Generation "D" Is Not Movin' Out
Imagine negotiating a six-figure mortgage for your dream house with the following conditions: (1) the house won't get built for an unknown number of years, (2) there's a chance that the house won't ever get built, and (3) you will be obligated to pay off the entire mortgage, plus interest, whether the house gets built or not. Seems kind of risky, doesn't it?
Now substitute for that uncertain dream house, a career you want to pursue, and substitute for that six-figure mortgage a six-figure college tuition loan. Does that sound like a better deal?
Yet there are thousands of teenage American college students who are taking that deal every fall before they start their classes. They are, in effect, mortgaging their futures for jobs the nation's economy is not building for them to move into after they graduate.
Just as we saw the housing bubble, this century's first mass economic disappointment (in the axiomatic value of real estate), burst upon the rocks of the profiteering finance industry, now we are witnessing the arrival of the next bubble, that of the big-ticket college education as talisman against a weak job market.
In 2011, college seniors who took out loans owed an average of $25,250--up 5% from 2009. In May of 2012, total student loan debt topped the unprecedented trillion dollar mark, and is still climbing. Congress has just delayed for a year the 2007 legislated rise to 6.8 percent interest rates on the highly popular federally guaranteed Stafford Loans to college students, currently held by 7.4 million individuals.
But merely holding the interest payments down on some college loans will not avert the economic damage that will result from this debt bubble bursting. It will just stretch it out by slowing down default rates.
Having a college degree, as economists are quick to point out, may still generate more income over a lifetime than not having one. But as adjusted working and middle class wages stagnate and even fall, as they have over the last quarter century, access to the conventional basics of middle class security (home, health-care, dental-care, child-care, etc.) become more and more delayed and elusive for everyone.
Moreover, as the number of underemployed college grads moving back in with their parents approaches record levels, so too are those grads holding off on their purchases of houses, cars, IRA's, marriage licenses and baby carriages while they figure out how to pay off their college loans. Needless to say, neither will their impaired spending capabilities be contributing any time soon to a consumer driven economic recovery.
The federal government first bailed out the major corporations in 2008, and has just gotten around to providing some mortgage refinancing relief to distressed homeowners. A full national economic recovery, however, sooner or later, will have to directly address, as well, the plight of the college loan burdened "future leaders of America" grimly treading economic water out there.
Billy Joel's famous 1977 song "Movin' Out" criticized, in its day, a joyless middle class workaholic mentality. And that was even with the high inflation and unemployment plaguing the late 70's. But at least, as Joel saw it, Generation X, as it came to be called, still sensed it had viable choices to accept or reject a consumerist, work-centered life.
In this, our own age of Occupy Wall Street, were an update of that song to reflect a more contemporary reality, I don't think it would be about the perceived options of "movin' up" or "movin' out." It would be about Generation "D" (for debt) facing the more restrictive prospect of moving back in and down.