A Culture of Debt

We seniors find ourselves, to quote Churchill, at the “end of the beginning” — a transient junction in life most observable here at the Ithaca airport, where students in suits shuttle to New York each week to plan the “beginning of the end.” Though the worlds they’re leaving and entering are dauntingly different, they’re increasingly marked by a similar phenomenon: a culture of debt.

If I were such a student in a suit (I prefer pajamas), I wouldn’t be feeling very optimistic at the moment. As the result of backing mortgage-lending companies’ dubious loans to homeowners with low levels of credit, the nation’s largest banks are facing serious write offs and having to cut jobs in their investment banking sectors.

The major banks have written down over $40 billion in loans so far this year; last month, Bank of America announced the elimination of 3,000 jobs; the CEOs of both Merrill Lynch and Citigroup were forced to step down in recent days; earnings at Bear Stearns fell 10 percent in the bank’s first loss in two years and Goldman Sachs reported its lowest gain in three quarters, at 1 percent, according to USA Today.

The financial downturn has not escaped Ithaca, where students and administrators reported a poor season in recruitment for finance jobs.

“Hiring is very poor this year,” Prof. Charles Chang, finance, told The Sun. “There are less than half the offers going up than last year. The amount of callbacks is lower — last year maybe 8 out of 10 interns at a company would get hired. This year it will be more like 4 out of 10,” he said.

With as many as 2 million foreclosures on homes estimated by year’s end and some economists predicting an impending recession, one wonders how and why so much debt has accumulated.

It might not be obvious here in Ithaca, which, like many college towns across the country, has largely escaped the subprime loan crisis.

“Most home loans in Ithaca are done by local banks,” Prof. Ronald G. Ehrenberg, economics, noted, most of which offer only prime loans to a population largely composed of relatively well-off academics and students. Driving through downtown Ithaca, you don’t see the “foreclosure” signs tacked in front of nearly as many houses as you might in Valley, Ariz., where the number of homeowners losing their properties has shot up 566 percent this year, according to The Arizona Republic.

But beneath the surface, there’s plenty of debt in Ithaca.

It starts with the price tag of a Cornell education, which likely inspires the most debt in the Ivy League. According to a survey in The New York Times published in April, Cornell’s average financial aid packages are well below its peers: for 2005, our grants were on average $21,000, compared to Harvard’s $30,200 and Penn’s $27,300, and more than any other Ivy, we give aid in the form of loans and work study instead of unrecompensed grants.

These fiduciary debts are compounded by growing intellectual deficits at the university level, many of which I’ve expanded on in previous columns (the increasing commercialization of the university, its lack of a core curriculum and impending faculty retirements to name a few).

More and more, it seems, the University plays the role of obsequious middleman between ambitious but intellectually incurious students and carrot-waving recruiters.

Recently, on-campus recruiters criticized Cornell students for what they considered poor interviewing skills. Whereas University administrators might have pointed out that we’d rather our students know how to construct a Boeing jet than be able to guesstimate how many ping pong balls one can store in its fuselage, they instead pandered to their critics, and promised to increase production at our newly-minted finance factory.

“For the future, we are checking with recruiters of our students to determine if there is any further technical material we can provide to our students,” Applied Economics and Management department chairman Prof. William Lesser told The Sun.

“Cornell students have a little harder time articulating why they are the right student for the position,” Rebecca Sparrow, director of Cornell Career Services, lamented. “That may be just a lack of practice interviewing, it may be lack of doing research on an employer — that there really is no excuse for.”

What of the possibility that the Cornell student — let alone any Ivy League graduate — isn’t the right student for the position? Might we take pride in not visualizing ourselves in front of an Excel spreadsheet for 100 hours a week?

And here the culture of debt comes full circle.

It’s 1999, and you’re a bright-eyed Cornell senior — you’ve always wanted to be a teacher. Come graduation, and you realize that you’re in the hole to Uncle Ezra for nearly $80,000, so you head to the Career Services office, because you can’t take an offer at the public school to teach fourth grade with that kind of debt looming over your head. They say, why not take an interview with one of the banks — you could repay your loans in just a year or two.

So you interview, and you get an offer. You take it. You slave through two years as an analyst, and having paid off your student loans, you’re now out of the red; so you stay on at the bank for a few more years.

One day, a client comes in looking to tap into his credit line, estimated at $11.5 billion — he’s with Countrywide, the nation’s biggest mortgage lender. You meet with your boss, and you approve the credit, and then suddenly it’s November of this year, and 2 million people across the country are out of a home, and you’re out of a job ...

Universities are a weather vane for society, and when nearly a quarter of employed graduates at Cornell go into financial services or one-fifth of Harvard men take jobs in investment banking, one wonders whether a wind that originates in Ithaca, Cambridge or Princeton can carry through rows of vacant homes across the country. While we’re still here, let’s at least insist on an education that isn’t, for lack of a better word, subprime.

Rob Fishman is a senior in the College of Arts and Sciences. He can be contacted at rbfishman@cornellsun.com [1]. Agree to Disagree appears Tuesdays.