Freddy Arsenault is a successful actor and a co-founder of the Artists Financial Support Group. AFSG’s mission is to help educate students and professional artists on strategies for managing student debt on an artist’s income. AFSG was founded in 2010 after several alumni of the NYU Graduate Acting Program met in New York. They had all graduated from one of America’s leading training programs. They were all working in the field for which they were trained. And, they were all struggling to make ends meet. They began to realize that they might not be able to afford to be artists, because they had gone to school to be artists. If you are in this position yourself, I highly recommend the book written by another AFSG Founder, Mathew Carlson, “*Repaid: An Artist's Guide to Student Loans & Financial Self-Advocacy.”* It is an excellent resource.
I learned about Mr. Arsenault and AFSG from an article in American Theatre and I applaud the effort to examine this crisis. The article featured the results of a survey of 500 theater artists about student loan debt and the results paint a grim picture.
Do you think you will be able to pay off your student loans?
I assume that the five hundred theater artists polled were extremely talented but this is completely irrelevant. This is not a “let’s give it a shot,” kind of decision. It’s one thing to head to a popular new restaurant, and join the queue knowing you might ultimately get turned away. Sure, you’ll be hangry, but you’ll eat eventually. The theatrical job market is unstable, and highly saturated. David Warshofsky, an assistant professor at the USC School of Dramatic Arts in California states it plainly. “You have to want it beyond rational thinking, [because] it’s not rational. It may be borderline irresponsible.”
Who is ultimately responsible for consequences of irresponsible for decisions made by people thinking irrationally? The people themselves, or the people who saw the behavior and did nothing to stop it? This is not a fanciful question as evidenced by several legal examples. In many jurisdictions an establishment can be held legally responsible for the actions of an intoxicated individual who subsequently causes an accident. The legal principle known as the “duty to act” refers to the obligation to prevent harm. For example, a doctor has a duty to act in the best interest of their patients, and a school has a duty to act to ensure the safety of its students. A bartender can’t simply outline the risks of continued drinking and possible driving, they need to stop it. Perhaps admissions officers need a similarly high standard, especially when student loans are involved.
The 2008 financial crisis stemmed from irrational exuberance on the part of borrowers, and irresponsible business practices on the part of lenders. Long observed standards for lending were relaxed, or even eliminated opening up the housing market to many new buyers. Home ownership is a central theme in the “American Dream,” so it’s not surprising that many unwitting families took the opportunity to jump on board. Why not, everybody else was. The aftermath of the 2008 crisis resulted in a lot of hardship. Millions of Americans lost their homes due to mortgage foreclosures, and by the summer of 2010, the jobless rate had risen to almost ten percent.
Most of the details of this complex story are not germane to our discussion but the role of irresponsible lending is. Traditionally, and again today mortgage lenders evaluate a borrower’s ability to pay, and the value of the property in question. Both hurdle’s must be crossed. Lenders require an independent appraisal and inspection to determine a property’s value and will cap the loan size accordingly. This protects both the lender and the borrower. Think of it like this. The home of your dreams comes up in a hot housing market. Properties are selling quickly and you want to race over and make an offer. You’ve been approved for a $400,000 loan based on your income and make the offer. The bank rolls in and says, sorry, but this property is worth $250,000 and that’s all we will loan you. This is a good thing. The lender is protecting you from your own irrational behavior. If you happened to have $400,000 in cash you could go ahead and buy it. But if that was the case the harm would be minimal, even if it was only worth $200,000 you’d still have a house and no mortgage. You wouldn’t go bankrupt, or loose your job, and if it was the house of your dreams, cool.
The current student debt crisis is being fueled by another dangerous dance between irrational borrowers, and irresponsible lenders. In this case loans backed by the federal government free lenders from fear of default while the dream of a college education pushes borrowers into irrational decisions. Moreover student loans are one of the few debts that cannot be discharged in bankruptcy, making them the most onerous financial burden one can assume. It’s a lot more like dealing with a criminal loan shark, than a boring banker and this needs to change.
Let’s return to David Warshofsky’s statement, “You have to want it beyond rational thinking, [because] it’s not rational. It may be borderline irresponsible.” Now consider the psychosocial forces we discussed in “Making space for decisions.” While there is no rational financial basis to pursue a career in theater I think there are several valid reasons why a person might decide to anyway. They have every right to spend $350,000 on a degree in a field with limited opportunities and sub-standard pay. What’s irresponsible is lending them the money to do it. These loans would stop tomorrow if the federal government stopped backing loans for degrees with such limited value. This would prevent many talented students from being able to pursue these degrees—I’m okay with that. There is simply no justification for enabling a young person to saddle themselves with debt for training in a field that can’t provide them with the compensation required to rid themselves of it.
Thinking of this reminds me of the lyric “I owe my soul to the company store,” from the song "Sixteen Tons" by Merle Travis. The lyric refers to a form of debt peonage prevalent among coal miners in the 19th and early 20th centuries. In this system, miners were often not paid in cash but in scrip, which could only be used at the company store. The prices at these company stores were often inflated, and miners could end up owing more to the store than they made, trapping them in a cycle of debt. The system for college financing is broken, even if you’re being trained for a job that pays well. Being an actor does not.