I Approve My Tax Dollars to do That: Refinance College Education

Back in high school, I did a project on the most recent boom and bust of the housing market. The collapse of so many risky mortgages precipitated the 2008 financial crisis that crippled the US economy. In doing research for that project, I came across whisperings about the source of the next crisis. The consensus? Student loans.

Yesterday the federal Consumer Financial Protection Bureau released a new report, citing similarities between the management of student loans and the oversight of mortgages by the private sector. Complaints included conflicting information, lack of transparency in fees, unwillingness to create payment plans for borrowers and failure to accurately process payments. (http://www.businessweek.com/articles/2012-10-16/the-echoes-between-student-loans-and-mortgages#r=nav-r-story)

The cost of a secondary education is a major concern, from parents with young children trying to save up or students currently enrolled exhausting scholarship, work-study and financial aid opportunities. Many resort to taking out loans to cover the remaining cost. Very few can actually afford to pay for college and/or graduate school out of pocket. 2010 marked the first time that student debt exceeded credit card debt. The following year it surpassed auto loans. As of March, student debt was recorded at over $1 trillion dollars. That’s before you account for interest. (http://www.businessweek.com/articles/2012-09-06/student-loans-debt-for-life#r=lr-fst)

 How did we arrive at $1 trillion in student debt? According to Bloomberg, some of it stems from an increase in college attendees. Much of it, however, comes from increases in tuition that are very disproportionate to increases in income. One thing this illustration does not show however is savings lost in the stock market crash in 2008. 

Photo credit: http://images.businessweek.com/cms/2012-09-05/feature_collegeloans37__01b__630x420.jpg 

On one hand, a college education pays off – literally. As Bloomberg Business Week writer Peter Coy observes, “You can lose your house to foreclosure, but never your education.” (http://www.businessweek.com/articles/2012-09-06/student-loans-debt-for-life#r=lr-fst) Even if you default on your loan, the bank cannot come and take away your knowledge and experience. It is no secret that college graduates earn more than their high school counterparts. But that in itself has a catch: you have to get the education first.

How states compare to one another. Having grown up in New England, it is no surprise to me that the top ten most expensive schools all reside in the Northeast and coincidentally, that same area has the largest percentage of students attending private institutions. Surrounded by so many top-notch private schools, the state schools cannot hope to compete. I do wish this map showed the proportion of high school graduates in each state go on to attend a four-year institution. 

Photo credit: http://thumbnails.visually.netdna-cdn.com/average-student-loan-debt-by-state_50290b4526609.jpg

In my home there was never a question about whether I would attend college. That being said, I grew up in a fairly wealth Eastern Massachusetts town where over 95% of my graduating high school class went onto college and both of my parents have professional degrees. While I do receive a substantial scholarship and financial aid, I recognize I’m fortunate. Students from lower-income families aren’t so lucky. As strapped-for-cash colleges seek out potential full-tuition attendees or bribe high-scoring test takers to boost their own statistics, low-income students are stuck. Loan payments are not calculated based on income; they’re based on dollar amount, often preventing students from being able to pay them back. Why make the effort to go to college if it shackles you with thousands in debt you cannot pay off? It’s simple: you don’t even try. As a result, the accessibility of a college education is increasingly restricted to the upper class.

How can we reverse the growing income inequality if the tools are not available to those who could benefit from them the most?

My tax dollars need to do something about this. If I ultimately pay for my parents’ wars, then my parents should finance my education. You cannot expect an entire generation of people to succeed if they are already laden with debt by the age of 25. Educational value aside, it is bad for the economy as well. An economy will not grow if consumers are unable to spend money. Just like how the big banks cannot be allowed to fail, the up and coming generation cannot be allowed to financially collapse.

I approve my tax dollars to do that: refinance a college education