The New York Times’ Ron Lieber made interesting, if implausible, points about student loans in an article yesterday. His primary thrust was to advocate for paternalistic accountability and oversight on the part of lenders, schools, guidance counselors… every interested party, that is, but the borrowers themselves.
Mr. Lieber drew heavily on statistical data: percentages of graduates struggling to pay back student loans, unemployment numbers, average increases in college tuition, and the rest of the usual suspects. The landscape was a bleak one of hoodwinked lambs pawning their diplomas frames. In Mr. Lieber’s opinion, student lenders and the financial aid offices of universities have acted in concert to advance oversized loans to students who are poor credit risks, convincing them a college degree was worth any price. He thinks collegiate financial aid offices at places like NYU should advise students to consider cheaper schools and lenders should be less willing to make enormous loans so freely.
Both ideas are good ones, but Mr. Lieber’s statistical analyses take no account of folk wisdom: buyer beware. The primary responsibility in the purchase of any item, whether a pencil or a college education, is the buyer’s. Interested parties like lenders and schools are just that… interested parties: they have their own interests and they work in the service of those interests. Buyers ought to know this. It’s the rare fool who thinks the salesman has anything but his own bottom line at heart, and a fool and his money are soon… well.
Colleges are wonderful places and contribute immensely to the cultural and intellectual fabric or our country. But colleges are also businesses, even if non-profit, and the point of business is not to turn away business. This is true of lenders, too. Consumer know this, or ought to, and so the onus is on them to exercise sound judgment in making a purchase.
Should banks counsel students and turn away default risks? Probably. Should schools make sure families know the risks of borrowing? Most likely. Should voluntary borrowers of any sort be primarily accountable for their own borrowing, knowing that lenders are for-profit organizations intent on money-making? Without a doubt.
It’s more important now than ever that consumers inform themselves as to the cost of their consumption, whether of gasoline or education. Is the product worth the price? Mr. Lieber leans heavily on a girl recently out of NYU, nearly $100,000 in debt. She earns barely enough money to meet her monthly expenses.
“She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies. After taxes, she takes home about $2,300 a month. Rent runs $750, and the full monthly payments on her student loans would be about $700 if they weren’t being deferred, which would not leave a lot left over.”
The girl has a degree from one of the best schools in the country, which administers some of the best programs in the world. Its price seems justified, given its graduates’ comparative earning potential. Still, students need to take the initiative in charting their own finances; banks and schools cannot, and should not, be active co-pilots. Every customer of every product must decide: is the product worth the price, and can I afford the price?
If the product is an investment, like a college education, is it likely to be a sound one, returning profitable dividends? For instance, is “an interdisciplinary degree in religious and women’s studies” a product likely worth its price, or an investment likely to ever return anything at all?