The Real Student Loan Problem

US News says ONU is "more selective." But with an 81% acceptance rate, "more selective" than whom?

This weekend's New York Times had a story on the crushing debtloads of college students, and predictably, it managed to showcase every single one of the typical predatory loan tropes: the I-didn't-realize-how-much-my-loan-payments-would-be-after-graduating-from-a-4th-tier-private-college liberal arts major; the directionless student who takes six years to graduate; the mediocre student who assumed he/she would be rewarded with a lucrative job for graduating from any college at all, etc. Case in point:

“As an 18-year-old, [Ohio Northern University] sounded like a good fit to me, and the school really sold it,” said Ms. Griffith, a marketing major. “I knew a private school would cost a lot of money. But when I graduate, I’m going to owe like $900 a month. No one told me that.”

Look, bitch, you owe $120,000. You have ten years to repay on a standard repayment plan. That's $12,000 a year for which you're on the hook...BEFORE interest! I know you must not have done well on the quantitative section of the SAT, which is why you're in this situation in the first place, but seriously. There are third graders who can do that math.

Now, leaving aside the question as to whether college is overpriced (it is, because student loans are too easy to obtain), that's not to say that there aren't smart people at Ohio Northern, or that it's always a bad choice. But students seem not to understand the concept of expected value. The valuation on Ohio Northern is pretty appealing if they give you a full ride. But if you're going to need a job at Goldman Sachs to afford your debt burden, you'd better damn well go to a school at which Goldman Sachs recruits.

So I don't have much sympathy for the "I paid $26,266 a year to go to Bob Jones University to major in psychology and now I can't repay my student loans" contingent. That was a stupid decision, and nobody should have given you money to go in the first place. I'm sure a lender would love to deny you based on your piss-poor earning potential, but then they'd violate fair lending laws and then have to pay like a million dollars in punitive damages so why not just give you the money, because maybe your parents will accidentally buy a lost Picasso at a yard sale and then they'll get paid back.

I am troubled by the tacit assumption that if consumers are more informed, they will automatically make better decisions. Some most certainly will. But it's hard for me to believe that a student - no matter how young or unsophisticated - can look at $120,000 loan balance and not realize that that would be an onerous debt burden. I think the real issue is that people uniformly overestimate their own prospects. For example, I thought I would easily crack the top 10% of my law school class through a strict daily regimen of drinking and playing video games. I may have very well finished in the BOTTOM 10% were it not for a couple of people who drank even more than I did.

So, my proposal is that every school should have to report the average salaries of all its students in every major. You'd get a slip of paper in your admissions packet that says: "Our graduates who majored in Psychology in 2012 averaged a starting salary of: $15,000. Sixty percent of them are unemployed. Odds are, you will be too."