The New Americans: Young, Stressed and Almost Broke

We’re reading so much propaganda about how well we are doing economically. True if you own a lot of stock or are in the top 5% of wealth and earning, you are indeed kicking butt. But if you are in that massive 70% of working Americans whose earnings – in terms of real discretionary buying power – is the same or lower than it was for this demographic 40 years ago… or you are in an even economic segment… the economy truly sucks. What is super-amazing is how badly college students are faring, both while in school and once they graduate (if they do graduate).

Betsy DeVos – the mega-billionaire who, as Trump’s woefully undereducated Secretary of Education is dedicated to cutting the federal government’s role in education at every level – has rather dramatically sided with lenders and big business and fought against relieving students from debt accrued with fraudulent and now bankrupt for-profit post-secondary schools. Squeezing college students is one of her specialties. DeVos has had a lot of help along the way with other federal agencies dedicated to supporting her vision.

Screw students! Support those who have ripped them off and enable even further enhanced predatory lending practices. The Consumer Financial Protection Bureau is rather dramatically misnamed, since consumers are now expendable. Big financial businesses rule! Try this one on for size: “The resignation of the government's chief student loan watchdog could not have come at a worse time, and demonstrates the Trump administration's unwillingness to protect borrowers, advocates say.

“Seth Frotman, student loan ombudsman at the Consumer Financial Protection Bureau, resigned on Monday [8/27]. In a letter to Mick Mulvaney, acting director of the CFPB, Frotman said he was leaving due to sweeping changes at the bureau, including the abandonment of enforcement and the protection of bad actors from scrutiny. ‘You have used the bureau to serve the wishes of the most powerful financial companies in America,’ Frotman wrote. The letter was obtained by NPR.

“The Consumer Financial Protection Bureau did not immediately respond to a request for comment. Frotman also could not be reached for comment.

“Frotman's absence underscores the current vulnerability of the country's millions of student loan borrowers, said Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities.” CNCB.com, August 27^th.

For those who have graduated or otherwise left college, the burden of student debt has risen from bad to intolerable in a relatively short time. Think of it this way. If you are a college grad with even average levels of student debt, just about everything your parents did if they graduated from college – from getting married to buying their first house – is of necessity placed on hold. Sometimes for a decade or more.

And trust me, this is a consumer-stifling drag on the entire American economy, something that is pushing young grads away from the capitalist system that seems to own them toward a modern view of socialism – the Bernie Sanders vision of America. Facing further job loss and wage-suppression from a combination of artificially intelligent automation and a new gig economy with no retirement, vacation, healthcare benefits, student debt has become part of a lots of straws breaking a lot of camels’ backs.

Writing for Bloomberg Opinion (reproduced in the August 26^th Los Angeles Times), former advisor to the president of the Dallas Federal Reserve, Danielle DiMartino Booth explains: “As of the fourth quarter, student loans represented 10.5% of a record $13.1 trillion in U.S. household debt, up from 3.3% at the start of 2003…

“Student loans are now the second-largest category of household debt in America, topping $1.4 trillion and trailing only mortgages at $9 trillion. And while the management consulting firm Korn Ferry puts the average starting salary for a 2018 college graduate at $50,390, up 2.8% from 2017, the just-released July consumer price index report shows the inflation rate rose 2.9% over the last 12 months.

“Does the phrase ‘treading water’ come to mind?... A recent report by Bloom Economic Research breaks out the demographic challenges that have resulted from the 176% increase in student loan debt in the decade through 2017… In the years of dramatic loosening of mortgage credit standards leading up to the housing crisis, many families tapped readily available home equity to finance pricier higher educations for their children than they would have otherwise been able to afford.

“After the bust, this avenue was blocked, leaving only the higher education inflation it had fueled.
From 2007 through 2017, the CPI rose 21%. Over that same period, college tuition costs jumped 63%, school housing surged 51%, and the price of textbooks rose 88%. These troubling growth rates wipe away any mystery behind today’s staggering levels of student loan debt, which has almost tripled from the 2007 starting point of $545 billion…

“The outer birth-year band for millennials is 1981, meaning millennials are starting to be closer to 40 than they are to 30 [when they “begin life” as their parents did]. While home ownership has picked up, it’s been held back for a decade by stagnant wage growth coupled with onerous debt burdens.

“The macroeconomic ramifications are well-documented. Baby boomers house a record level of their millennial offspring who can’t afford to leave home. Birth rates have fallen to a 30-year low as marriage is put off.

“Clearly, reform of some kind must address the issue of student debt, which is not to say debt relief or outright forgiveness. Institutions of higher learning in this country must take some of the responsibility for the current state of affairs in the nation’s most populous demographic group.”

Add to this mix that bankruptcy laws were amended in 2005 to make it close to impossible for debt-laden former students to find bankruptcy relief. With easy credit, college tuitions skyrocketed, and the pressure to get higher education exploded. It is estimated that 59% of millennials have some college education. Less expensive online education is gaining traction, and you are watching as young folks are often skipping college altogether as a costly waste of time. Tech companies are even beginning to hire kids out of high school for engineering jobs.

We are going to have to redesign how we fund education at every level, from the ground up… or the United States of America will be further less competitive with the rest of the world. College is free in so many countries (major universities in places like Singapore and Germany), first rate studies that train some very impressive graduates. In the United States, the Trump administration is simply siding with those who want to make such educational vectors more expensive. We are going the other way… Making America Less every day.

I’m Peter Dekom, and if you think this cadre of financially-impaired college grads are going to grow into conservative Republicans, you are probably living in a state where recreational marijuana is legal and have become a very good customer of that substance.