Should we re-negotiate student debt? If so, why? Does this create a moral hazard?

Absolutely not.  These people entered into a legal agreement.  They were given money for college, and they used it to get an education.  And you know, they’re able to get loans for an amount that far exceeds the actual cost of tuition and books?  So, they get the maximum loan and then use the excess to party or to live on or to buy a new flat screen TV or a new car.  Just because they can’t get a high paying job once they graduate doesn’t absolve them of the liability.  If you go to the bank and get a mortgage for a house but then can’t afford the house, the bank keeps what money you paid and they take the house.


These kids weren’t worried about the student loans when they took them out, and they didn’t really consider whether they should take the money or not and apparently no one bothered to counsel them on this.  If you’re a student majoring in marine biology, for example, and there are a couple hundred other students at your college majoring in the same thing and thousands of others majoring in the same thing throughout the nation, do you really think you’re all going to get a job?  And did you ever consider what the average earnings are for the field relative to the amount of student debt?  Did anyone ever think of that?  Probably not.


The sad thing is that young people have been sold a bill of goods that you need to go to college and get an education and then you’ll have a great job and make a fortune.  The job market can only support so many marine biologists and history majors and English majors.  I know plenty of college graduates who are waiting tables and tending bar and struggling to pay off the student loans for a degree that they’re not using and that is going to waste.  People really need to consider this when they’re going to college.  I’ve long advocated that we need to better counsel kids in high school about college and their options.  Some of them probably need to go to vocational or technical schools.  The world is always going to need mechanics and plumbers and electricians and professional servers.  These are good professions, and those in the trades can make a good living.  Getting a four year college education isn’t for everyone and can sometimes be a vast waste of money.


Counseling alone isn’t going to stop this, and the colleges certainly don’t want to tell kids this.  Each kid that walks through their door is a dollar sign.  If you’re an unemployed college graduate who spent tens of thousands of dollars on your education but can’t find a job in your field, ever ask what your college did for you?  Think they care about you now that they have your money?  Something to think about.


But you’re not going to convince idealist young people that their college education is going to make them a millionaire.  Some will become millionaires.  Some will make very good livings and do well.  Some will spend a lot of money on their education and spend half their life paying off the debt.  So, we’re always going to have more kids go to college for disciplines where the demand is low but the supply of graduates with that degree is high.  If you’re an employer looking at resumes from ten college graduates and your looking to fill one position who are you most likely to consider?  The applicant with the 2.5 GPA or the applicant with the 3.8 GPA?  Even with a degree, those who didn’t excel academically would seem less likely to get the job over those who showed that they did academically excel at college.  Maybe less partying and more studying would have helped that GPA, and don’t give me the excuse that ‘I’m not a good test taker.’  That’s a cop out.  Everyone in the class took the same test.  Maybe you were just too hungover or too high to focus.


So here’s an idea.  Maybe it’s time colleges and universities reconsider the awarding of degrees.  To me, the students who barely squeaked by are cheapening the degrees of those who dedicated themselves to their educations.  Maybe each department at a university should only be allowed to award degrees to those with a GPA above 3.0 (or some other hurdle grade point average) or the top 75% of the class.  That seems like it would weed out a lot of marginal or underachieving students and help those who worked harder.  After all, shouldn’t there be incentives and rewards for hard work and disincentives for laziness and lack of applying oneself?

Read more here at Thinking Outside The Boxe

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