One Magazines and the Student Loan Craze

The American student debt issue is multi-pronged, some of which have been addressed by previous government programs ranging from alternative payment plans, Public Service Loan Forgiveness, and the rare approval to discharge through bankruptcy. These programs were designed for students who attended for-profit schools, like Corinthian, that targeted revenue goals over student achievement; students who had to drop out for personal hardship related to family or health issues; and graduates of high-price, high-reward professional schools interested in community service rather than country clubs. One magazine, however, made six-figure student debt a cultural phenomenon. Ten to twenty years ago, there was one authoritative source of truth on the best colleges in America: The US News & World Report. This annual compilation synthesized various data such as standardized test scores and acceptance rates (the lower, the better) to rank the prestige of America's universities. I had a classmate who chose Stanford (#3 in 2011) over Harvard (#1), and this decision was talk of the campus- both students and parents- for several weeks, reflecting how much influence this list held. As a "normie" high school student, the goal was naturally to attend a Top 25 university. Rebels and artsy students could attend a small liberal arts college instead. Classmates at my preparatory high school made contingency plans for surviving at a "second page" college, namely, an institution ranked between #51 and 100. Oftentimes, these universities offered generous scholarships; and it was this tier that represented large state universities in my classmates' suburban home states of Virginia and Maryland. Until the US News & World Report era, going out-of-state for college was fairly uncommon. It was common for the Ivy Leagues, the Service Academies, and specialized programs like Naval Architecture; but financial and practical issues kept it from being a cultural phenomenon. So-called "no-name" schools actively strived to increase their ratings. The University of Alabama offered free tuition to any student with 1400 out of 1600 on their SAT score, or the top 5% of scorers. The people of Alabama, and the other 95% of students, had to pay for this indulgence. Other colleges sent out application forms to students who certainly wouldn't be admitted anyway. George Washington University (#51) thoroughly gentrified its campus. Utilitarian dormitories built in the 1930's and 1950's were gutted and rebuilt as palaces for students of higher learning. Student loans could also be used to lease cars, and take vacations to Montreal or Cancun. Tuition rates became uncoupled from reality- from the real inflation rate and from students' actual earning potential. Finishing students four years was no longer a priority for many colleges; the "forever student" was the new model. Yet this amenities race was not universal. At some small colleges like Deep Springs and my alma mater, the US Merchant Marine Academy, students continued to clean the dormitories and perform other on-campus work. Today, there is better understanding that "strength" comes in multiple forms. You are more likely to see more focused lists such as: "Best Upward Mobility" and "Best Mid-Career Income". Even better, "Lowest Cost of Attendance". The hangover from the US News and World Report era is far-reaching. There are fewer traditional college students now than in 2011, and a greater appreciation among them for acquiring marketable skills. Some small liberal arts colleges have had to close. The maritime industry is a good place for graduates to pay off their loans, yet the price of trade-offs is apparent now: a smaller mortgage, a later retirement age. But wasn't college a blast? "If I knew then what I knew now...", they begin to say.

Mama Lenders and Mortgage Lenders

 As it is today, the housing sector is a provider of equal opportunity. People in their respective economic milieus live in somewhat-integrated neighborhoods. Taking Fairfax County, Virginia as an example, Working-Class Whites and Latinos may share one neighborhood; and Upper-Middle Class Whites and Asians may share another neighborhood.

There is one group that is left behind, studies show: middle-class African-Americans, who miss out on the opportunity to purchase in the same neighborhoods that White Americans of similar economic status do. Merely calling it “systemic racism” won’t solve the discrepancy; but dissecting it will.  

Qualification for a traditional mortgage is based on the ability to repay; in addition to making a down payment. Many prospective homebuyers must budget carefully to build the down payment, by cutting out some discretionary spending.  African-American purchasing habits are similar to other Americans, although the community spends slightly more on haircare and barbeque supplies, slightly less on home appliances. Contrary to pervasive stereotypes, spending on discretionary goods (such as shoes and handbags) does not differ from other groups.

How “consumer debt” is handled, does differ culturally. In the African-American community, it is common for family members in middle-class jobs to gift, or loan on flexible terms, significant sums of money to less-fortunate relatives. This could be cash for a nephew to buy a used car for his new job, medical expenses for a parent, or college textbooks for a cousin.

