initial interest rate.
Months later when I returned to Florida on vacation and chatted about it with my older sister, she reacted as if I made a colossal mistake, “Why?! Why would you do that?!” Naturally, her response got on my nerves; it was laced with her implication that I had made this choice out of sheer laziness or stupidity (or perhaps both). She asserted that having a fixed loan meant that I’d know precisely what I’d be paying every month. She was wrong, of course. My loan payment, like many others, included the escrow payment for my property taxes, which fluctuates over time.
I paid off that mortgage years ahead of time, so I suppose that I managed my money just fine.
The burden of student loans
Despite my family being relatively poor, I attended a private school, the University of Miami. I went into a program with a large subsidy, got a scholarship (eventually), worked nearly every weekend in college, and yes… I took out a student loan. My loan was modest, and I deferred payment once. However, once I started working, I sent the payments regularly. Once I ran out of tickets, I paid off the loan. I didn’t really celebrate that day, since the payments were modest.
Having paid off my student loans, many may conclude that I oppose student loan forgiveness. I don’t generally oppose student loan forgiveness but don’t necessarily believe that any debt that you accrued in getting your education should be unconditionally erased. The cost, and thus accessibility, of higher education is much more nuanced than that.
Many will assert that student loans are like any other debt, and as such, they should be treated the same way. In other words, we don’t erase anyone’s mortgage or car loan, and similarly we shouldn’t simply erase anyone’s student loans. However, student loans are different in a number of ways.
Though before we even go there, let’s ponder through where you’ll attend school.
Where you attend school matters
Naïvely, we may believe that a bachelor’s in computer science from any accredited school should be sufficient qualifications to apply for a job. This is true, but there are nuances. When I first started looking for work in 1990, my interviews occurred strictly on-campus interviews where each company coordinated with my school’s career placement office. I’d meticulously sign up for 30-minute slots with companies that I found interesting. Microsoft didn’t interview at the University of Miami until 1991. My first observation, I wouldn’t have gotten my first job out of school if it wasn’t that they started to recruit at my school.
Once I arrived at Microsoft, we observed that recruiting segregated different disciplines by school. They designated University of Miami (and others) as school for the ‘test engineering’ discipline and ivy league schools as ones for ‘development’. Some of these limitations were logistics; they sent engineers of a particular discipline to the schools to recruit for those 30-minute slots. However, they still bucketized candidates. They treated a candidate with an engineering degree from MIT differently than one from University of Miami. My second observation, bias still exists around a person’s competency based on the school they attended.
However, I eventually switched from test engineering to development. Once I got situated and established as an engineer in general, no one really remembers where you attended school. The way in which you conduct your work speaks more loudly than your alma matter. You may reach your destination using several different routes; to obsess about taking a particular route is a waste of energy. My third observation, your school may not matter as much as you think.
Student loans are unlike other loans
When we take out a home or car loan, what happens if we default on the loan? The bank takes possession of that property. We call these foreclosures or repossessions, respectively. This is their collateral. We treat student loans differently; they don’t require collateral. The security, of sorts, is your ability to pay it back in the future.
Similarly, if you fall upon hard times and declare bankruptcy, you can erase most debt… Except student loans. It is exceedingly difficult to discharge student loan debt through bankruptcy. In fact, there’s an excellent (and incredibly distressing) documentary about student loan debt called Loan Wolves. We can’t legitimately compare the modern student loan to any other type of debt, or even student loan debt before 1998, when the rules changed. It’s an entirely different animal.
Why I support student loan forgiveness
On a basic level, we are The Land of Opportunity; we believe that every child has an equal chance at social and economic mobility. While I won’t suggest that everyone needs a college education, it is the easiest and most consistent path to become a contributing, self-sustaining member of society. Many have described education as the great equalizer.
If we fail to make education accessible to everyone, have we failed in this ideal? I’m not necessarily suggesting that it needs be free or even easy, but it should be possible. A college education should be attainable by every US citizen. However, if we require wealth to acquire higher education, it no longer serves to level the playing field.
We have broken the existing student loan system. We expect teenagers, not yet allowed to drink, to commit to tens of thousands of dollars in debt. Much like most of us have done when signing escrow papers for a new home, when they do commit to the loan, they acquiesce to its terms without understanding everything. We amended the rules for discharging student loan debt in 1998, making it considerably more difficult. The modern student loan is the antibiotic resistant staph infection of loans.
Stop thinking about the money
The biggest objection to student loan forgiveness is that we keep thinking about the money. We reflect on the $30k figure that we paid back slowly each month, and the sense of unfairness overwhelms us. Why should they get to avoid paying their student debt?
However, that’s the wrong way to think about it. I’ll give you a hypothetical. Let’s say that a canister of baby formula sells for $1000; a sum which you can’t afford for your infant. There’s a baby formula loan program (usable only for baby formula), and you borrow $60k to buy formula for your infant. Years later, we magically erase that loan. Here’s the trick question, did you just get to pocket $60k? No, it just feels that way. What we effectively gave you was 60 canisters of formula (at inflated prices).
Similarly, once we stop thinking of the dollar figure attached to the student loan, we’ll realize that it’s not about the money. We’re merely suggesting that a college education should be attainable by everyone. We’re making the college degree mostly free (or considerably cheaper), much like those 60 canisters of baby formula. The inflated price of the college education (or baby formula) is merely a red herring.