I recently listened to an episode of the Martinis and your Money Podcast in which Shannon interviewed Adam Carroll, the author of a documentary on Student Loans called Broke, Busted and Disgusted.
From a macro perspective, Carroll is as familiar as anyone with the student loan debt situation in the United States, but what struck me about this interview is that Carroll isn't hopeless. Student loan debt is a $1.2 Trillion Dollar problem (6.7% of annual US GDP for perspective), but, at least according to the world's foremost expert on the matter, the problem can be solved.
Good news everyone! Student loans don't have to be a crisis! We can solve a big problem.
How to solve a big problem
I'm not an expert on solving big problems, but I have watched a lot of war movies. What I've learned from watching these movies is that people must behave differently during periods of crisis as opposed to generically difficult periods of time. In times of crisis, even the general must shift his focus from the war to the battle. It is to a General's credit that he might be able to shift his attention back again quickly.
Crisis management requires responding to only things that are both ultra-urgent and ultra-important. It's only once the crisis is contained that people can begin to respond to urgent and important things, and hopefully focus once again on the important.
When confronting a crisis (even a first world crisis like Student Loans), it is critical to address the crisis in the right order. This is the right order.
1. Defend (Ultra Urgent and Ultra Important)
2. Triage (Urgent and important)
3. Prevent (Important but not urgent)
In the case of the student loan crisis, the most important work is defenending future generations from taking on unbearable student loans. The most at risk are16, 17, and 18 year olds who are preparing to attend college in the next two years.
In the case of the student loan crisis, defense looks like education, awareness and deferral. If young people understand what a $10K, or $20K or $80K loan package means for their future, they might be a lot smarter in how they pursue college (if they pursue it at all).
Students who take out loans aren't required to know what their monthly payment will be, and how long it will take to pay off the loan. That's nuts.
Even an immature 18 year old understands that he doesn't have the money to take out a $60K, 7 year loan on an F-150, but that same 18 year old can be completely oblivious to the fact that he's going to take on $90K to obtain a 4 year degree that may or may not pay off.
You can't reform the entire higher education system in two years, but in two years you can defend your child from a decade of indentured servitude to Sallie Mae.
I rarely think force is a good parenting technique when it comes to teenagers, but I'm going to suggest the use of force in this one instance. Do not file a FAFSA for your teenager unless they correctly run a projection for the debt they plan to take on. Force your teenager to understand the financial consequences of debt (PS- if you have a good relationship, you might not have to be overly forceful).
If the conclusion of your teenager's debt analysis is that student loan debt is going to cripple them for life, then give them options. Help them see that working for 1-2 years is a good idea. Help them see routes to the middle class that don't require a degree at all. Help them consider that a community college can be an excellent option.
Triage saves lives, but its an ugly business. People get sorted into depressing groups.
There's the suck it up and deal with it group. These are people who are in a ton of pain, and nobody's going to help them because their lives aren't at risk.
There's the he's not dead yet group. These are people who are going to die during triage. If there are enough pain medications, these people might get some. Somebody may try to comfort them during their last moments. Priests and pastors may administer spiritual balm in lieu of medical treatments.
Finally, there are the he just might live group. These are the people who get the majority of time and resources during triage. It's people whose injuries are bad enough that they might bring on death, but some amount of medical attention could save their life. Some of these people live through the crisis thanks to the attention they received.
If you've already been attacked by Student Loans, you may be waking up in a triage hospital. If you're waking up, that's good news. It means you're not in the he's not dead yet group. Your student loans haven't killed you.
Since that's the case, it means that you are either going to have to suck it up and deal with the pain, or you're going to need some serious intervenous help. You might feel like you need serious help, but if that isn't how others have you classified, then you're not going to get serious help. The majority of people who live through triage, live through it because they didn't need much assistance to begin with.
When it comes to student loans, if you're case isn't one of the "urgent" cases, you shouldn't look for more than a paltry level of assistance. It's up to you to be vocal about your needs, and someone might help you. Or they might not.
For the real bleeders, programs relating to student loan forgiveness might help you out. Everyone else should expect little personalized help. It's an unfortunate fact of crises that the victims are so numerous that systematically caring for victims in their greatest time of need is impossible.
Of course, just because the triage hospital won't help you, doesn't mean you can't recover. If you can assemble your emotional support team (check out DearDebt.com to learn more about that) and network into higher paying jobs and Hustle your way out of Debt (Book by DC, available on May 5th, I haven't read it yet, but I love DC's blog Young Adult Money), then you just might succeed.
When it comes to reversing the tide of student loans, defense isn't enough. We eventually need to change the conversation around post-secondary education altogether.
Of course, parents like me should take pains to do this at a micro level, but the conversation can and should change at a macro level as well.
How many of the entrepreneurs who read this blog would be willing to hire someone who has audited a few classes through Khan Academy and created a robust online portfolio of their work?
How many slightly larger companies would be willing to take a 17 or 18 year old who has shown the right aptitude and train them to become a technologist (or technician in some industries), so that they can decide if engineering really is right for them?
What would it take for Bachelor's degrees to no longer be the hoop that pushes you into adulthood? Would it be an abbreviated version of high school that would make associate's degrees for 18 year olds the new norm (my old high school now offers track and it isn't even considered an "honors" track. It's just for motivated students.) Is it emphasizing the importance of internships to the exclusion of college in the first year or two out of high school?
What if parents allowed their kids to pursue business aspirations their final year of high school rather than academics? What if we admitted that adopting a liberal arts plan for everyone isn't egalitarian when the rich can afford it and nobody else can?
If you're on the front lines of defense, focus on defense. If you work or live in the triage hospital, focus your attention there. However, if you're fortunate like me, then focus your attention on prevention. Focus on changing the conversation for the next generation.
Why this matters to me
In the near future, I'll ostensibly have two children (one of these children seems to prefer living inside of me, but I deem that behavior unacceptable!).
One of my foremost goals as a parent is to raise children who are wise adults. I would love to give my kids a gloriously innocent childhood, but Rob and I won't give them that at the expense of their ability to navigate the adult world at the appropriate time.
I think it's realistic to believe that in 15-18 years when my kids are preparing to launch that the conversation about post-secondary education can look different than it looks today. I can imagine that my kids won't assume that they have to go to college to succeed, and I can hope that a debt free start to adulthood will be the norm.
If we can treat the student loan crisis with the attention it deserves, we can solve the problem! I would love to hear about your ideas for defense, triage and prevention!
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.