Samantha is a remarkably responsible young woman. She studied hard and gained admission to a good college. She earned her degree, graduated and got a good job in communications. Unlike many in her generation, she refused to take on any credit-card debt because her mother had drummed into her the importance of retaining a good credit rating. She pays her debts. And now she and her mother are on the verge of bankruptcy.
What happened? What happened was higher education. The price Samantha paid for her education put her into a debt that her mother co-signed — and that may bring both of them down. Samantha went to Marymount Manhattan College. With her single mother doing what she could to help with the burden, Samantha graduated from college with $90,000 in debt. Then she and her mother discovered that the cost of paying her loans was $1,200 a month.
Samantha kept current on her loan payment, but she has watched the total she owes rise in the two years since she graduated from school.
Now Samantha and her mother wrestle with unforgiving options. They could go to a graduated repayment plan that would enable them to pay interest only for four years. That would still cost a staggering $650 a month and leave the debt as large as it is. At a time when Samantha might be saving for an apartment, or her mother could be putting money away for retirement, they are yoked to debt.
Their situation is mirrored across the nation. The cost of college is soaring faster than inflation. Grants aren’t keeping up. Government loan programs have interest rates that return a profit to the lender; private loans are worse.
Upon graduation, young people are burdened with debt. These debts will make this millennial generation one of the most unequal from the start. Putting aside money for a down payment on a house or for retirement will be impossible for many. Those whose parents could afford to send them to college will have a head start that will grow larger over time.
This is perverse. Virtually everyone agrees that we have an enormous stake in young people gaining higher education or advanced training.
Now the administration is forwarding billions to Citigroup and Bank of America to get the economy moving again. This is watering the leaves, but simultaneously, we must water the roots: the least of these who deserve government support.
These banks and the federal government get loans at rates far lower than those charged for educating the young people; they are making money from loaning money to students who are our nation’s hope.
Students deserve incentives, not barriers to enter and graduate from college and graduate school. A student stimulus would be a key tax cut and investment plan that we can see, measure and justify. This is the time and place for a structured student investment development bank.
We need change we can count and feel now. We can change the flow of this river and set our sails in a different direction. We should challenge colleges that run up costs and fees. Grants and work study should be dramatically expanded. We should offer students loans at the same rates the big banks get, 0 percent to 1 percent. Repayment schedules should be linked to income levels.
We hear a lot about generation gaps, but the shackling of young people in perpetual debt concerns both old and young, parents and children. We need a national movement to make college affordable and curb the outrageous practices of credit-card companies and predatory lenders. If parents and students don’t come together, today’s college graduates will not only face a bleak job market. They’ll find their life choices foreclosed by rising levels of debt.