Friday, June 23, 2006

Debt















Today we visited the Missoula Food Bank on our Friday farm fieldtrip. The PEAS Farm grows and donates 15,000 lbs. of food to the Food Bank every summer, and so today we decided to go and check out how that food gets distributed. According to Aaron Brock, one of six full-time staff, there are 120 regular volunteers serving 12,689 clients (2005 figures)--that's one in eight Missoulians who have sought and received food assistance. Aaron explained that there aren't just one or two causes of hunger, but that it can result from a lot of different factors.

Our visit to the Food Bank brought up a lot of thoughts for me, particularly about how we define poverty, and the concept of who is "in need." As I sat listening to Aaron's stats about Food Bank patrons and the causes of hunger, my own financial reality sort of rose up and smacked me in the face.

Being a student these days, I have become reacquainted with a life financed entirely by student loans. Since last September, every meal I have eaten, every bag of groceries I have bought, has come out of a loan disbursed to me in the form of a check which gets deposited as cash into my account. This feels like real money--but comes with the price of 5.5% interest. I wish I could do the math about how much my milk and eggs will actually cost me by the time I have finished paying those loans 20 or 30 years from now. And by then, if I choose to continue living according to what society proposes for someone in my position, I will also have DEBT for cars, property and higher education for my kids!

As we sat at the Food Bank today, I wondered, in fact, what is the difference between the "poverty" we think of as poverty, and the situation that most Americans are living in, which is way beyond their means and up to their ears in DEBT? In actual fact, I have NO money--no cash. But my position in society, within a particular class and with a certain set of opportunities and advantages, situates me in such a way as to present DEBT as a resource at my disposal. Because DEBT is seen as a resource to which I (and many people) have almost unlimite
d access, it is assumed, even expected, that I am supposed to rely on it, even to meet my basic needs. My revelation today was that if I chose not to participate in such DEBT reliance, I would be among those who need to rely on the Food Bank to make ends meet.

I have been fortunate in my life to have the support of loving, middle-class, working parents who have encouraged and helped me to continue my education through college to the graduate level. I am also fortunate to attend a prestigious institution such as Harvard; a fact which, if I chose to pursue the more lucrative opportunites upon graduating, almost guarantees an adequate future livelihood. These two factors, as Josh pointed out, create a "safety net" that separates people like me from those who are truly living in what we call poverty. While I fully acknowledge that there are people who are struggling to survive and fulfill their needs without the privilege and opportunity that I enjoy, the balance sheet will indicate that there is no financial difference between us. The difference between me and what we call poverty is class privilege and expectation, not cash.

I resent the expectation imposed upon me that I should rely on DEBT and my future ability to pay it back in order to fulfill my basic human needs. While my conscience would agree with anyone who argues that the Food Bank should be reserved for those who are in greater need than myself, I am beginning to re-evaluate what that means... Who is actually "in need"? Why are we not assisted by society to fulfill our basic needs without relying on DEBT? Why should we accept the idea that "people like me" shouldn't take free food but should actually pay double for it (when all is said and done and credit card bills are paid)? Somehow "we" think that we are supposed to be financially, materially better off than those living in "poverty"--even when we don't actually have a real dollar to our name! And because of the possibility of future prosperity, the person who has taken an opportunity to pursue higher education has little choice but to go into the serious red now.

23% of students are using credit cards to pay for tuition and fees.

While one might argue that in my case I am relying on DEBT now because I have chosen to be a student (that if I had made another choice, I might actually be working now, with a sufficient income on which I might be able to live and break even) I would wonder if I've really ever had a choice. I was just caught up in the stream of expectations like the rest of us, waking up to the truth of the matter after ten years of playing along. And now I'm not sure I know how to make the choices that would free me from DEBT reliance.

In fact, I've made such bad choices because I was never aware of the real game I was being forced into. If we think about it, we might wonder why high school students are not taught the very basics of money management. Why were we never taught to reflect on our economic choices? Why were we never cautioned against living beyond our resources? Is it not true that with a population heavily relying on debt, and at ease with the convenience of plastic, our economy thrives and grows? If we were all doing our best to live within the constraints of our income, would we not show much more restraint in our purchasing, and would our economy not suffer for our moderation? It is not simply out of neglect that I was never taught about money matters; in fact the country thrives by keeping me ignorant.

