The Ethics of Bootstraps

In the past few weeks we’ve been hearing more and more about the deepening crisis regarding student loans and payments that can’t be reduced, discharged through bankruptcy, or even written off on your taxes, and how the estimated $1 trillion is contributing to our nation’s ongoing fiscal crisis. Since this is an election year, people have been lining up to use this as a partisan issue, with people on the right claiming that this is just another example of people feeling entitled (and proclaiming that THEY never took out any loans to fund their education), while people on the left attack the idea of student loans that must be repaid as being anti-education, anti-intellectual, repressive measures used by the ruling classes (or plutocracy, if they think to use the term) to keep people down. As always, I’m going to leave the political and social issues to those better qualified to discuss them, but there’s an obvious business issue regarding whether people should be required to pull themselves up by their bootstraps – and whether that’s even possible anymore…

First off, there’s the issue of how college tuition and related expenses have climbed while the relative value of college degrees has fallen. Minimum wage has risen by a factor of slightly more than twice since I was in school, while tuition for my relatively cheap public university has risen by a factor of more than ten. When considered in the light of the devaluation of the bachelor’s degree, the disappearance of affordable consumer credit and the crashing economy, it seems clear that present conditions are not comparable to those of even one generation ago; suggestions that the undergraduates of 2012 can do things the way those of 1982 (let alone 1952) are at best disingenuous, and at worst, self-serving nonsense. But even if we accept that obtaining a college education is more expensive (and therefore more difficult) than in previous decades, the issue of how much assistance should be made available to students remains unclear…

Consider, for example, the scenario so beloved of right-wing politicians where a student has assumed $100,000 worth of debt in order to a bachelor’s degree for which no career track exists. In previous generations such a debt load (even adjusted for inflation) would not have been required, and the graduate would likely have been able to obtain a suitable (if not ideal) job on the strength of the degree alone. Under present conditions the graduate may well have no realistic hope of ever being able to pay off the loans – leading to crushing poverty, career failure and the aforementioned trillion-dollar drain on our economy. Moreover, it is now relatively simple to determine the expected income of any career track, as well as the number of such jobs currently available. With this information it should be possible for a student to calculate the probability that he or she will be able to manage (and pay back) a student loan, just as they would with any other debt. Or, I suppose, a compassionate lender could do it for him or her…

Now, I don’t want to suggest that everyone who wants to get an education shouldn’t have the opportunity to do that; I’m just pointing out that it isn’t economically possible to provide financial assistance to everyone, just as it would not be possible to extend $100,000 worth of credit for car loans or credit cards to unemployed 20-year-olds with no job prospects either. The difficulty is that some of our most successful people did not have any idea what career they would follow or how their college degree would (or wouldn’t) help them in the future – and we can’t expect loan providers or their personnel to know such things either…

So the question is, do we have an ethical responsibility to provide every potential student with the resources to go to college, knowing that some of them will gain no benefit from doing so and that the continued failure to repay student loans contributes to the destruction of our economy? Or do we have an ethical obligation to our society, our taxpayers, and the employees and stockholders of our financial institutions to require them to make only those loans that have a reasonable chance of being repaid, even though we know that this will deny some students who would otherwise be wildly successful the opportunity to go to college and gain the tools they will need?

It’s worth thinking about…