College students and their parents have historically shared at least one truth—student loans are “good debt,” an investment in a student’s future. And it is true that at one time, a student could borrow $10,000 from Uncle Sam for a four-year education at a reputable university. And certainly, by virtue of having a degree, it would be easy to make up that $10,000 (plus nominal interest) in salary, countless times over. Until recently, there really has been no reason to question this paradigm. Student loans were simply a right of passage. Everyone seemed to have them, and everyone dutifully paid them off.
So, what has gone so terribly wrong with the student loan system? College, after all, is still considered a must-have. Statistics show, in the state of our economic recession, that the average unemployment rate for adults without a college degree is hovering around 12%, while the rate for workers with a four-year degree is about five points lower. Why then, has a college education become so unattainable? Would anyone dare say that we have regressed as a nation in our definition of equal opportunity, rendering college access a mere memory for middle income and poor Americans?
To find some answers, let’s start with the data. If you add together mortgages and revolving home equity from 1999 to when housing-related debt peaked in 2008, the sum increased from $3.28 trillion to $9.98 trillion. Over this period, housing-related debt increased threefold. Meanwhile, over this same period of time, the balance of student loans grew by more than 600%.
When considering the cost of attendance at any college or university, it’s important to calculate not only the rising tuition costs across the United States, but also the cost of living. Rent is higher than it was just ten years ago, as is gas, food, utilities, and medical insurance. All of these costs are factored into a school’s cost of attendance, which is the total cost students must borrow. And when federal loans don’t cover the total, students turn to private loans to supplement their aid.
Jeffrey Williams, author of Student Debt and The Spirit of Indentureprovocatively refers to student loans as the new form of indentured servitude, leading “leading those less privileged to bind their futures.” His theory is bolstered by several factors, but perhaps most poignantly, he points to the following:
•-The prevalence of debt, especially among the young and the poor/working class, subscribing to the commonly held belief that we need an education in this technological world in order to compete globally.
•-The increase in the amount of money borrowed not just from the federal government, but also from private lenders and credit card companies.
•-The length of loan terms, now extended to 30 years with consolidation, staying with many borrowers into retirement.
•-Debt secured not by property, but by personhood, “obligating his or her future labor.”
Pat Callan, President, National Center on Public Policy and Higher Education, recently said, “It’s not like we had a great national debate about whether we wanted to impose huge debts on young people. We just woke up one morning and it had happened.” It happened because it was subtle, confused with normal and expected inflation, and because everyone trusted college loan advisors, who subtly shifted focus from helping students to make responsible financial decisions to increasing their institutions’ profits. Colleges took up accepting kickbacks from student loan providers. Four-year programs are extended to five or more years. Students are forced to pay extra fees for things the students don’t necessarily want or need, like activity fees or health care fees. And perhaps the worst offense of all, colleges use low paid graduate students, many who speak sub-par English, to teach classes.
It’s time that we assess our priorities as a society and place a greater emphasis on providing access to affordable (but quality) education. At a certain point, we have to be able to accept that student loan debt could, in some cases, outweigh the benefits that the education provides…at least until we can fix this problem. Consider the field of social work, for example, where a bachelor’s, and often a master’s degree, is required for jobs that pay less than $50,000 a year. How could we realistically expect, as a society, to recruit the best social workers with this type of salary/debt discrepancy? And where exactly do we expect them to live?
It will be a dire shame to have a generation of talented students choose to forego higher education because they are not privileged enough to have parents that can afford to pay for it. But could anyone blame them if they did?
Note: John T. Weir sits on Binksty’s Advisory Board and serves as the CEO of Planning for College.
Photo Credit: http://www.yale.edu/opa/arc-ybc/v33.n30/story5.html