Pain, Education and Life

It’s “painfully” obvious that the gains in the job market, touted as a wild success by Donald Trump, are a patchwork of low-pay part-time/gig work mixed with high-pay STEM/business jobs for those with the right degrees and experience. When you drill down and look at additional variables – looking at neighborhoods, race, family structure – it becomes clear that for those outside of hot job markets, racial minorities and those already on the lower economic rungs of the social ladder, the job picture is not particularly rosy.”[Job] gains mostly bypassed residents — often African American — who had been born into poverty.

“That is among the findings of a study led by Raj Chetty, a Harvard economist whose newly launched Opportunity Atlas found no association between job growth and economic mobility for poor residents of the affected areas…

“President Trump has pledged to save neglected towns through ‘jobs, jobs, jobs.’ His Democratic rival in the 2016 election, Hillary Clinton, asserted that government investments to foster hiring would help create ‘an economy that works for everyone.’ Governors and mayors have traded tax breaks for pledges by companies to create jobs in distressed communities.

“But Chetty and his colleagues, whose atlas examined communities down to census tract levels, found that economic mobility hinges more frequently on other factors. A person’s race, for example, plays a pivotal role. Economic mobility varied widely among people of different races who lived in the same neighborhoods in Los Angeles or Houston, among other places.

“Additionally, living in neighborhoods with many two-parent families improves the likelihood of emerging from poverty — even when someone was raised by a single parent. Mobility is often greater for children who come from neighborhoods with higher-priced housing. And it’s generally better when a high proportion of adults in a neighborhood are working, according to the analysis by Chetty, economists Nathaniel Hendren of Harvard and John Friedman of Brown University, and researchers Sonya Porter and Maggie Jones of the Census Bureau.” Los Angeles Times, October 19^th.

But even for those with advanced degrees, too many are mired in too much student debt with job prospects and salaries insufficient to allow both independent living and to pay off those loans. The 2005 modification of our bankruptcy laws makes it exceptionally difficult to avoid student loan debt. With a surplus of willing lenders, over the past several decades, colleges have accelerated their tuition increases accordingly, creating a vicious spiral for students and their families.

The general economy favors those who bought homes before the most recent explosion in the real estate marketplace but punishes recent grads who are even further pummeled with hardship with a world of exorbitant rents in urban centers where the jobs are. All these pressures are stymying these younger workers from being able to participate the once-normal progression into the consumer economy, and that hurts our overall long-term growth big time.

“It’s 2018 and Americans are more burdened by student loan debt than ever. In fact, the average student loan debt for Class of 2017 graduates was $39,400, up six percent from the previous year.

“You’ve probably heard the other scary statistic: Americans owe over $1.48 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt.” StudentLoanHero.com, May 1^st. What’s missing here? For a rather large segment of recent grads, a well-paying job with a solid future. And interest keeps running. According to the Department of Education, over the past two years average private student loan interest rates have risen from 5% to 6.6%.

“While Wall Street and President Trump tout news of a booming stock market and low unemployment, college students may be quick to roll their eyes. The improved economy has yet to mean higher wages for graduates already struggling to pay down massive debt, let alone ease the minds of students staring down the barrel of six-digit loan obligations yet to come.

“Federal student loans are the only consumer debt segment with continuous cumulative growth since the Great Recession. As the costs of tuition and borrowing continue to rise, the result is a widening default crisis that even Fed Chairman Jerome Powell labeled as a cause for concern.

“Student loans have seen almost 157% cumulative growth over the last 11 years. In contrast, auto loan debt has grown 52% while mortgage and credit card debt actually fell about 1%, according to a Bloomberg Global Data analysis of federal and private loans.

“All told, there is $1.5 trillion in student loans out there (through the second quarter of 2018), making it the second-largest consumer debt segment in the country, after mortgages, according to the Federal Reserve. And the number keeps growing.

“Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

“Experts and analysts worry that the next generation of graduates could default on their loans at even higher rates than in the immediate wake of the financial crisis… Student loan debt currently has the highest 90-plus-day delinquency rate of all household debt. More than 1 in 10 borrowers is at least 90 days delinquent, while mortgages and auto loans have a 1.1% and 4% delinquency rate, respectively, according to Bloomberg Global Data. While mortgages and auto loans have experienced an overall decrease in delinquencies since 2010, student loan delinquency rates remain within a percentage point of their all-time high in 2012…

“Students attending for-profit colleges and community colleges represented almost half of all borrowers leaving school and beginning to repay loans in 2011. They also accounted for 70% of all defaults…

“Those most at risk of delinquency tend to be those who’ve incurred smaller debts, said Kali McFadden, senior research analyst at LendingTree. Graduates with six-figure degrees that are valued in the marketplace — such as post-graduate law or medical degrees — usually see a good return on their investment.

“‘There’s a systemic problem in the student loan market that doesn’t exist in the other asset classes,’ Hupalo said. ‘Students need to get a job that allows them to pay off their debt. The delinquency rate will rise as long as students aren’t graduating with degrees that pay back that cost.’

“As young adults struggle to pay back loans, they’re forced to make financial concessions that create a drag on the economy. Student debt has delayed household formation and led to a decline in homeownership. Sixteen percent of young workers ages 25 to 35 lived with their parents in 2017, up 4% from 10 years prior, says Bloomberg Intelligence.” Los Angeles Times, October 21^st.

It’s clear that the current system of paying for higher education simply does not work. Bernie Sander’s socialist leanings, particularly as it relates to college education, resonates with this student-loan-encumbered constituency. Sadly, I know more than a few educated workers in their 40s and even their 50s still paying off their student loans. Absurd.

Lifetime job security is a thing of the past for most workers – changing jobs many times is the new normal. The acceleration of technological change, artificial intelligence, suggest that continuing education – plus the burden of paying for it – is becoming a lifetime commitment for most workers. That only means such debt just might rise over time, like filling bucket of water with a hole in it.

I’m Peter Dekom, and education and retraining are so much a part of the fabric of modern employment that if we cannot figure out how to afford this necessary process, the United States will become very much the opposite of “Great Again.”