Unpayable Debts

Debts that can’t be paid, won’t be. — Michael Hudson

I

John Grisham’s 2017 novel, “The Rooster Bar,” tells the story of four friends who attend a for-profit law school in Washington, D.C.

Between them, they have borrowed nearly one million dollars for an “education” that will leave them unlikely to pass the bar exam, even less likely to land a job in the legal profession, and totally unlikely to land a job that will enable them to pay back what they owe.

While Grisham’s “solution” to their dilemma is literally the stuff of fiction, their dilemma is not. The novel was inspired by a 2014 Atlantic Monthly article, “The Law School Scam” by Paul Campos.

To understand the “scam,” it helps to understand how the Law School Admissions Test, or LSAT, is scored and its predictive power. LSAT scores range from 120 to 180, with the average being around 151. Despite 151 being the average score, a person who scores 151, as Campos, a law professor at the University of Colorado, told readers, is only in the 41st percentile of all those who took the test.

Stated differently, they scored lower than nearly sixty percent of all test takers. And their chances of passing the bar exam are pretty low. Score 145 and they are “quite unlikely” to pass the bar exam.

Yet, most of the students in Grisham’s novel and in the schools featured in Campos’ article scored around 145, and many of them scored even lower. That’s because just as there are dealers and lenders who will finance car buyers with credit scores that would cause potential landlords and even employers to turn them away, there are law schools, and not only for-profit ones, that will admit “students” who have no business being in law school.

Why? Because of the money, of course. Students can get federally-guaranteed loans that will not only cover the cost of tuition, which runs upwards of $45,000, but also living expenses. That’s how people in both the real world and in “The Rooster Bar” wind up owing more than $200,000 with virtually no chance of ever paying it back.

It isn’t only law school. Total student loan debt in the United States is an estimated $1.48 trillion. That’s at least a half-billion dollars more than total credit card debt. “The average student loan debt for Class of 2017 graduates was $39,400.”

While the face of improvident student loan debt is a person who borrowed in the six figures to study puppetry at a small eastern liberal arts college, that $1.48 trillion is spread among 44 million borrowers virtually none of whom studied puppetry or some arcane ideologically-driven subject.

Instead, they are participants in what Matt Taibbi of Rolling Stone has dubbed “The Great College Loan Swindle.” In it, “everyone feels obligated to go to college, most everyone who can go, does, creating a glut of graduates. And as that glut of degree recipients grows, the squeeze on the un-degreed grows tighter increasing further that original negative incentive: Don’t go to college, and you’ll be standing on soup lines by age 25.”

In this scenario, there’s no reason for schools to keep costs down, especially since “there is a virtually unlimited amount of credit available to young people.” At eighteen, people who “don’t even understand the concept of interest or amortization tables” are borrowing tens of thousands of dollars.

And then they find out that the “glut” has turned their B.A. into the equivalent of a high school diploma in the 1950s and 60s. The soup line beckons and so does graduate school, which means more loans. Lather, rinse, repeat.

II

It’s impossible to imagine a satisfactory solution to problem of escalating student debt. It’s difficult to imagine even an unsatisfactory one. According to Kristin Blagg of the Urban Institute, 22 percent of all borrowers default on their loans within four years of graduation. The Brookings Institution predicts that by 2023, that number will rise to 40 percent.

And that brings me back to what Michael Hudson, an economist at the University of Missouri-Kansas City, said. A lot of these debts will never be paid back, certainly not in full. A person who has borrowed the national average of about $40,000 would have to average at least $62,000 a year their first ten years after college to pay back their loans on time.

How many people with only a bachelor’s degree from a non-elite college enter the labor force on those terms? Tack on $20,000 for grad school and the required income jumps to $93,000.

Debts that can’t be paid, won’t be.

Now, you may be thinking something along the lines of what one of Grisham’s characters said in the novel: “No one put a gun to our heads and forced us to borrow the money.” Absolutely true . . . and totally beside the point.

That’s because the impact of the student debt problem is felt by society as a whole. “Men and women laboring under student debt ‘are postponing marriage, childbearing and home purchases, and . . . pretty evidently limiting the percentage of young people who start a business or try to do something entrepreneurial . . .’” You know who said this? It wasn’t Nancy Pelosi or Elizabeth Warren. It was Mitch Daniels, the former Republican governor of Indiana and currently the president of Purdue University.

So, as emotionally-satisfying as a Rick Santelli-style rant might be, we’re still left with a dilemma: Even in an economy with extremely-low unemployment rates, people are struggling to pay back these loans and often can only do so by postponing marriage and childbirth. These loans are anchors for many debtors and a drag for the rest of us.

Yet, if we forgive these debts or make them dischargeable in bankruptcy without demanding reforms and, more importantly, changes in the way we think about higher education, we’re simply setting ourselves up for more lather, rinse, and repeat.

III

An example of the kind of changes I have in mind is a story that Rod Dreher tells about his late father. When Rod graduated from high school, he really wanted to attend Georgetown University. But that would have required him to take out student loans. If he attended Louisiana State University in nearby Baton Rouge, he not only would be charged much-lower in-state tuition, he would receive a scholarship that covered the lion’s (tiger’s?) share of the cost.

His dad wouldn’t let him borrow the money to attend Georgetown. At the time, Rod was, to put it mildly, angry at his father. Now he’s grateful for his father’s refusal. Without the debt he wanted to incur, Rod’s career choices became a lot freer.

While this is hardly a solution for the larger crisis, it, along with the advice of people of Michelle Singletary of the Washington Post, can help Christians to avoid being caught up in Taibbi’s “student loan swindle,” and take their proper place on the soup line: as servers.


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