By John McDonald
Excessive debt is among the biggest entrapments in which to be caught. Day after day and sleepless night after a sleepless night, Americans facing a disproportionately – and dangerously – high debt burden live in a financial cage of their own making, sometimes motivated by the highest of ideals (like starting a new business or getting an education) and sometimes motivated by the high-consumption lifestyle that has become the norm in the land of the free and the home of the brave.
Consider the pervasive issue of student debt, for example. The case for pursuing higher education is a persuasive one. The U.S. Census Bureau tells us that those with a four-year college degree stand to have lifetime earnings about $1 million more than those with only a high school diploma.
The differential jumps by an additional $400,000 over a lifetime for those who receive a graduate degree.
But as always, the devil is in the details. That oft-cited statistic from the U.S. Census Bureau is agnostic of two critical issues: The amount of debt being carried by the student and the degree received by the student.
It turns out that, in some cases, the debt associated with a college degree creates a financial vacuum that eliminates the financial benefit of the degree and leaves the student with a lifetime of debt.
Consider, for example, the unfortunate case of students who receive an arts degree from Kentucky’s Murray State University. Whereas the typical holder of a four-year degree will earn $1 million more over a lifetime than someone with only a high school diploma, a person with an arts degree from Murray State will actually earn $147,000 less than the typical high school graduate over the course of twenty years after the cost of their debt is taken into consideration.
Clearly, the negative impact of student loan debt can be more powerful than the positive impact of the education that debt funded.
It’s not just student loan debt. Many demographic segments within America – particularly millennials – are obsessed with living beyond their means, as their exposure to credit card debt grows regularly.
Among millennials, student loan debt gets practically all of the attention in the press, but the harsh reality is that, according to a survey by CompareCards, only 36% of millennials have student debt, but over 63% have credit card debt.
The examples go on and on among practically every demographic and cultural group within the United States.
In this season of Presidential politics, liberal politicians routinely make caricatures of themselves by racing to see who can throw the most federal money at the problem of private debt under the guise of “fairness” and “compassion”, but at the end of the day there’s only one answer to the booming crisis of personal debt: old-fashioned personal financial responsibility.