Imagine if someone offers a Pakistani young person, a loan to buy a car or a credit card, but that young person refuses both credit facilities and asks for a loan to educate himself at a university of his choice.
Well, welcome to America.
This is exactly what is happening in America since 2006. Since then, more and more American young people are refusing loans for cars or credit cards and instead opting for educational loans. So much so that in 2006, the total student loan burden was around $448 billion. Credit card loan was around $760 billion and car loans summed up at $876 billion.
Fast forward 13 years from 2006 to 2019. The total student loan is above $1.5 trillion dollars. Yes. You read it correctly. It is fifteen hundred billion dollars. More than what America has spent in the war in Afghanistan. More than it has spent in a decade in infrastructure development or any scientific or technological research. More than any individual State’s budget and almost 7% of the entire American debt, $19.8 trillion, the debt it took America to hike up in 300 years, it took its students to add up in 32 years.
So the debate here becomes not about debts, but about the kind of debts that are welcomed. Debts to build roads or wage wars or debt to expand corporate activity or industrialisation or a debt to educate the youth. Of course any sane mind would prefer a dent burden that enables the youth to educate itself and earn to pay back what it borrowed.
I had to take a student loan at Rutgers Univetsity for two semesters. The ease with which my loan was approved by Peoples National Bank in New Brunswick, New Jersey, at that time didn’t surprise me. It surprised me 6 years later when I went to apply for a car loan while working. The difficulty I had to face to get a car loan, albeit an expensive car, as opposed to a student loan of almost half the amount, made me realise that nations that value education make it easy for their youth to educate themselves and facilitate them. They may give them a hard time later on when the same youth applies for loans for their luxurious wishes.
But that is ok. It is perfectly fine. That is the way it should be.
Here in Pakistan, we do not have a concept of student loans. We have banks running to give you credit cards. Car loans at exorbitant rates. But you ask them for a loan to educate yourself, they would look at you like you are asking them to make you the Chairman of their bank.
Roads are good. Building bridges is great. Infrastructure helps. Economic expansion might be good in the absence of borrowed funds. But you be the judge, which country will succeed and sustain that success, the one that builds roads on borrowed funds or the one that lends to its students to educate themselves to earn in the future and add value to the economy.
I know your answer. Or I think i do.
Banks in Pakistan are sitting on piles and piles of cash at least for the few months a year. But they are never lending to any student. Well we need legislation. We need to make it mandatory for banks to lend a certain percentage of their assets to the students. However small the amount maybe in the beginning. It has to begin somewhere.
This government came into power on the slogans of empowering the youth. Nothing can empower them more than education. Higher education. Laptops do not empower the youth. Specially the ones who are already in a university. What about the ones who could not enter a university because of financial problems. They neither get the laptop nor a degree.
Those are the ones we need to take care of. We need to legislate a law forcing the banks to lend to the students. Pay the university directly what the students owe it in fees, if there is trust deficit between the borrower and the lender marred with the fear of the youngster spending the money somewhere else rather than for the education purposes.
Whatever it may be, the modus operandi of handling the process, but the process needs to begin NOW.
By the way, did I tell you that these loans for students are interest free in many cases ?
I thought that would wake you up further.