As the controversial pause on student lending approaches its end, it’s clear that the growing financial burden of higher education rests heavily on the shoulders of the younger generations.
A new book being released this month, “You Will Own Nothing” by Carol Roth, uncovers some startling realities about the financial predicament facing Millennials and Gen Z. While researching for her upcoming book, Roth found intriguing facts about the earnings and wealth of these generations.
Even though Millennials, adjusted for inflation, have a 21% higher median income at age 40 than Boomers and over 10% higher than Gen X’s, they hold significantly less wealth. Roth notes, “When Boomers were roughly the same age as Millennials are now, they owned about 21% of America’s wealth, compared to Millennials’ 5% share today.” The culprit behind this financial disparity might surprise you – it’s the escalating cost of college education.
Taxpayers should not have to pay for others' college debts. But the entire system is a financial scam and the govt is a predatory lender and that needs massive reform.
— Carol Roth (@caroljsroth) July 5, 2023
The cost of higher education and the subsequent student loan debts have mushroomed into an enormous financial scam, with the U.S. government morphing into the largest predatory lender. Young adults, sometimes even minors, sign up for substantial financial commitments that obstruct their ability to create wealth, especially when they can’t generate a significant return on their investment.
The numbers don’t lie: In the first quarter of 2023, around 15.1 million Americans aged 25 to 34 held roughly half a trillion dollars in college loan debt. An additional 14.7 million Americans in the 35-to-49 age group owe $636.2 billion.
These figures reveal a disturbing trend: debt is being pushed onto the younger generation in a manner disconnected from achieving a meaningful return on investment. The government’s nationalization of a significant portion of the college lending business has inflated college costs over the past decades, outpacing the growth in GDP by nearly five times and wage growth by an astonishing eight times.
While colleges are raking in profits, the younger generations are shouldering the costs. This imbalance is hampering their economic freedom and ability to create wealth. This transference of wealth from the young to colleges and universities compromises the youth’s pursuit of generating personal wealth.
Economic prosperity hinges on owning appreciating assets, not accumulating liabilities and debts. Current discussions about the benefits of attending college often emphasize higher earnings. However, if these earnings are overshadowed by high debt loads that take years, even decades, to pay off, the individual’s financial position is weakened, and wealth accumulation is delayed.
Roth suggests that students should be shown their expected return on investment at every step of the loan process based on their major, school, and other factors. Furthermore, she advocates for colleges to either be part of the loan underwriting process, taking on a portion of the loan, or face potential lawsuits if graduates cannot utilize their degrees to improve their professional outcomes.
Finally, Roth proposes that the government should step back from student lending. This move could disrupt the current flawed system.
If we truly aim for economic prosperity for the younger generation, it’s crucial to scrutinize the role of higher education in wealth accumulation.