Graduation 2013: Massive Student Loan Debt Stifles Innovation and Creativity


We are in the midst of graduation season, which, along with much pomp and circumstance, carries a message of “finding your passion” and “following your dreams.” But with a total of $1 trillion in student-loan debt crushing the economic prospects of millennials, many dreams are quickly turning into horrifying nightmares.

This $1 trillion figure reflects a near-quadrupling of student loan debt since 2003, fast outpacing rising inflation. In fact, the total amount of student-loan debt now exceeds the total amount of auto and credit-card debt. Unlike credit card and other forms of debt, however, even declaring bankruptcy won’t erase student-loan debt.

This reality of skyrocketing student-loan debt for many college students and recent graduates raises a very legitimate question: What for?

With many countries, such as Finland and Germany, providing virtually free education (including post-secondary education), one has to question the economic rationale, as Noam Chomsky recently did, for the rapidly increasing cost of higher education. And in a true testament to how higher education loans can shatter hopes and dreams, almost 60% of the total student-loan debt in the country is shouldered on the backs of households with a net worth of less than $8,500. This unequal distribution of debt constrains the degree to which education can truly break the cycle of poverty.

What results is the transformation of dreaming into a luxury, and risk-taking into a privilege. According to a recent report by the Consumer Finance Protection Bureau, this can stifle the formation of new business and, by extension, economic growth. The capital that young entrepreneurs could use to invest in their businesses must be allocated to seemingly never-ending student loan monthly payments. 

Entrepreneurship isn’t the only thing stifled by massive student debt. Diminished risk-taking means that less lucrative professions are less frequently pursued, because they, too, are deemed risky. Being a schoolteacher, public defender, community organizer, or poet can simply be unaffordable in the face of mounting debt from education loans. Instead of evaluating the fulfillment such paths might bring, or the important social role that they fill, one is forced to do as a recent Onion article satirized: “Find the thing that you’re most passionate about, then do it on nights and weekends for the rest of your life”.

Perhaps most worryingly, all of this contributes to a growing culture of anti-intellectualism in our universities and education system. With such massive debt looming over many millennials’ heads, the purpose of a university degree realistically needs to be that of returning one’s investment. This means that there are right and wrong things to study, and that education ceases to exist for education’s sake. As William Deresiewicz said , “Our universities have forgotten that they exist to make minds, not careers.”

Things can, and likely will, get worse without intervention. The interest rate of some federal loans will double to 6.8% on July 1 if Congress doesn’t extend the current rate. As these include subsidized Stafford loans, low-income students will again shoulder this burden. A number of private initiatives and policy changes will need to stem the rising tide of student-loan debt, before former hopes and dreams result in sinking feelings.