Of students surveyed by Smith College, 55% said they had never taken a course about personal finance.

I have $15,000 of debt for my undergrad degree--a diploma, though from a "good" school, that qualified me for nothing in terms of well-paying work. Had I been monitarily motivated and ruthlessly strategic, I might have landed some kind of entry-level professional job after college, and perhaps by now I'd be making a decent salary. But I have always been more motivated by learning and trying new things, developing projects and exploring new places. I wasn't ready to play the game after college. And so what I got was a BA that was good for almost nothing, at a cost of about $110/month (my minimum payment on my student loan). I graduated in '97 and though making the monthly payment, I have not made a dent on the principal balance. So it has cost me $1,310 in interest each year (minus two years in Peace Corps and this past year in grad school). That's $7,860 in interest alone that I have paid in the past ten years for the privilege of that BA degree, which has served me only by qualifying me for graduate school. My advice to any young person now would be to avoid that high school game of getting into the "best" college. Go for the cheapest! Get that BA for the least amount of money, work while you're in school, carry as little DEBT as possible, and get good grades. With a BA and good grades from anywhere you can get into a decent grad program.

I wish I had been smart enough to work my way through college. Even if it had taken me six years to work and earn my tuition, it would have really served me in the long run. By the time I end up paying off that $15,000 DEBT for my undergrad degree, it will likely have cost me over $20,000 in interest. Why didn't anyone explain that to me? Instead, what I remember being told is that "everyone takes student loans--that's just the way it works." It's hard to pay your own way thorugh expensive liberal arts colleges. It was always "my choice" to go there, but I really had no idea what I was signing up for. My choice was based on the societal priority of prestige and privilege; things that attending a fancy college promises to deliver, but which in fact don't amount to much at all.

The average college graduate has more than $2,200 of revolving credit card debt and 20 percent of student credit card holders carry more than $10,000 of revolving debt.

DEBT reliance creates so much anxiety and a sense of futility in our whole society--we find it necessary to accept the mundane, passionless life which comes from work sought out and performed with the sole aim of making money. We work to pay bills. We choose our careers, we build our whole lives around that profession that will situate us in life according to our desired level of material comfort. As my friend Thoreau points out in Walden, we're spending a good third of our entire life's time and energy just to address the debts we have already accumulated by living beyond our means out of ignorance and a sense of class entitlement.

"The cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run. An average house in this neighborhood costs perhaps eight hundred dollars, and to lay up this sum will take from ten to fifteen years of the laborer's life, even if he is not encumbered with a family...so that he must have spent more than half his life commonly before his wigwam will be earned...
When I consider my neighbors, the farmers of Concord, who are at least as well off as the other classes, I find that for the most part they have been toiling twenty, thirty, or forty years, that they may become the real owners of their farms, which commonly they have inherited with encumbrances, or else bought with hired money--and we may regard one third of that toil as the cost of their houses--but commonly they have not paid for them yet...The man who has actually paid for his farm with labor on it is so rare that every neighbor can point to him. I doubt if there are three such men in Concord."
H.D. Thoreau

Similarly, I doubt that there are many who would call themselves middle class in this country who are not severely compromised in such a way. Our system is set up to create heavy reliance on DEBT, to the point that we cannot pursue higher education or afford to buy a car, a house, and even many of our most basic necessities without using credit, which has been made easy and available to almost everyone.
Those who do not have a negative net worth are those who have inherited wealth, or those who have played the game perfectly--mortgaging their entire existence until such point as their education secures them in the very groove they were intended to fill--those young doctors and lawyers who can finally begin to pay back their $300,000 student loans because they are making six figures right after grad school.
We have been so conditioned to seek money that we forget what life is about and we think that so many people choose such careers of their own free will and natural propensity for such work. But I would venture that most choose such careers for the knowledge that they will be able to beat the DEBT reliance before the rest of us. They see such professions as the key to eventual independence--giving perhaps only one third of their lives to the payment of DEBT while the rest of us may never escape it, working our entire lives without breaking even.

No matter what you make, there is a way to live within your means, stay out of debt and save enough for your short- and long-term goals.

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