Saving Today's Graduates From Crippling Debt and Ensuring American Prosperity for Years to Come
This post introduces the macroeconomic solution that will fix America’s fractured educational and retirement systems so that our students enter the workforce better prepared and financially secure
Graduating high school is one of the most important milestones in one’s life.
It is a time for celebration, for reflection, and for setting dreams into action.
Yet, with approximately 60% of students taking out loans in order to pay for college, for most it is also the commencement of a life-long debt shackle.
According to NerdWallet, 2024 high school grads are expected to enter the labor force, on average, with $37,000 in college debt.
Because most high schools in America are neglecting to teach even basic financial literacy skills, today’s graduates have no comprehension as to how fast that debt will accrue thanks to one of the oldest and most rudimentary financial concepts called, interest.
Shockingly, even though mankind has been paying interest on loans for over 4,000 years, a startling number of today’s adults are unaware that there is actually a price for borrowing money. According to a recent poll by Beyond Finance, 35% of Americans, across all demographics, confessed to not knowing the term "interest" in a financial context.
Given that the majority of Americans are critically unprepared for retirement, it should come as no surprise that the very same poll also revealed that almost half of the American adult population have no idea what a 401(k) is.
Financial nescience of this magnitude makes it impossible for anyone - especially today’s graduates - to comprehend the integral role that insolvency plays in making personal life decisions. It also prevents them from being able to conceptualize the global repercussions of their aggregate debt and widespread retirement savings shortfalls.
Today’s grads will soon discover that it’s their financial obligations, not their college degree, that will establish their career path; and that it is their debt load, more so than their biological clocks, that will determine when they can start a family - if they can afford to have one at all.
They will also soon realize that it is their collective debt, as opposed to their cumulative votes, that will frame government policy as unsurmountable national debt will always be an impediment to innovation, prosperity, and freedom - regardless of who they elect.
One can only hope that Blackrock will already have funded the construction of enough safe spaces to console today’s impact-activated pupils by the time they figure out that it was their fiscal recklessness that did far more damage to the environment than pollution ever could. For, it was their pervasive indebtedness that diverted funds away from clean energy innovators and into the hands of rapacious creditors.
The reality is that the innovation that fuels human advancement depends on investment from the people, which is created when a person’s income exceeds her expenses. The freedom for citizens to use their surplus capital, to invest in and capitalize on the ingenuity of their fellow citizens, is what enabled America to emerge from a vast farmland into a leading global innovator and the greatest economic superpower in the history of the world. This very basic and proven formula for economic success should have been taught in elementary school.
However, instead of receiving these fundamental building blocks of investment and fiscal management, most of today’s grads squandered their early schooling being mathematically victimized by common core, a national “educational” initiative that deliberately overcomplicates straightforward arithmetic by forcing kids to spend indispensable learning hours wondering why numbers add up, instead of just tallying them.
So that our youth need not waste any more of their precious time over-scrutinizing simple digits in order to grasp the profound repercussions of college debt in today’s stagflationary economy, I’ve crunched the numbers using real math. The same irrefutable math that, despite enabling our forefathers to construct mankind’s most magnificent bridges, tunnels and architecture, is suddenly being canceled for no earthly reason. See: Everything Wrong in the World Today Comes Down to One Single Math Equation.
Without accounting for fees, at a 6% annual interest rate, one’s $37,000 student loan will ultimately cost $49,293 if paid off in 10 years or a staggering $63,619 if paid off in 20 years.
However, with the costs of living now exceeding starting salaries for college graduates, it begs the question whether monthly student loan payments can be made at all.
According to the US Bureau of Labor Statistics (BLS), the median annual wage for bachelor’s degree holders across all fields is currently $60,000. After taxes, this amounts to approximately $3,853 in monthly take home pay.
Unfortunately, $3,853 falls far short of the average monthly expenses for a single individual, under 25 years old, living in the U.S. that the BLS tells us has now reached $4,432.
To make up for the monthly $579 deficit, many newly college grads will resort to credit cards, thereby paying an extra 25% annually just to afford basic necessities. After just one year of post-graduate credit card charging, another $8,685 will have been added to one’s debt pile. After only 4 years, that initial $37,000 debt load will have already doubled.
With college debt far outpacing real wage growth, it becomes more and more unlikely that today’s graduates will ever break free from their debt shackles – let alone build nest eggs.
Particularly with Social Security teetering on the brink of depletion, America cannot afford to support another influx of negligent retirement savers.
To make matters worse, in addition to being financially distressed, today’s college graduates are also wretchedly ill-prepared to enter an interminably technologizing workforce.
Innovation is revolutionizing vocations at such a breakneck pace that it has become virtually impossible for universities to effectively train students for inbound positions. As a result, students are graduating college without having acquired the skills now sought by employers.
Due to inflation, technological advancement, and dare I say, academia greed, a college degree that once cost a few thousand dollars, and would last throughout one’s entire career, now cost 20 times as much while possessing a shelf life of 5 years at best.
And with innovation evolving at accelerating speeds, it won’t be long before that 5-year shelf life shrinks to mere months.
