Student loans: What a drag

The Associated Press recently reported that the wealth gap between the young and old in America is the widest on record. A typical household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone younger than 35, the AP reported.

I'm at the oldest end of the millennial generation, and despite the AP's troubling statistic, I'm optimistic about my generation's future. Our economy is going to experience an incredible amount of creative destruction (old things replaced by superior new things) and scientific advancement over the next 10 to 20 years, and my generation is poised to take over.

In the short run, however, the amount of debt — particularly in student loans — that my generation is taking on is going to be a serious drag on our economy. Our society's current framework, which encourages these loans to pay for more and more education, is at the root of the problem.

I started college in 2001, when the economy was still in relatively good shape. I received enough merit scholarships that I didn't have to take on student loans. But I watched a lot of my friends make a D in first-semester calculus, lose their scholarships and take on loans to finish college. I also watched a lot of friends say, in 2008, "There aren't any jobs, so I'm going to graduate school."

And I have a lot of friends finishing graduate or law or medical school with a mortgage's worth of student-loan debt. I'm sure most will do well over the course of their careers, but starting out with that much debt hardly seems like a path to prosperity.

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The buzzword underlying any discussion of debt is responsibility. A significant faction of the Occupy Wall Street movement is comprised of millennials saddled with massive student-loan debts. I've heard many an aging baby boomer or op-ed columnist or tea partier dismiss the protesters as lazy kids throwing a tantrum rather than growing up and taking responsibility for their lives.

Of course, I believe people have a moral duty to pay their debts and to honor their contracts, and I don't want to let my generation off the hook. But I would urge those sniping baby boomers to keep in mind the context for why my generation is the way it is.

By and large, mine was a coddled generation. We were told constantly that we all were above average and could be anything we wanted when we grew up —scientist, artist, astronaut. The meat-and-potato jobs that most of us will spend our lives doing weren't in the cards for us. We were special.

To reinforce this concept, we were padded with helmets and kneepads. We lathered up with antibacterial soap. We were told not to talk to strangers or stray out of the neighborhood. In some cases, we literally were put on leashes. Hence the term "helicopter parenting."

Finally, we arguably had more prosperous childhoods than anyone in the history of human civilization. Sure, there was menace out there — bacteria, skinned knees, strangers with candy — but we were safe.

We were, by and large, well fed, content and docile. We went where we were told. We did what we were told. And at eighteen, we applied for college like we were told. None of this excuses us from our responsibility, but it is part of the framework for the current economic drag on the millennials.

(And just as I would encourage baby boomers to keep in mind how they raised us, I would encourage millennials to rebel a little, to break a few rules, to do something without permission. That's what adulthood is about: taking responsibility by giving yourself permission.)

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The other critical piece of the framework is the nature of student loans. In nearly any other venture — from buying a house to expanding a business — money is dirt-cheap. The Federal Reserve's short-term interest rate has been hovering near zero for years now.

For graduate students, however, such as my law- and medical-school friends, rates on loans are stuck around 7 percent. Worse, these loans are the most permanent kind of debt. In any other venture, a person (such as Donald Trump), a business (such as US Airways) or a city (such as Harrisburg, Pa.) can file for bankruptcy and discharge massive debt.

Student loans cannot be discharged, meaning the government is going to collect this money come what may. Many student loans are federal, but even most private loans are backed by the federal government. There is an income-based repayment option, but just like making a minimum payment on a credit card debt, the loan is still there, gathering interest.

I don't want to discount education here, because human capital is what drives the economy. I don't want to scare taxpayers with the threat of a looming wave of student-loan defaults (although maybe that's a concern). And I don't want to scare millennials with the threat of government leg-breakers garnishing their wages and sending them into a modern-day indentured servitude (although maybe that too is a concern).

What I do want to do is call attention to the fact that our federal government is throwing out buckets and buckets of money to everyone — banks, auto manufacturers, green-energy companies, homeowners, small businesses, big businesses, government employees, seniors and students.

All of these groups — except for students — have powerful, deep-pocketed lobbyists who are negotiating great terms for this money.

And now look at the state of the world:

Solyndra is in bankruptcy, but by and large corporations are sitting on a pile of cash and banks are raking in money. Homeowners are still in dire straits, but they have access to nearly rock-bottom interest rates and can write all of that interest off on their taxes. Finally, the first wave of baby boomers, with their 47-to-1 ratio of wealth over the young, are beginning to slurp up their entitlements.

Meanwhile, millennials are paying their loans every month, with no recourse. At least someone is contributing to the government's coffers.