At 59, Chris pleaded for a renegotiation. “My life expectancy is 15 more years. At this rate, you’re not going to get very much…’ Their response was, ‘So?'”
By Matt Taibbi and cross-posted from his Substack platform.
Whether it’s CNBC telling us what issues mattered to the young in the presidential election, or Yahoo! Finance telling us the big winners in the 2020 election were “young people and student voters,” or Forbes telling us “young people with student loan debt have a harder time reaching financial milestones,” the student loan controversy is almost universally presented as a “youth” issue.
This is the first of many deceptions baked into coverage of one of the more misunderstood and misreported issues of our time. Student loans matter to older people, too. In fact, that’s the problem. They matter far too much, to too many older people.
“People that are 45 years and older, that’s where the student loan problem is a real issue,” says “Chris,” who took out his first loan in 1981. “Because those are the people that normally would have the highest balances.”
Now 59, Chris asks to tell his story under a pseudonym, to protect the service industry career he’s built in part with the hope of someday escaping his student debt.
“In the realm I’m in now, I don’t really advertise the fact that I owe $236,000,” he sighs.
It’s often argued that forgiving student debt would unfairly punish other groups, particularly those who “did the right thing” and paid off their loans. In truth, political changes have already punished plenty of student loan holders. Chris is a prime example.
He grew up in the Midwest, and began studying philosophy and political science at Southwest Missouri State (now called Missouri State) in 1980. He began paying for his undergrad studies upfront, a decision that would have fateful consequences. He entered school just as Americans were electing Ronald Reagan, who wanted to dramatically re-order federal spending priorities. Among his first acts: raising the interest rates for some federally-guaranteed student loans from 7% to 9%.
“What’s really ironic,” Chris says, “is that if I hadn’t paid cash the first year and a half that I was in college, my loans would have gotten locked in at a much lower rate.”
Paying the Reagan rate instead of the pre-Reagan rate was Chris’s first political misfortune. The second kicked in years later, in the mid-eighties, by which time he’d transferred to the University of Missouri-Columbia, graduated with a B.A., entered and completed a grad program there, and moved on to Joe Biden’s Alma Mater at Syracuse law. He left graduate school owing $14,000, and left law school with a total balance of $79,000.
He thought he’d be graduating with a law degree, and expected to be able to make his payments. Part of his calculation involved the fact that student loan interest was once tax-deductible, much like mortgage interest. But the Tax Reform Act of 1986 began a see-sawing journey for the student loan deduction, essentially eliminating it as a personal deduction for a time.
“I looked at education as a capital expenditure,” Chris says. “Part of my strategy was, is that the interest would always be tax-deductible. So that would at least give me a little bit of a [cushion] in making my payments, because, I would have that tax deduction.”
After they changed the law, “It was like, ‘Wow, this is going to be difficult, this is going to be interesting.’”
The loan system we have now is predicated on a few key assumptions, all unrealistic. One is that people graduating with higher education degrees will be immediately employable in their chosen fields. Even with the sort of professional credential that once meant nearly guaranteed income in America, like a law degree, this is no longer true. Job markets tighten, economies hit recessions or worse (in the years after the 2008 financial crisis, for instance, the number of law school grads still looking for jobs a year after graduation nearly tripled, from 4.1% to 11.2%), and technological or cultural changes can lower the value of degree…