The dire macroeconomic consequences of rapidly depreciating college degrees cannot be overstated. As the value of a diploma wanes, the onus to educate will cumulatively shift from university to employer. Instead of focusing on sales and product development - the departments that drive revenue growth and job creation - businesses will be forced to reallocate more and more resources to bridging the skill gaps that our colleges are failing to fill.
Consumers and retail investors will be the ones who suffer the most from escalating corporate upskilling expenses. These expenditures will either be passed on to consumers - who are already withering under record inflation - in the form of price hikes. Or they will eat into corporate profits causing stock prices to tank and 401(k) values to plummet, effectively turning today’s retirement crisis into another financial meltdown.
As someone who would never trade my college years for all the money in the world, it truly pains me to pen this article pointing out the devolution of America’s university apparatus. For even as the degree becomes worthless, I still believe that the college experience remains invaluable.
Despite it having become a financial albatross, college serves as a significant steppingstone toward self-discovery.
Neatly sandwiched between childhood (when one’s attributes and talents are first revealed) and adulthood (when one’s gifts are able to be monetized), college allows one’s strengths and confidence to blossom before plunging into a dog-eat-dog work culture.
But let’s be honest. Not even the strongest of economies - let alone an already flagging one - can survive with a majority of its labor force having pledged a lifetime of indebtedness to banks and the federal government in exchange for a few short-lived skills and some self-assuredness.
Today’s fragile U.S. economy will never withstand the infiltration of another underskilled and insolvent generation. This is something that policymakers seem to acknowledge as evidenced by their recent attempts to introduce legislation that would coerce retirement saving - albeit through economic erosive business mandates.
Unfortunately, despite being hundreds of pages in length, none of these retirement bills have put forth a viable long-term solution. This is because instead of addressing the actual root of America’s retirement crisis, these makeshift laws accomplish nothing except perhaps enable politicians to buy themselves a few more years in “public service.” Read: America’s New Retirement Bill Raises Many Questions but Offers Few Solutions.
Americans cannot afford any more of these regulatory band-aids. America’s educational failures and retirement ails are not little boo boos that get better with mommy kisses. They are symptoms of the fatal disease, known as Keynesian Economics, that politicians are too scared to confront, let alone cure.
Keynesian Economics is a failed macroeconomic theory that has put modern nations in peril with its gross misconception that personal savings and fiscal responsibility are detrimental to an economy - all based on the archaic assumption that saving and spending are diametrically opposed.
This core principle of Keynesian Economics is premised on a 300 year-old theory called, the “paradox of thrift” which suggests that if individuals collectively increase their savings then aggregate demand will fall - ultimately resulting in decreased consumption, saving, earnings and economic growth.
Anyone who has been following fintech recognizes that there are countless examples of ways in which modern innovation has invalidated the “paradox of thrift” hypothesis. In fact, multiple well-established fintech use cases have proven that saving and spending can indeed function concurrently, thereby discrediting this central tenet of Keynesian Economics.
For the great American experiment to prevail, it will require the seamless transition to a technologically conducive and sustainable macroeconomic solution. One that will ensure workforce readiness as well as ample retirement balances for the masses - without sacrificing higher learning or the personal consumption necessary to fuel economic growth.
Fortunately, this macroeconomic panacea will be an imminent reality.
Keynesian Economics destroyed the American dream. P2E Economics will restore it.
P2E Economics (short for Participate-2-Earn) is a modern-day macroeconomic solution that, by leveraging blockchain and fintech innovation, will bridge national skill gaps and deliver GDP expansion while simultaneously ensuring that all Americans retire comfortably - and without government assistance or cost-prohibitive employer mandates.
Blockchain, for example, has introduced educational solutions that make incentivized learning a reality. Through P2P (Professional-2-Pupil) and L2E (Learn-2-Earn programs), students can reap real financial rewards as they improve their financial literacy skills and receive training on the latest technological advancements directly from innovators and financial experts. High Schools and Universities can easily integrate with these P2P/L2E programs in order to provide their students with bleeding-edge, monetizable courses that will ensure students receive the latest digital skills as well as the funds needed to help offset college costs.
Furthermore, fintech savings apps with roundup features, like Worthy, make certain that some of the money used for college tuition and general cost of living expenses can accumulate in savings-style accounts that earn attractive annual returns that outpace inflation.
Most significantly, at the heart of P2E Economics is a groundbreaking consumption-based retirement framework called, the REdefined Contribution Retirement System, that ensures policymakers will be able to swiftly, easily and inexpensively resolve all of America’s retirement problems without ever having to raise the retirement age, increase payroll taxes, cut promised retirement benefits, or even disrupt existing workplace plans.
P2E Economics will make certain that all of America’s future graduates enter the ever-evolving workforce appropriately skilled and with capital reserves instead of debt. The REdefined Contribution Retirement System will ensure that our graduates continue to amass wealth throughout their lifetimes - and without their collective savings triggering an illusive “paradox of thrift” or causing what Keynesian’s refer to as “economic leakage.”
We can, and will, resolve all of America’s educational and retirement challenges - so long as we don’t use the same flawed macroeconomic doctrine that created them.