SIMON BLACK ON EDUCATION AND STUDENT DEBT

March 30, 2015
Sovereign Valley Farm, Chile

What I’m about to tell you is not my own opinion or even analysis. It’s original data that comes from the United States Federal Reserve and national credit bureaus.

1. 40 million Americans are now in debt because of their university education, and on average borrowers have four loans with a total balance of $29,000.
2. According to the Fed, “Student loans have the highest delinquency rate of any form of household credit, having surpassed credit cards in 2012.”
3. Since 2010, student debt has been the second largest category of personal debt, just after a home mortgage.
4. The delinquency rate for student loans is now hovering near an all-time high since they started collecting data 12 years ago.
5. Only 37% of total students loan balances are currently in repayment and not delinquent.

The rest—nearly 2 out of 3—are either behind on payments, in all-out default, or have entered some sort of deferral program to delay making payments, with a small percentage still in school.

It’s pretty obvious that this is a giant, unsustainable bubble (more on this below). But even more important are the personal implications.

University graduates now matriculate with tens of thousands of dollars worth of debt.

Debt is another form of servitude. Like medieval serfs, debt keeps people tied to jobs they dislike in places they don’t want to be working for bosses they hate doing things that make them feel unfulfilled.

Debt makes it very difficult to walk away and start fresh.

In fact, ‘starting fresh’ is almost legally impossible when it comes to student debt. Even in US bankruptcy court, student debt cannot be discharged in almost all cases.

It is an albatross that hangs over you for a decade or more if you do make the payments, and it follows you around for the rest of your life if you do not.

(I’m not suggesting anyone default on what they owed—simply pointing out that nearly every other form of debt can be discharged EXCEPT for student debt.)

This kind of debt has a huge impact on people’s lives.

Again, according to the Federal Reserve, “[G]rowing student debt has contributed to the recent decline in the homeownership rate and to the sharp increase in parental co-residence among millennials.”

So the Fed’s own analysis shows that student debt is a cause for people in their 20s and 30s to live at home with their parents. Amazing.

This certainly hollows out the argument that a university degree is a one-way ticket to a higher salary, brighter future, and better standard of living.

Look, I’m not going to try to tell you that a university education is worthless or a cruel joke.

There are clearly both tangible and intangible benefits to completing a four-year degree, especially for vocations in science, medicine, etc.

But let’s be honest-- many kids end up at university by default. They don’t know what they want to study. They don’t know ‘what they want to do’.

They’re just sort of expected to enroll, attend, major in something, and graduate.

Much of this is done merely to please other people or satisfy a social expectation without any real sense of whether the path they’ve chosen at that time is the right one.

Modern university education, in fact, is based on the premise that an 18-year old kid can make up his/her mind about what s/he wants to do in life.

But how can they really know what they want to do in life without first having some exposure to life itself? How can anyone know?

Most students grow up living at home with their parents. They graduate from high school. And they go off to college pressed to make some grand life decision without ever having dipped a toe in the world to get a sense of the infinite options.

From this perspective, spending four to five years discussing theory at such a formative age can be terribly counterproductive.

Subsequently graduating with an enslaving level of student debt can make the experience borderline destructive.

Again, it’s not to say that university has no benefit.

The question is whether it’s worth the cost at that particular time, i.e. whether entire generations should be forced into a cookie-cutter path where everyone spends ages 18-22 in university, graduates with a boatload of debt, starts a career in whichever industry is willing to hire them, and ultimately begins paying taxes.

This route takes away all the choice... the ability to live life deliberately.

It’s how people ‘end up’ doing what they do by default, instead of finding their professional passion and life’s calling.

Most people give up the choice. And it all starts with debt.

It didn’t used to be this way.

Long ago, people actually went to university to learn. That was the goal.

Today we’re told that it’s a necessary stepping stone for social and financial success.

Curious how the data demonstrates the exact opposite.

Like many of our prevailing social constructs, this education system is on the way out.

Just like our unsustainable monetary system in which we award totalitarian control of our money supply to unelected bureaucrats who conjure trillions out of thin air in their sole discretion…

… just like our unsustainable banking system in which commercial banks hold just a tiny fraction of their customer deposits and then gamble away the rest of it…

… and just like our political system in which a government that’s $60 trillion in debt continues to waste money with wanton abandon…

… this education system is unsustainable.

It’s just as unsustainable to expect a 22-year old to enter the world with uncertain prospects and tens of thousand of dollars of debt.

And, like our monetary, banking and political systems, it’s time for a reset.