A few weeks ago, CBC ran a story about parents taking on debt so that their kids didn’t have to. It’s a story worth parsing carefully, because it’s a great example of how economically irrational people can be when it comes to debt.
One family in this story recounts shelling out $200,000 for their three kids to go to university. They even went into debt themselves to do it. But they wanted to do this, apparently, because they wanted their kids to have flexibility and freedom when they graduated. This would allow their kids to take time to work out what they wanted to do, instead of being forced into work quickly.
Let’s leave aside for the moment the question of why anyone would take on debt at commercial rates when your kids could borrow interest-free from a public loan program (though, let’s face it, that’s kind of nuts). If the only thing you’re worried about is making sure your kids are making stress-free career decisions, then why not let the kid borrow the money, and then agree to assume the loan repayment for the first couple of years after graduation? Or let the kid ease into repayment by gradually transferring the burden (25% in the first year, 50% in the second, etc.)? It’s far cheaper, and doesn’t require the student to take on any burden until they’re ready. It should be a slam dunk, no?
The problem, I think, is that transferring money to your kids while they’re in school is socially acceptable in a way that paying for your kids debts is not. It’s not simply a matter of pre-graduation = child, post-graduation = adult, and that gifts to children are more acceptable than gifts to adults; giving large sums of money to your kids still is acceptable even after graduation, as long as it’s attached to certain types of life events (e.g. marriage, buying a house, etc.). Taking on debt, as David Graeber has pointed out, presupposes adulthood, since debts can only be incurred between legal equals. And settling debts, making good on one’s obligations, is intrinsically connected to notions of virtue and honour. Interfering with this – offering to make payments in a child’s stead – is in some ways seen as interfering in a rite of adulthood in a way that simply handing them money prior to graduation is not. Effectively, it’s emasculating.
There are many culturally-rooted views about debt out there, and policy can’t be made to accommodate them all. Equally, though, there’s no reason to assume that, just because government comes up with economically “rational” policies, students and families will react to them in a “rational” way. There’s way too many notions of innocence, duty, sin, and honour tied up with children assuming debt for the first time for that to be possible.