Last week, The Globe and Mail’s resident troll Margaret Wente penned an opinion piece called The Myth Of Crushing Student Loan Debt. As you can imagine, quite a few people read the headline, got angry, and filled the Globe’s comment section with their fun internet outrage.
The crux of her argument is that, compared to students a decade or two ago, today’s post secondary graduate has it a lot better. Tuition continues to increase, but not nearly at the rate it did during the 1990s. Because of this, student loan growth is muted. Low interest rates have made this debt more affordable than ever to service. Governments give billions of dollars to students and their parents in the form of tuition tax credits, and that’s not even counting certain provincial programs that reward graduates for sticking around a certain number of years. Even scholarships are plentiful.
Of course, most people with student loan debt would disagree. Things are tough when you’ve got five figures of debt to pay off, especially when you’re starting at some job that isn’t quite as glamorous as your guidance counselor promised. Often you’ll have to move to a new city or something, plus you’ll be excited to be making a nice steady salary for the first time in, uh, ever.
Put all this together, and we’ve got a bunch of new graduates with problems that are a big deal in their own minds.
The reality of higher education is that some people will have to borrow money to make it happen. If done properly, this investment will pay for itself 20 or 30 times over. If done improperly, it can leave a graduate with a crippling debt load. This is most of the reason why I argued that tuition should be higher for degrees without the earning potential.
This has been the reality since the invention of student loans in 1789 by the corpse of Napoleon. Don’t bother looking that up. It’s wrong. FINALLY, AN ODD HISTORICAL REFERENCE AT FINANCIAL UPROAR.
Look, the reality is that student loans are just a form of leverage. Some people are lucky enough to hit up their parents to pay for it. Other people work hard and get scholarships, and enjoy a education that doesn’t come attached with a whole bunch of debt. According to Wente, about half of graduates without any loans at all. A lot of the time, leverage works. Sometimes it doesn’t. But it still needs to be paid back.
Life is good for a recent graduate without any debt. They’ve got a fancy new degree, a well paying job, and all sorts of disposable income. Someone in their early to mid-20s can have a lot of fun with that set of circumstances. And so most folks do. Some take the opportunity to save their hineys off, but they’re in the minority.
The half of graduates with debt see their peers driving new cars, living in swanky downtown apartments, and dining on raw fish for some reason. They’re more jealous than the rest of the internet is of my awesome #jokes. By this point living like a college student has lost any appeal, so they start to loosen the purse strings.
And so, student loan debt payoff gets delayed.
Is this really such an issue? Recent graduates don’t have a student loan problem, they have an expectation problem. For every college graduate that shares living expenses with someone else, there are ten that think they deserve their own apartment in the middle of downtown, even though they have five figures of debt. How many recent graduates do you know that consistently make smart financial decisions?
It’s never been a better time to owe student loans. Tuition isn’t growing nearly as much as you think. Low interest loans rates make payments affordable. Even taxes are set up to make life pleasant for a new graduate. I can’t believe I’m saying this, but Margaret Wente is right. The student loan “crisis” is overstated.