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.
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