The student loan crisis isn’t just hurting young graduates, it may be contributing to the overall rise in wealth inequality as well. The math is pretty simple: wealthy students who can afford to go to college without taking on loans can immediately begin investing their money and saving for retirement as soon as they enter the workforce. Their less well-off peers, however, spend these years paying off their considerable debts, thus expanding the gap that existed at the beginning. As the AP reports:
“If you graduate with a B.A. or doctorate and you get the same job at the same place, you make the same amount of money,” said William Elliott III, director of the Assets and Education Initiative at the University of Kansas. “But that money will actually mean less to you in the sense of accumulating assets in the long term.” […]
At the other end of the spectrum is Zbylut, an accountant-turned-attorney in Glendale, Calif. He’s been chipping away at nearly $160,000 in student debt since graduating in 2005 from law school at Loyola University in Chicago. Now 48, the tax attorney estimates he could have $150,000 to $200,000 in a 401(k) had the money he’s paid toward loans gone there.
“I’m sitting here in traffic. I’ve got a Mercedes behind me and an Audi in front of me and I’m thinking, ‘What did they do that I didn’t do?'” Zbylut said by cellphone from his Chevrolet. He’s been turned down twice for the type of mortgage he needs to buy a home big enough for himself, the fiancee he would have married already if not for his debts and her 10-year-old son.
None of this is terribly surprising on the face of it, but it serves as yet another warning bell at how deeply misguided education policy has been in this country for decades. Expanding access to education is critical for any nation’s future prosperity, but doing so by expanding indebtedness is not the right formula. We need to rethink the very delivery mechanism of education, from high school to university rather than fiddling around with solutions that end up causing more harm than good.