debt

On Sunday, Morehouse College’s commencement speaker surprised the graduating class of 2019 with the stunning news that he is going to pay off all of their student loan debt. “On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus,” billionaire Robert F. Smith told the graduates. Cheers and even tears of joy erupted as the impact of Smith’s words sank in. His gift to the graduates comes to about $40 million.

Smith, the founder of a private equity and venture capital firm, is worth about $5 billion. The Cornell University graduate is well-known for his philanthropy. In 2017, he signed the Giving Pledge, a commitment by the world’s richest individuals and families to donate more than half of their wealth to charitable and philanthropic causes.

Morehouse President David A. Thomas called Smith’s pledge “a liberation gift.” That it most certainly is. In fact, it’s a life-changer for these young men. Student debt has skyrocketed in the past decade. The average student loan debt for those graduating from the historically black college in Atlanta is between $30,000 and $40,000, a little higher than the national average of $29,800. In the U.S., more than 44 million borrowers owe a whopping $1.5 trillion in student loan debts. For American consumers, it is the second highest debt they owe — only home mortgage debt is higher.

Two-thirds (66%) of college seniors will graduate with a staggering level of debt. The implications of that are impacting the financial success of these young Americans — and society in general. When one is struggling to make monthly student loan payments, the additional costs incurred in buying a home or a new car, getting married or starting a family often are put on hold — or might never happen.

Some researchers point to student loan debt as a big reason marriage rates and birth rates are falling. Both men and women are putting off marriage, often until their 30s — if at all. And women are delaying childbirth until later ages. Last year’s birth rate of 3.7 million babies was a 32-year low, with women in their teens and 20s experiencing record low births. In 2018, only women between the ages of 35 to 44 saw an increase in childbirth rates. Experts were hoping the improved economy would see those rates rebound, but that hasn’t happened.

And, in addition to delaying family life and purchasing a home, student loans are putting a crunch on small business growth and entreprenuership. College graduates often owe too much money to even dream of investing in a start-up. According to the Harvard Business Review, less than 4% of millennials are self-employed. When loan payments are due every month, it is easy to understand why graduates would prefer to take a well-paying job at a big company than assume the risks and often lean months that are part of the challenge of starting one’s own business. And those most affected by the millstone of student loan debt are students from poorer backgrounds — especially first generation college graduates.

And those readily available student loans — whether the money comes from the federal government or private lenders — is certainly one of the reasons behind the rapidly increasing costs of college tuition. According to U.S. News and World Report, in the past 20 years, on average, tuition and fees at private universities have jumped 168%. Out-of-state tuition and fees have risen 200%. And in-state tuition and fees at public universities have increased a stunning 243%.

Wouldn’t it be wonderful if more billionaires and millionaires stepped forward to contribute to college tuition costs? But that is not the answer — nor is it realistic. While there is no doubt that education is the key to success, maybe some high school students and their parents should take a look at whether a traditional four-year college and its often crushing costs are necessary. Other options exist. Today’s trade jobs often are quite financially rewarding. For most, one needs only an associate degree, a certificate of training or apprenticeship or similar qualification. Jobs such as electricians, elevator technicians, geological technicians, respiratory therapists and dental hygienists all have annual median incomes around $55,000 or more — with little to no debt incurred.

Education is a lifelong pursuit. Paying for it shouldn’t be.

— Robin Beres

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