The day I paid off my undergraduate student loans felt like a momentous inflection point.
I had just sold my first apartment, which I'd bought in Dupont Circle in 2000 on pretty much the lowest possible income you could make and buy a place in Washington, D.C., in what turned out to be the waning days of the era when you could afford to buy tiny apartments in Dupont Circle on such salaries. Three years of piecemeal renovations later, I sold it for enough that that I was able to turn around after settlement and write the largest check I've ever written, then or since, to the U.S. Department of Education, for the full amount I owed.
Rousseau called money the instrument of liberty, but the converse is also true. Debt is the enemy of individual freedom. For the first time in my adult life I was debt-free. But what it felt like was more like this: For the first time in my adult life I was free.
The experience taught me several things:
- The real American dream is not buying your first home, it is selling your first home at a profit. (I'm only half joking.)
- What people with major student loans need most is exactly the thing they have always lacked, and why they have such loans to begin with. They need capital, or, barring that, a means of reducing the principal on their debt, such as through one of the loan-forgiveness programs the federal government runs for people who do valuable and important work in under-served communities.
- It is almost impossible to get rid of major debt on the installment plan in any kind of timely fashion unless you make far more money than many people -- and especially those with Big Debt -- wind up earning during their first decade after graduation. Despite Pell grants and work study and summer jobs and an extremely generous discount from my university, I graduated with about the same debt as the average American college graduate today (more, actually, if you run the number through the inflation calculator), then found myself unable to put much of a dent in the sum while running through journalism's notoriously low-paying starting-salary positions.
- The government routinely uses the housing market to achieve broader social-policy goals, and it can be a major factor in transforming aspects of people's lives that extend far beyond where they live and in what kind of square footage. Housing policy can be used to transform communities and help individuals build wealth at the same time. Back in 2000, D.C. was all-in on the still-pretty-novel first-time-homebuyer tax credit to encourage people to return to the underpopulated city and help shore up its tax base. That helped encourage people like me to buy. People like me buying in Washington in large numbers changed the city, but owning real property also changed my life in all sorts of ways I was not able to anticipate.
I bring all this up because on Thursday and Friday, President Obama will take his summer policy speech-making tour to Binghamton University, the State University of New York, in Vestal, N.Y., and Lackawanna College in Scranton, Penn., for a town hall and remarks focusing on higher-education policy. "We have to fundamentally rethink how higher education is paid for in this country," the White House announced in previewing the speech.
So here's one idea. Tie together college debt reduction and housing in a way that's potentially liberating to individuals and beneficial to the recovery of distressed communities at the same time to a create a virtuous cycle like the one I accidentally stepped into in Washington.
Cities like Detroit, Cleveland, and Gary, Indiana, need people. Young people, college-educated people, people with an entrepreneurial spirit who might be willing to put down roots and pay local taxes and taken on renovation projects and bring new views and businesses and opportunities to distressed, underpopulated communities.
Debt-burdened recent college graduates, for their part, need cheap housing and to pay off their student loans. They need to live in a place they can afford, and they need some means of reducing the principal on their debt in a timely fashion so they can get on with their lives. Even the existing program that allows people to pay no more than 10 percent of their income on federal student loan debt isn't enough, because as helpful that may be to those in the program, it does nothing about the real problem -- enormous underlying principal balances, thanks to the massive ramp-up in college costs -- for 20 years.
Maybe it's time to try to yoke these two problems together and allow for partial loan forgiveness for people who commit to living in distressed communities for a set period of time. The rents in Detroit couldn't be cheaper, nor could houses, should anyone want to lay down deeper roots. Think of it as something akin to Washington's first-time-homebuyer tax credit, but available to renters, too, and accomplished through educational-debt reduction rather than the tax code.