The stock of Electronic Arts, the maker of sports-related video games, is up almost 6 percent on a down day in the stock market. Why? The official news is that Amazon may be buying them, but that is misinformation. Truth be told, the Biden administration just threw a financial lifeline to the 20-something deadbeats who can now stay in their parents’ basements playing video games instead of getting a job for at least a few more months.
Disclaimer: The above paragraph is a joke. Joke is defined by Merriam-Webster as, “something said or done to provoke laughter.” Jokes were prevalent on college campuses in the days when there were no safe spaces, trigger warnings, or student loans the size of mortgages.
NBC recently conducted a poll in which a plurality listed “threats to democracy” as the most important issue facing the country. They made a big deal about this being the first time ever this was the case; turns out it was the first time NBC had ever asked about “threats to democracy.” If one seeks the right answer, she must ask the right question.
Should we forgive student loans? Wrong question. What should we do about the student loan crisis in this country? Premature question. Why does college cost so much that one has to take out a mortgage-sized loan to pay for it? That is the right question.
The student loan crisis is real, and it is causing harm to a generation, but student loans are not the disease. No, loans are the symptom. I’m no doctor, but I know enough to know that masking a symptom doesn’t cure the disease; it often makes it worse.
The disease is the runaway cost of education. The cost of education – both higher education and private secondary school – is criminal. No other industry in the world would be able to get away with it. Education makes healthcare seem affordable.
When we had a mortgage crisis in this country in 2008, what was the government’s response? They did not wipe out America’s mortgage debt. Instead, banking industry CEOs were forced to testify in front of Congress, specifically to answer for selling mortgage products to naive borrowers who really did not understand what they were getting into.
Here are some good questions: How many of the student debt holders were first-generation college students? Did they borrow this money to go to college because they wanted to enrich their spirit with a better education, or because they were told they need a college degree to get a good job? If it was the latter, did anyone at the university explain that when it comes to employment, all degrees are not created equal? When borrowing hundreds of thousands of dollars to obtain a master’s degree in Russian poetry, was it explained that the degree would qualify them to be a slightly more interesting barista?
These are questions university presidents should be forced to answer. Quality education since the time of Socrates has required just three things: a place to meet, a good teacher, and a good book. None of those things should be so expensive that it cripples the student’s financial future.
How did this happen? Slowly over time. That is always how good people end up doing bad things. One bad decision leads to another, and then another. It is often fueled by one of the worst questions one can ever ask: What are the others doing? We raised our tuition because our peers raised theirs. Now that it costs more, that old non-airconditioned dorm that has a constant smell of stale beer isn’t quite good enough. New dorms it is. Costs are up, so we must raise tuition again. Now we need more degree programs, because a competitor offers a degree we do not; that means more professors and more classrooms. Tuition goes up again. It becomes a death spiral fueled by the most popular excuse for wrongdoing in human history, “Everyone else is doing it.”
In the meantime, what about the quality of the actual product? Evidently with all the thousands of dollars of debt being piled on these students, no one has bothered to teach basic civics. What are the three branches of our federal government? What are their distinct roles?
The biggest threat to our democratic form of government over the last 20 years is not a riot at the capitol, or the takeover of Seattle by radicals; it is executive action. The role of the Executive branch is to administer the law as passed by Congress. This abuse of power has been used by presidents from both parties, and it cannot continue. It has afforded Congress the luxury of not having to function, and has resulted in regulations that would have never made it through the democratic process. Perhaps most importantly, the use of executive action has created an environment in which we do a complete 180-degree turn ideologically every four to eight years. A stable nation cannot sustain that.
Democracy is slow and painful to watch, but that is by design. That need to compromise, and the slow back-and-forth nature of it, adds stability. How does the person who did all the “right things” and just finished paying off their student debt feel today? There is a lot wrong with this student loan forgiveness, but perhaps the most concerning issue is the idea that one person thinks he has the power to do it all by himself. Now that is a threat to democracy. At least that is my perspective.
Warm regards,
Chuck Osborne, CFA
Managing Director
