Welcome to Finance
The ongoing improvement of the human condition, brought about in part by development in financial substructures, has led to a robust market for education. The previously coveted luxury has been financially democratized, making it available to more people than ever before. In modern times this is evident by an increasing percentage of Americans taking advantage of the opportunity provided by student loan financing to pursue higher education. These student loans have come to serve as our first real introduction to finance.
I had at least $10,000 in student loans before I was finally approved for my first credit card. Before university you may have experience with a checking account, savings account, and if you’re lucky a small car loan. But all of these things are trivial in the broader context of wealth, especially for those who are experiencing them at a high school level. Then you get accepted into a university, e-sign some pdfs, pack your bags, and ship off on a track that could lead to hundreds of thousands in indebtedness.
The Paradigm of Student Loan Politics
I distinctly remember sitting in my dorm room, as a freshman in college, wondering how I was ever going to pay off my student loans after graduation, on top of dealing with all of the typical expenses of life. I’m sure I was not unique in that regard. However, somewhere along the line, the personal question of how to handle my student loans that I faced at university, was co-opted by the American political system. As such, the paradigm that shapes modern conversation on the topic was defined.
The debate focuses on:
- Is the cost of university too high?
- Is it still possible to pay for university while working your way through school?
- Are students squandering their time and capital instead of working toward paying off their debts?
- Are the student loan terms “predatory”?
- Should you be able to default on student loans?
- Has student loan indebtedness reached a tipping point?
- Should the loans be forgiven?
- Is now the time to do so?
- Is it fair to ask taxpayers, who may or may not have had the opportunity to go to university, to pay for the collective burden of student loans?
- If their graduates are unable to pay for the debt of their education, are universities failing in their societal responsibility?
The deeper the discussion goes, the more theoretical it becomes, and the more the individual, the student, is forgotten.
Weaponizing the Student
The drums of political discussion make their way to campus and students are forced to re-evaluate their position. Will they reap the rewards they were expecting by going to university? Are they on a path to meaningful employment? Will their degree actually give them the upper hand in the job market come graduation? Are they confident in the “value” of their degree?
Elementary through high school, education is a central component of one’s life, the very framework of one’s being, providing quantifiable metrics of your commitment to your future. Success in this realm acts as evidence that you take your life seriously and can handle responsibility. Then you make the bold decision to pursue education at a degree greater than the state-subsidized minimum and add a layer of sophistication to your balance sheet. On the asset side, you have increased engagement with your chosen specialty/major as measured by good grades and eventually a degree. On the liabilities side, you have an increasing loan balance measured in real dollars. The education that was so prized in your youth now has a glaring personal financial cost and, due to the politics of the situation, many begin to see you as the fool for bearing it.
Unemployed and racking up debt, students are quickly disenfranchised from financial systems. You wake up one day and realize that you have made your first real financial decision. Those already financially marginalized because of their inherited economic status, university major, or personal spending habits may be predisposed to greet this newfound agency with a crisis of confidence. This personal crisis, and the passion it creates, is the bread and butter of political radicalization.
Enter perverse politicians that act as demagogues, exploiting the financial insecurity of the masses to garner public favor and political power. These neerdowells prey on students in their time of financial weakness, exacerbating their feelings of helplessness, telling them that they are destined to financial serfdom and that their only hope is political action, if not outright violence.
A Fork In the Road
Loans originally meant to act as a writ of passage, a transference of responsibility from the state to the individual that triggers a new perspective on a student’s financial agency, are now acting as a political precursor.
Students reach a fork in the road where they have two options:
- Financial Individualism, where the student accepts the responsibility of their debt situation and looks for a solution OR
- Financial Rebellion, where students reject financial structures as a whole, giving a finger to “the man”, and treating their student loans with protest
This decision acts as a part of a much larger self-sorting mechanism. Those that succumb to the indolent and puerile temptations of Financial Rebellion are adopting an identity with consequences far greater than their student loans. Fundamentally, the Financial Rebel’s identity revolves around a disdain for financial systems. It is not simply a perspective in debate of a singular issue, it is a modus operandi for viewing the world. The decision cascades and acts as a handicap for them.
