November 30, 2010 | File under: Schooling • Society and Pressures
Zero money down! No interest for two years! We are constantly bombarded with messages telling us to “buy now, pay later.” The concept of living life on credit has become so accepted, and to some degree, encouraged, in society that many people rarely think twice about purchasing items they would not otherwise be able to afford without the assistance of Visa or American Express. And given that our economy largely depends upon the constant flow of consumer credit, borrowing money even for non-essential goods such as plasma TVs or luxury cars has lost much of its stigma as irresponsible personal finance. So it is no surprise young people willingly take on tens of thousands, or even close to two hundred thousand dollars, in educational debt without as much as a second thought. I mean, that’s a necessity, right? Everyone is entitled to an education! But assuming such a massive obligation with no certainty as to future income is a huge mistake.
Social acceptance of consumer debt is but one of several factors that encourage people to sign over many years of their life to credit companies. There are also the common beliefs that one must earn a college degree to acquire the skills for respected jobs, that college is a rite of passage that every young person deserves to experience, and many other pressures that provide easy encouragement to sign on the dotted line. The debtor mentality provides the perfect rationalization: everyone else is doing it, right?
What happened to saving for college? Some people still do it, but in addition to the challenge of saving an amount of money equal to rapidly rising education costs, there is also a disincentive to amassing substantial savings because doing so disqualifies one for financial aid. Colleges dole out grants, or free money, to students demonstrating financial need. Someone coming from a family with an income equal to that of a student qualifying for aid will not receive an equal benefit if that person’s family made sacrifices to establish a college fund that qualifies as an “asset.” The student with no savings may live among many consumer good luxuries and enjoy frequent expensive vacations, but with no money in sources that colleges measure when determining need, they have an advantage over the student with a college fund that is reflected on financial aid forms. Why try so hard to save when free grants and low-interest loans are so plentiful? Why forego the luxury goods that everyone else enjoys? If you’re going to borrow some, you might as well spare yourself the hassle of saving money and borrow it all, right? “Go big or go home” is the motto many live by.
The lure of buying now and paying later for higher education would not be so strong if student loans were not as commonplace or accessible. I do think access to credit is important, but the problem is that many people view it as right and not a privilege, and therefore education something that is easily taken for granted. This casual attitude is compounded by the fact that higher education loans are ridiculously easy to secure. Once you are accepted into a school, credit companies will fork over huge sums of money without any concrete demonstration of future earning capacity or even a vague statement of what type of job you intend to obtain to pay back the debt. Just attendance at a school is enough.
The result is a glut of extensively-schooled individuals in a tight job market. Everyone has a college degree these days, so not only has its value declined, but it’s now necessary for one to attend more school and assume more debt in order to distinguish oneself. Graduate school is also an attractive option when one is not really sure what to do after college and desires to further delay adulthood, an easy route thanks to readily available credit. This spiraling trend certainly makes the credit companies happy, but it leaves many people like myself facing years and years of loan repayment after graduation before they can even begin to net positive income.
People are easily led into the trap of educational debt initially because it is consistent with consumer behaviors one is conditioned to accept as normal. If you want it, you can get it. Instant gratification. The repayment of indulgences is almost invisible thanks to credit cards, though rarely is one purchase enough to result in serious financial hardship. Comfortable with this way of life, and eased into loan agreements by colleges’ reassurances that career opportunity will make repayment a cinch, people enthusiastically take on a type of debt that entails a much heavier burden than a few credit card purchases.
This reality is slow to sink in. One hundred thousand dollars (or more) later though, you may find yourself stuck in a job you hate to make your monthly loan payment, unable to afford a home because you can’t set aside the money for a down payment, and so disgusted with the concept of credit that very few purchases warrant assuming more personal debt. You realize the “paying later” involves much great hardship that you ever expected. You are trapped in your job to pay off debt. You are careared.