Student Lending Crisis Winner: Olive Garden

In a span of a few years between the mid-70s and early-80s, our family went from upper-middle class to simply put, poor. Growing up in northwest Arkansas, at the edge of the Ozarks and Boston Mountains, we came up as one of the few old-money families in the area – and, as a kid, it was great!

In my pre-teen years, for a number of reasons, it all went away. My brother, sister and I all had to get jobs by the time I was 12 to help pay bills, buy our own coats and those kinds of things. For me, I processed the situation into a motivation to work hard, earn some money and get myself into college.

Going to and graduating from a university, for me, was one of the best/worst decisions I’ve made. It opened doors to internships and eventually one of those internships led to my first job in journalism. The downside of it all was the enormous financial stress it placed on my head for years in trying to land financial aid or get a couple of extra restaurant jobs to cover the costs of that education. At the time, I had the strange opportunity to talk to the university president one-on-one about it. I told him, “The way the system is set up makes future me regret what I’m doing here.” His response, in part, was, “It’s about the experience, Mr. Ogden.”

I have college-age kids of my own now, and we’ve had a lot open discussions surrounding the question: Is it worth going to college?

My kids have, for the most part, dropped out because, as my son put it, “Dad, it’s too f**king expensive for me to not know what I’m doing.”

I feel bad for this generation of middle- and lower-class kids whose choices about the future have been even further constricted by ultra-competitive education requirements to get into the schools I could have attended even as a pretty good student. And the obscene cost of a degree today is disgusting. I know, this isn’t news to you. If I had to do it over again today, I wouldn’t go.

When the middle- and lower-class ask for advice, the response tends to be in the range of “work hard and good things will happen, and here’s your FAFSA paperwork. Good luck.”

When the upper-upper-class point out something is wrong with our university system, it makes national headlines.

J.P. Morgan Chase’s CEO Jamie Dimon has spoken up about this issue. (You know the guy; he just bought acres and acres of land out west to build a new headquarters to hire thousands of people who graduated from college, to help figure out what fintech firms he should invest in).

In his annual letter to shareholders, Dimon, while touting his company’s $111.5 billion in record revenue, sounded his student debt crisis alarm.

“No one can claim that the promise of equal opportunity is being offered to all Americans through our education systems,” Dimon stated. He noted that income inequality has gotten worse as “40% of American workers earn less than $15 an hour, and about 5% of full-time American workers earn the minimum wage or less, which is certainly not a living wage.”

Here’s exactly what else Dimon said in his letter: “Irrational student lending, soaring college costs and the burden of student loans have become a significant issue. The impact of student debt is now affecting mortgage credit and household formation – a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8%. Recent research shows that the burdens of student debt are now starting to affect the economy.”

With those 58 words, if you read the national business news outlets, you’d think that Moses or Mel Brooks himself came down from the mountain with the 15 … 10 … 10 Commandments!

I will give Dimon full credit here; he did write 91 more words on this topic.

“We should have programs to ameliorate the burden of student loans on some former students. We would be well-advised to have more properly designed underwriting standards around the creation of student loans. Direct government lending to students has grown almost 500% over the last 10 years – and it has not all been responsible lending. It would also be helpful for the government to disclose student lending programs as if they were accountable on the same basis as a bank. Addressing these factors would lead to far better, and healthier, student lending.”

I, and many of you as credit union leaders and parents, struggle with this issue of sending kids off to college or not. What are the financial costs, savings, upsides and downsides of what the choice would mean for their future?

Even if your child does go to college and lands a job at J.P. Morgan Chase, here’s what that will get them, according to Dimon’s own letter to shareholders: “We now pay a minimum of $31,000 a year for full time entry-level jobs.” While that statement was positioned as a bragging point, that salary is just short of $15 per hour – before taxes. In Dimon’s own words, that’s not a living wage.

Ten years after the Great Recession (and you could argue starting well before that), has our country basically created a system that benefits Olive Garden’s recruitment team? Get a degree, get a low-paying job and work as their wait staff at night. “Good evening, I’m Shawn and I’ll be taking care of you tonight. I have a degree in hedge fund management. Would you like some unlimited salad and breadsticks?”

I think this is our national emergency. I believe it’s time that credit union executives devote the kind of attention to this problem as they do to any kind of strategic planning. Devote an entire series of industry conferences to this. I obviously don’t have a solution, but I’d be willing to guess a group of CU people could figure it out.

Dimon acknowledged that he believes taxing the wealthy more to help fund infrastructure and education is a good idea. As he stated, “If that happens, the wealthy should remember that if we improve our society and our economy, then they, in effect, are among the main winners.”

Oh good, we’re measuring this problem in winners and losers. This is so broken.

Michael Ogden is editor-in-chief for CU Times. He can be reached at mogden@cutimes.com.