The Consequences
The virus of Financial Rebellion perpetuates a society of “haves” and “have nots” by subverting the financial IQ and performance of its host. A Financial Rebel does not save for the future, for the future will be divinely delivered, or is otherwise unlivable. A Financial Rebel does not invest his money, for doing so perpetuates “predatory” financial systems. A Financial Rebel does not start a business, for a successful business requires working with financial structures. A Financial Rebel does not desire financial success for financial success undermines his identity. So where the Financial Individualists save, invest, dream, and build a future of financial abundance, the Financial Rebel has barred himself from participation.
A lack of participation guarantees a lack of results. Anyone of achievement knows that success is all about putting yourself in a position to receive it. Where the Financial Individualists take risks they are rewarded. They set aside a portion of their income for savings that can be lifesaving on a rainy day, they get lucky investing in multibaggers in the stock market, they take the leap and start the business, and they look to the future with pride and optimism.
The divergence of results is staggering. Those who embrace the financial system end up leading it, and those who reject it, end up serving it. An ironic outcome, given that our Financial Rebels adopted their identity in part due to demagogues that were “rebelling” against said financial outcomes. So we are left with a self-fulfilling prophecy where these “politicians” are undermining their own supporters and helping to engineer a financial dystopia.
The Truth of Student Loans
As mentioned previously, student loans have become our first real introduction to finance, but they are only an introduction. The “big boy pants” are on, you’re expected to go somewhere with them. Total student loan indebtedness is typically in the tens of thousands – low hundred thousand dollar range and to a student this feels like a lot of money. It would be difficult to fit it in your wallet or spend it at the store, but this is a very one-dimensional view of money. Our students need to think bigger.
With an understanding of finance, the paradigm switches from what you can buy with money, to what you can do with it. You don’t look at money as something for “spending” (buying material junk that you may or may not need), you view money as a tool for helping deliver that which you are actually trying to accomplish. And you view debt as the cost of receiving that which you can not attain alone.
Real estate prices in most US cities absolutely dwarf student loan balances. If you want to buy a home, and can’t do so alone, you need to get a loan. The 30 year mortgage is a much greater balance and commitment than a 4 year degree. The home is a fundamental, cultural purchase for the American family, acting as a signifier of the middle class. We need to aim up, looking beyond the student loans so as to see the mortgage. Likewise, a little bit of money can go a long way in starting your own business. But building a successful business is an even greater commitment than home ownership. Employers bear a financial burden for themselves, their business (which has ongoing expenditure and recurring loan commitments), and their employees (as determined by the economic contract of their employment). We need to aim up, looking past the student loans so we can see the business.
The Larger Issue
The most wealthy people in the US tend not to own starter homes or small businesses, they operate on the highest end of financial sophistication. This level of success is most differentiated by teamwork, it’s not just you managing things anymore, there is an army of employees and advisors working to manage that which you have built. There are levels to the money game and most Americans are operating on the lower end of the spectrum (as viewed with a national not global aperture). Typically people view student loans in a negative light. But by adding a degree of sophistication to the average American’s balance sheet, they are actually being brought into the big leagues. The symptom that is Financial Rebellion is evidence of a culture shock.
I think on average, Americans still have a dream of becoming wealthy, they are just struggling to understand what wealth is. Rap songs, Instagram, and Hollywood paint a picture of what financial achievement looks like on a fantastical, primal level. People think they want private jets, yachts, and mansions. But when it comes to bearing the real costs associated with a higher level of operating, we’re seeing a cultural rejection.
From a certain point of view, it is only natural for a fundamentally wealthy populace, who is learning/taught to disdain wealth, to self-sabotage. If this self-sabotage continues to develop as a cultural norm, I think we are going to see a long term divorce of the American identity from financial success and a regression to a simpler way of life. Said regression occurring hand in hand with economic stagnation or decline, and ultimately capitulation to a competitor superpower.
Sources
Primary Image Credit: “ISC Orientation 1st Meeting Fall 2011” by Jirka Matousek, CC BY 2.0
