In a TikTok video that went viral this week (newsworthy, I know), a barefaced young woman sits in her car, in the middle of what we Gen Zers call “a crash out.”
Alyssa Jeacoma, you see, has been making student loan payments of $1500/month (the cost of a one-bedroom apartment or the mortgage on a starter house) for two years.
In tears and disbelief, she explains that she spent two years thinking she was paying down her debt, and was shocked when she discovered that, thanks to a 17-percent interest rate, her total balance had gone up.
The comments section is full of commiseration: “Yep. Used $31k in student loans. I graduated 10 years ago and I now owe $59k…”
The video went viral, with millions of views, and for good reason. It hits a nerve for many young Americans who — 15 years after Obama’s drastic federal takeover of the student loan program — are drowning in debt, unable to sustain the upward trajectory of living that they were told was the American dream.
If a young person with no credit history and no collateral assets tried to take out a $50,000 loan to start a business, few if any banks would take the risk. Ms. Jeacoma, who now owes $90,000, seems to agree that’s questionable: “How does this even make sense? I signed up for this…when I was 17. This should not be legal, bro.” A college education was once thought such a safe investment that no one blinked at the idea of giving tens of thousands of dollars to a teenager with only the barest understanding of the contract she was signing.
This woman’s student debt has an interest rate close to that of a credit card (the great no-no of financial advice – whatever you do, don’t take on credit card debt, or you may never climb back out of the abyss again). We’re giving away crushing student loans like candy. The entire university system is riding on the shoulders of broke twenty-somethings, mortgaging their futures to pay for football stadiums and presidential salaries, asking them to be small Atlases holding up a whole world while they slowly suffocate under the weight.
Pundits decry that Millennials and Gen Z “stuck in their parents’ basements.” Headlines lament that we aren’t growing up fast enough, aren’t buying houses fast enough, aren’t getting out of debt fast enough. The average age of buying a first house in America is now 38, the highest on record. And no wonder, when so many are still trying to pay down their student loans.
But, the argument goes, you have to go to college to be successful in life. If you don’t go to college you’ll end up working at Burger King and living at your parents’ house and never making it on your own.
Unfortunately, if that was once true, the data show it isn’t anymore. Yes, young people are working at Burger King and Starbucks, living at their parents’ houses, and failing to strike out on their own. But a lot of them also have college degrees, and those college degrees aren’t saving them. Pundits and guidance counselors alike are selling college degrees as a life raft in the rising waters of an unhappy economy. But said college degrees are proving to be oxygen masks that don’t work, life rafts that fail to expand when they hit the water. Even students with the coveted sheepskins are discovering, too late, that parchment doesn’t float.
52 percent of college graduates are underemployed a year after graduating (52 percent of the class of 2023 were working jobs that didn’t require degrees at all). At the ten-year mark, 45 percent are still underemployed. The New York Fed estimates that 33 percent of all college graduates are underemployed – of all ages, in the entire economy.
As Cassandra (and entrepreneurs like Isaac Morehouse, writers like Ryan Craig, political players like Robert Reich, and countless others) have been saying for well over a decade, college does not make you employable.
College doesn’t even guarantee you an education. The great redeeming value of college has always been its educational value. Even if you aren’t going to use the degree in a specific field, a liberal arts degree will still help make you a well-rounded person.
But again, the statistics say otherwise.
Only 46 percent of American adults can read above a sixth-grade level, but 47 percent of American adults have at least an associate’s degree (another 15 percent attended college but didn’t graduate). That means more adults have college degrees than are literate at a high-school level. We send young people to college who shouldn’t have graduated high school, and even after they’ve graduated college they still have an elementary-level literacy capability. How does that even happen?
And if all these statistics are true, then why on earth are we consigning kids to a debt rat race?
The cultural fear runs deep: if you can’t get a job that requires a college degree, you’re not going to make it in life (fundamentally not true). A blue-collar job can pay well into the six figures. Even a moderate hourly rate (say $20/hr) can be enough to establish a foundation in life. A young person living at home and saving for the first couple years of their career can have an enormous advantage over their college-educated peers.
What’s actually shackling young people is the debt, an anchor around their neck they can’t untie fast enough, while sinking at an alarming rate (to the tune of 17 percent a year interest rates). It’s almost impossible to tread water fast enough to keep above the surface.
And debt for what? Not for the benefit of the students, clearly, if some are graduating still unable to even read at a high school level.
Of course, some make it inside the system and thrive. According to the stats, most don’t. Fewer than half who start finish in four years. Every industry is filled with stories — doctors who hate their careers but are so shackled by crippling med school debt they have no choice but to carry on.
The cost-benefit analysis doesn’t check out. But high schoolers aren’t taught how to do a cost-benefit analysis, so they don’t know how to analyze the life-altering decision that comes at them often before they’re even legally adults. Most high schools don’t require an economics class as a prerequisite for graduation. Classrooms don’t cover personal finance – just interpreting Shakespeare and prepping for the SAT and putting a condom on a banana. Everyone is taught how to get good grades, how to ace a test, and how to impress a college admissions officer.
Which they do, to a tune of 62.8 percent (the number of 18-24 year olds enrolled in college in October of 2024). High schools are really, really good at producing students that can get into college.
But they’re really bad at preparing kids to make financial decisions that won’t weigh them down for decades to come. Students sign up for loans (the average graduate owes $33,150) with a 17-percent interest rate without knowing what that means, then are shocked when they see their balances rising.
The solution isn’t free college — because clearly college isn’t solving anyone’s employment problems.
The solution is to stop the cycle. Do a cost-benefit analysis on what you’re buying before you make the purchase. Assess: is the career path I’m on really going to work for me? Or is the liberal-arts-to-Starbucks-pipeline not the well-worn highway I want to traverse?
Teaching kids how to run cost-benefit analyses and understand finance might cripple our opulent, bloated, debt-fueled higher education system. It depends on our young people’s naïveté to pad its budgets and the pockets of its administrators. But it might just save the next generation of young people, who are far more important.