After writing about the student loan crisis recently, a reader uploaded a cartoon that went around the Internet. It shows a recent college graduate wearing a cap and robe looking at a blackboard that reads, “The student loan crisis is over: you took out a loan. Pay it back.
It’s a nice feeling. But imagine you’re a kid with a freshly prepared bachelor’s degree in some liberal arts field – history, English, or something like that.
Here’s what that piece of paper qualifies you to do: serve coffee at Starbucks.
There, you could have a take-home pay of $ 400 per week. But the payments on this loan could reach $ 300 per week.
On this point, I disagree with many of my Conservative colleagues. The problem is not the people who have to repay these loans. These are the people who make these loans.
Uncle Sam is working a scam on American youth.
At about the age of 18, these children are told not to worry about paying off their loans; the increase in salary that accompanies this college degree will more than offset the loan repayments.
But imagine these kids have to sit down with someone first to reveal Uncle Sam’s secret to them: he makes you come and go.
Suppose you borrow $ 50,000 for this undergraduate degree. Many years later, you will have paid off that $ 50,000 and maybe another $ 50,000 in interest. But that’s not all you’ll pay. You must also pay federal income tax and payroll taxes on the money you earn to make these payments. According to in which tax bracket you are, the IRS will recover around $ 30,000 or more in taxes.
It is even worse if you are a concert worker, as so many young people are. Then you have to pay the employer’s share of payroll tax, another 7 percent of your income. You also have to pay for your own health insurance, which is about $ 4,000 more per year. (Here is an excellent explanation ways this debt can pile up on you.)
All of this sets up a vicious cycle in which a child can get trapped for decades paying off loans.
But what about that job that would give you enough income to pay off those loans?
Have you heard of the tree expert with a master’s degree?
This is not a joke. I heard it from George Leef, an academic at the James G. Martin Center for Academic Renewal in North Carolina. Leef told me that an economist friend of his had recently had a tree cut down at his house and that “the guy who did it had a master’s degree.”
“Something that has gone unnoticed is that people go to four-year colleges to graduate and find they don’t have any skills,” Leef said. “Then they go to a coding academy or community college and get actual training. “
Meanwhile, they’re racking up student debt, $ 1.5 trillion at last count.
“We have dug a big hole here with the overselling of higher education,” he said. “The diploma is becoming more and more expensive and it is doing you less and less good. “
He used his own alma mater, Duke University, as an example.
“When I went to Duke in 1974 the tuition was $ 2,300 a year,” he said. “Now it’s over $ 50,000.”
Well done. It’s done $ 55,880 per year.
“Universities in general have figured out that they can charge a lot, a lot more than before, because there is this river of money flowing in people’s pockets because of all this easy access to loans,” he said. -he declares.
But with the COVID-19 crisis, the whole edifice may be on the verge of collapse. Who is the new president Joe Biden going to do about it?
His campaign platform doesn’t offer much hope for recent college graduates. Biden focuses most of his loan relief on public employees such as teachers – in other words, on people who already have secure jobs with secure benefits.
It may be good for the government, but what about the rest of us?
I have a few suggestions that would be popular with younger workers and even older members of Congress.
One is to stop charging interest on federal loans. When my son-in-law bought a car not too long ago, he got an interest-free loan. If Volkswagen can afford to give you an interest-free loan, so can Uncle Sam.
Also, I would allow loan repayments with pre-tax dollars, like we fund Medicare. If education is so important, then let Uncle Sam take the plunge.
And when it comes to college costs, I would ban participating colleges from increasing tuition fees above the rate of inflation.
That would put the blame in its place – and it’s not on the kid whose disposable income comes out of the tip pot at Starbucks.