To many Americans, a college education is at the heart of the American dream.
The idea is simple: get a good education, earn a good living, and provide an even better life for your kids.
Things haven’t gone as planned for many Millennials and now Gen Z. The dream has become a student loan nightmare. Instead of new opportunities, many borrowers now face crippling debt and financial hardship.
The new economics of higher education represents a significant setback to the American middle-class. These changes have also provided a significant boost to wealthy Americans.
How Most Wealthy People Benefit from the Student Loans of Others
The idea that most wealthy people somehow benefit from others’ student loan hardships might initially sound absurd. If they are not directly profiting off the interest or generating revenue from the college, where is the benefit?
The reality is that not having student loans is a massive advantage that impacts non-borrowers in many profound ways.
As the price of college has spiraled out of control, students have increasingly had to be selective about the school they attend.
Students who depend upon student loans to pay for school often have to decide between a huge financial commitment to attend a highly regarded school or spending less money to attend a less prestigious institution.
The result is that many students opt for the financially sensible route. However, this choice has many consequences. These students don’t have access to the top minds in the field. The degree they receive has less value in the job marketplace.
While some top schools have made efforts to increase affordability and access, the problem remains. We are not sending our best minds to our best schools. Instead, we are giving children of privilege a big advantage.
At its best, the unpaid internship is a valuable opportunity for young workers to gain on-the-job experience. Eventually, this experience leads to excellent job opportunities for many former interns. As a result, many internships are highly competitive.
For many student loan borrowers, an internship isn’t feasible. If you are running up a substantial student loan tab, the idea of working for free doesn’t make sense. Rent still needs to get paid. You still need to eat.
For the privileged, an unpaid internship provides valuable real-world experience. It is a “foot in the door” to many different organizations, and it is an excellent resume builder.
As a result, the wealthy can benefit from internships, while everyone else has to make a considerable sacrifice or miss out.
Starting a Business
A reporter once asked Bill Gates about the competition that most concerned him. Rather than responding with Apple or Google as the reporter expected, Gates famously responded with, “I worry about two guys in a garage.”
As Americans, we tend to romance the next big idea coming from somebody’s garage. We celebrate small businesses and the entrepreneurs who create them.
Student debt makes it a huge challenge to start a business.
If you have over $100,000 in student loans, you can’t afford to spend two years in your garage creating the next great tech company. Instead, you need to take a job working for the tech company that pays the most.
This harsh reality benefits the wealthy in many different ways. Shareholders of already successful companies continue to attract the best minds. Business owners have less competition, and creating a business becomes an option reserved for the privileged.
Finding Meaningful Work
Noticing a pattern yet?
Student loans close doors. The more student debt you have, the less meaningful choice you have in your financial decisions.
However, the burden of debt goes beyond dollars and cents. Some jobs are less lucrative but provide far more meaningful work for the employees. Programs like PSLF help some borrowers find work they are passionate about, but PSLF is an imperfect fix to a significant problem.
The students who are privileged to graduate without any debt can choose a meaningful vocation. They don’t have to take the highest paying job or the best financial opportunity. Instead, they can find the satisfaction that comes from doing work you care about.
Separating the Haves from the Have-Nots
The student loan crisis provides advantages for the wealthy that go far beyond early career decisions and opportunities.
Student debt helps reinforce the line between the haves and the have-nots. If you don’t have student debt, when you enter the workforce, you can immediately start saving money for retirement.
Student loan borrowers need to carefully balance student debt and saving for the future.
The inability to build wealth becomes a multi-generational problem. If you are still paying off your college education, saving and paying for your child’s education becomes more challenging. The haves can pass wealth on to the next generation while the have-nots are stuck in a cycle of student debt and financial struggles.
Ending the Student Loan Benefits for the Wealthy
We need to make college more affordable. We need to reduce the burden of student debt.
Until we take meaningful steps to address these issues, the wealthy will have yet another huge advantage over everyone else.