Student Loan Woes

A few weeks ago Senator Jeanne Shaheen came to Merrimack to participate in a town hall meeting at Fido.  The company had started a program about a year ago to help pay back employees’ student debt.  Many participate and this event was used as an opportunity to showcase what we were doing and discuss the issue of debt.

Yes I think the cost of higher ed is too high.  Unlike many Silicon Valley types who doubt the value of college education, I think the act of immersing yourself in a 4 year exploration of thought is a good thing to mature young minds before they enter the workforce.  I don’t think the curricula match the needs of the modern workforce or industry needs, but that is another topic.

I also think that students need to be rational about their financial footing when they make choices about college.  Not everyone can or should afford $50k per year.  And if you decide that you must have that costly education, you either need to not complain after you make that decision or get creative in the way it is financed.  I know this isn’t fair in the Bernie Sanders world but it is reality and you better get used to it.  I don’t drive my dream car or live in my dream house, but I live within my means and I get all the same benefits (transportation and shelter).  This is a lesson kids need to learn earlier in life.  There are lower cost options.

At the base of the conversation about student debt, everything came back to educating students on paying debt, refinancing, managing money, etc.  The panel kept talking about how kids don’t understand the financial implications of their choices.  I found this to be obnoxiously ironic.

When I worked in the Bursar’s office at NECC, we were constantly in contact with the Financial Aid office.  All they ever talked about were federal regulations on what they could and could not do in order to maintain our eligibility as a school that could award aid to students.  So the government can stipulate rules for the office, accreditation for the school, and which majors are eligible, but not requirements for basic student knowledge to receive that taxpayer paid funding?  I asked the question of the Senator; why not make a basic finance course a requirement of receiving aid?  If the problem is education, isn’t it irresponsible to finance a life at an educational institution that doesn’t educate on the most basic of needs to understand that financing just received?  I can’t believe how stupid it was to even ask the question.  More amazing is that the panel, including Senator Shaheen, enthusiastically agreed.  Yet I doubt this will ever become real legislation.

The default rates on student loans are nearly 10 times higher than mortgage default rates, 5x higher than credit cards.  We are talking about a subsidized interest rate with zero capital backing.  The government passes new and onerous regulations all the time, but we can’t require that students actually understand the financial implications of their debt?

College education is important.  And I do believe a much higher percentage of Americans should be college educated to prepare for the jobs of the future.  But I have to say that Bernie’s free college for all is not the solution.  Students need to understand, appreciate and value that education.  The first step is to understand that all this free stuff we give them, isn’t really free.  Isn’t that a crazy thought, woa.

About Josh Rutstein

I am an aspiring entrepreneur and hopeful political candidate. Father of 2 very special girls, husband to an amazing woman, and passionate American. I snowboard whenever possible and follow a 20x mentality for exercise. I also play golf and ultimate frisbee and am a die hard New England Patriots fan and season ticket holder. Everyday I wake up wanting to make this country a better place, someday I hope to actually succeed.
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1 Response to Student Loan Woes

  1. Interesting theory Josh…
    I do understand the need for “us” (I’m going to use that word because I certainly sit in this category of people), to understand financial responsibility about student debt before making the decision about if, and where to continue education beyond grade school. However, I do think the core of the issue is much far beyond that.
    In my mind, the issue is that we continue to treat the crisis with a legislative bandaid, temporarily relieving the issue. When in fact, what is really needed is a major overhaul on the entire structure to cut the exorbitant cost of higher education. Until we address the root cause of the problem, all students will continue to graduate with big debts that not only burden us, but create a drag on the economy as a whole, or even worse, enter the world uneducated. We need to turn our energy into creating new to theories of reducing tuition and making college more affordable, instead of focusing on educating students about paying debt. Those who come out of college prepared will inherently understand that…It comes with Accounting 101.
    I’m not sure you want to hear about my way of doing so though…because it begins with forgiving the current $1 trillion in student debt by closing a small number of the 865 overseas military bases, which cost about $102 billion a year and arguably, serve more harm than good when it comes to America’s foreign relations. Defending our allies certainly has been a priority for the American people, but what about when the next president is elected? A lot can and will change with this election….for the good or for the bad. I’ve gotta say, we’re probably going to have bigger fish to fry in the next 4 years than worrying about my/our student loan crisis.

    This was fun, good idea! And happy birthday? 🙂

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