In previous decades, this arrangement was highly beneficial, and even necessary to ensure a family’s security in light of the peonage, or debt-bondage, system common in the Jim Crow South. In the Agricultural South and Industrial North, young and middle-aged men had a short period of time in their prime-earning years. This relative excess would be used to support family members in more vulnerable financial situations, such as grandparents. Today, this informal system of family assurance is much better for the recipient economically than a payday loan, and better than a high-interest credit card. It, however, does not enhance the donor’s credit score; nor is the possibility of receiving mutual assurance counted towards “ability to pay” a mortgage.  

Asian-American families often have a similar practice of family assurance, but with one notable difference among the American-born: bank checks are passed instead of large bills. When financial transfers within a family are significant, traceability makes a large impact on perceived creditworthiness. When cash “disappears” from a bank account, it is assumed by mortgage lenders to have been spent. A check, written out to a relative, carries intrinsic proof as an intra-family gift.

Indeed, many members of the Black Middle Class may fall through the cracks of mortgage lenders; resulting in smaller loan approvals and higher interest rates; and consequently, less choice of neighborhood. What mortgage originators need to do, then, is to recognize this form of family assurance as a legitimate form of insurance and financial security. Community leaders should encourage the use of traceable instruments, such as bank checks or mobile apps, to ‘mainstream’ this mutually-beneficial practice in the eyes of institutional lenders.  

The College Experience: Now Customizable

As I walked around Old Dominion University, I felt like I was back in the Fall of 2019. There were students on the streets and in the student center and in the local shops; I was no longer “the lonely graduate student” on an empty campus. While there are many anecdotes of college students joining the full-time workforce instead of attending classes online, evidence shows that traditional college enrollment has remained fairly stable. They have presumably been living with their parents while attending online class. Thus, while dormitories and dining halls remained available during the pandemic, they had been empty save for a small number of non-traditional students. At ODU, the Spring 2021 semester was conducted in a hybrid format. In addition to the essential lab and practical courses for nursing students that were never cancelled, in-person seats were made available in many other undergraduate classes. 

So even when the opportunity presented itself, many of the youngest adult generation passed on "The College Experience". This college generation has better sensibility in avoiding frivolous expenditures. Tuition and expense estimators are now placed prominently on each state university's website. Understanding the effects of automation on entry-level white-collar work, this generation is more realistic about life expectations than those who attended in the early 2000s' campus amenities boom.

“The College Experience” for millennials was not built in a vacuum. As they were born in the 1980s and 1990s, there was a widespread feeling that moral and professional underachievement racked society from top to bottom, from the corporate boardroom’s tolerance of workplace inefficiency, to the high school dropout. Books like A Nation At Risk were published, and programs such as No Child Left Behind, and Common Core were implemented. These were good decades for the professional middle class, but would their children fall from grace?

A concatenation of data did offer a model for intergenerational middle-class replication: The only sensible way to succeed in life was to attend college for four consecutive years, while living on or near campus with peers. This assumption was built into the Post-9/11 GI Bill of 2008, giving extra benefits to veterans participating in the traditional “College Experience”. In addition to ostentatious amenities like indoor water parks, the university had become a city in itself, replete with administrators and counselors; paid for primarily by student debt. This in turn led to young graduates expecting comprehensive workplace amenities and luxury apartments in a time of corporate restructuring.    

As the perceived struggles of young college graduates permeated the media, resentment grew against ivory-tower professors and administrators. Populists, in both major parties, sought to replace “The College Experience” with low-cost community-centered colleges, a few large campuses with good football teams, and massive online open classrooms (MOOCs). The Ivy League and the professional-managerial elite would be banished from positions of authority. I hesitate to call this the “conservative” model of higher education, because it was the early 20^th century Progressives who advocated for vocational and practical instruction at high schools and colleges. In Europe and Asia, students attending barebone but competent colleges engage in the local community for housing and social needs.

The COVID-19 pandemic forced a break from the perceived path to success, and a reassessment of how young adults are shaped in America. The “College Experience” was very formulaic, and assumed a student’s unbridled control of their future. As late as 1973 in the US, mandatory military service affected where, when, and even in what subjects a college student would study. While students today have more choice in how to spend their pandemic semesters; as online students, trade apprentices or volunteers; the academic interruption of COVID-19 will bring an end to the cookie-cutter resume.     

 

(Enrollment Information: It’s Time to Worry About College Enrollment Declines Among Black Students - Center for American Progress)