Part I in a series
By: John Zurick
Founder/President, Zurick Artificial Intelligence, LLC
It was my privilege recently to attend a lecture/demonstration in Florida by naturalist, Otter John. Included in the menagerie of his wild companions was a three-year-old alligator, who leveled icy eyes at his captive audience as Otter John paraded him around the meeting room, offering each of us a close-up stare-down. “There are over one-and-a-quarter-million alligators living in Florida,” Otter John reported as he held the three-foot gator out as if it were a cuddly toddler. “There would be considerably more of these cute little gators,” he continued, “except that more are eaten before reaching full size than survive…by bigger gators.” Alligators eat their young! Who knew?!
I lay awake that night thinking how much alligators eating their young is like higher education in America. In fact, in some ways, it might be better to be a young alligator victim than a higher education victim. A young alligator’s end comes quickly. The capture and drowning are sudden. The bigger gator makes a mighty chomp, wrestles the youngster to the bottom of a body of water in the famous gator “death roll,” chomps mightily on the little one a couple more times and it’s over for the precious devils.
Higher education, on the other hand, drowns its victims slowly, in debt and despair, over lifetimes. The trap is set long before college with the false promise, often referred to as, The American Dream, i.e. America is the land of opportunity. And college is your ticket to financial and social upward mobility. Implicit in this promise is the notion that anyone who goes to college can realize their dreams of a sustainable, purposeful, fulfilling life. In the post-World War II GI Bill era, this promise actually delivered. Higher education was accessible and affordable, with exponential returns on a student’s investments of time and money. Not so now.
Finish high school with moderate-to-high academic achievement and you can find multiple colleges that will take you. Or finish high school with low passing grades, or get your GED, and there’s still a school for you. If you can’t find a bona fide college, community college or university that accepts you, no worries. A glut of for-profit schools will take just about anybody. Can’t afford to pay for college? (Few people can these days.) Not a problem. Fill out a couple forms. And with your acceptance, your school will send you a financial aid plan showing you how to cover the costs, including how to cover some, most, or all of the costs with loans. It’s a bait and switch for all but the most privileged and savvy applicants. For most borrowers, and at far too many schools, student loan debt is their ticket on a train running backwards to financial and social subordination.
Today three out of four students borrow to meet their higher education costs. Those who rack up the most debt, are often the best off, relatively. Their debt is higher because they are in 2 the overall 50% of two-year and four-year students who stay in school and finish their degrees on time. The other 50% of today’s college students leave school before their two years or four years are up. The students who drop out find themselves with debt and in a workforce that offers no advantage for people whose resumes read, “some college.”
The borrowers with degrees have a reasonable chance of finding salaried jobs that pay a living wage. Yet over 70% of borrowers with degrees and fulltime jobs are burdened by their debt.
Numerous studies confirm that tens-of-millions of borrowers with degrees are having trouble making ends meet. They are having trouble affording a car. They are delaying buying a house. They are even having difficulties meeting the daily necessities of food, clothing and shelter. They are delaying saving money, getting married and starting a family. They are unable to afford to work within their intended career paths. They are unable to afford to work in the public sector.
Graduate degrees are unaffordable. And they are not able to start new businesses. These are the borrowers with the jobs made possible by finishing their degrees. The borrowers who drop out before finishing their degrees have less debt. But with no degree beyond a high school diploma, their employment opportunities are severely limited, and the burden of their debt is onerous. Multiple hourly wage jobs are required to make their loan payments, If they have children or other dependents, their student loan debt can be crushing.
The facts are stunning.
- Tuition has been rising at twice the rate of inflation for over twenty years.
- Total student loan debt is $1.5 trillion: an increase of more than 150% over that past ten years; totaling 60% more than all credit card debt in America; second only to home mortgage debt.
- Number of student loan borrowers with outstanding loans: 44,500,000…one in every four American adults, two-thirds of all Millennials.
- Average debt upon graduation: $37,000.
- Number of non-borrowers who are helping a family member or friend make payments: 8,360,000.
- Amount of student loans in default: $268 billion…more than the $208 billion in sub-prime mortgage defaults in 2007 at the collapse of the housing market.
- Average new student loan defaults per day: 3,000; one-third of borrowers in default owed less than $10,000.
- Borrowers with loans in deferment: 16,700,000.
- More people per capita over the age of 25 are living at home with their parents than at any time over the past 135 years.
The truth is personal and painful. The pursuit of higher education has become a scourge on millions of Americans. Lifelong consequences are triggered by decisions too often made blithely. Hopeful young people take on debt, not knowing the cost, believing higher education is a surefire path to easy repayment and a life of prosperity.
When payments come due and reality sets in, most borrowers turn first to their loan servicers, the companies that send out the bills, collect the payments, and address borrowers’ questions/concerns/cries for help. With over 44 million borrowers, 75 million loans, 3,000 loan defaults per day, and an opaque web of loan structures, repayment plans, deferral and forbearance options, as well as variable penalties for delinquencies and defaults, at any given time thousands of borrowers are looking for help. The demand on the servicers and collection agencies for repayment strategies and problem-solving is beyond their capacity to meet effectively.
Borrower options for self-guided, internet-based problem solving are limited, often user unfriendly, and frequently predatory. The backstop to the demand for borrower support is a loan servicer or collection agency telephone call center. Wait times prevail. Telephone agent knowledge is limited, and in many cases, biased to favor the financial interests of the servicers and collection agencies the agents represent. Borrowers can be led into “solutions” that generate higher fee payments to the servicers or debt collectors, but send the borrowers into a vortex of initial low payments and higher interest rates that multiply rather than pay down the debt.
How painful is the truth? Working two minimum wage jobs with two kids at home, no degree, defaulted student loans, no credit, garnished wages, tax refunds withheld by the IRS, no idea what to do next… Living at home with your parents because you can’t afford your own housing… Waiting tables on weekends because your salaried day job doesn’t pay enough to make ends meet… Married, over 30, and unable to afford starting a family… Owing student debt twice the amount of your annual salary… Believing that going to college was the biggest mistake you will ever make. The truth is your spirit drowning in debt.
Higher education in America is in an existential crisis.
Overall, higher education costs more and more and is worth less and less. Required humanities curricula no longer qualify graduates for jobs they can happily live on. Tuition increases are out of control. Federal and state governments regularly cut education funding, as if it’s a discretionary use of taxpayer dollars. Alumni donors are funding basketball arenas, and fitness centers with climbing walls and hot tubs, rather than scientific research and academic enrichment. Fortunes are being made by shareholders in for-profit colleges that overpromise, overcharge, and under deliver; they produce the lowest graduation rates and highest default rates in continuing education; and, they derive most of their revenues from federally funded student loans.
This is the truth we all need to acknowledge. Once the world’s model of progressive learning, free thinking and democratic access, higher education in America has become a dysfunctional $1.5 billion industrial complex funded primarily by student debt. The weight of it all is biting the hands that feed it. It’s eating its young.
Coming next: Part II, Saving Continuing Education
John Zurick is a social enterprise builder. Zurick Artificial Intelligence, LLC is the developer of PrestoSolvo® Student Loan Solutions