I grew up in an era where we were taught to go to college and get a degree. You would better your life I was told. That was the 1970s. At that time the majority of my peers were headed off to college and the majority would graduate without student loan debt. They had a degree and new hope for the future.
Today that’s not the case. Today more is owed in student loan debt than on all the credit card balances combined. About 94 percent of graduating students now have student loan debt and it is a noose around their neck they begin life with.
The New York Times just published a wonderful article and looked into the impact of student loan debt. You can read that article here.
The article revels that almost all students now have to borrow to pursue a degree. “As prices soar, a college degree statistically remains a good lifetime investment, but it often comes with an unprecedented financial burden.”
The average student loan debt in 2011 is $23,300. And while that might not sound like a lot, try just starting out from college, pursuing a job in your field, and saddled with unforgiving debt.
“If one is not thinking about where this is headed over the next two or three years, you are just completely missing the warning signs,” said Rajeev V. Date, deputy director of the Consumer Financial Protection Bureau.
This explosion in student loan debt began after my peers graduated from college. It was not until the 1980s when college tuition began to outpace inflation and become more and more expensive at both public universities and private colleges as well. Then in the 1990s we witnessed the growth of for-profit online colleges that heavily marketed their product but charged even higher rates to students that enrolled.
People that promote the enthusiastic borrowing of student loans to attend college forget that the majority of people that take out student loans, actually never graduate. It is estimated that less than 75 percent of student loan holders never achieved their degree.
Moreover, among students seeking a bachelor’s degree, only 22 percent succeed within six years, compared with 65 percent at nonprofit private schools and 55 percent at public institutions.
In that situation all you are left with is debt and no degree that advances your income potential.
Student loans pay off when you graduate. Not everyone graduates.
Unless Congress acts soon to prevent student loan interest rates on government backed loans to increase, the interest rate on those loans will double.
I agree that college should not be absolutely free but students are now paying the price of unbridled expansion and college passing on growing expenses to students. I’m not aware of any college that reduces rates each year and works hard to limit services to keep college affordable.
There once was a time when states helped to fund state universities so state residents could excel and get an affordable education. Budget cuts and crises have led to states reeducating the amount they now contribute towards funding their state schools.
According to Ohio State, state funding accounted for 25 percent of the cost of the university in 1990 and only seven percent today. That reduction in funding gets passed on to the students and much of it results in student loans.
Those student loans are not dischargeable in bankruptcy. Since 2005, private student loans are prevented from a bankruptcy discharge as well. This protects the lenders but sacrifices the future financial lives of all student loan holders and eliminates their rights under bankruptcy law. Essentially for student loan debt, as long as you owe it your pay may be garnished and tax returns intercepted for life if you owe government loans. You can even have your social security income garnished if you are still caring student loan debt.
Back in Ohio, state expenses now pay for almost as much for incarcerating residents as it does for educating them. It was much different forty years ago. In the 1970s Ohio spent about 17 percent on higher education and four percent on prisons.
A college education continues to be the mantra of parents like me. It is what was instilled in us when we were growing up. The consideration for school back in the 1970s was if you could get in. Today the consideration needs to be if you can graduate without the debt money on your back. It’s just no longer good enough to say a college education needs to be the goal.
College admissions and financial aid offices are not there to assist parents and students to make good financial decisions. They are there to admit students and fill seats.
There really isn’t a sound third party involved in the transaction to help parents and students make the best decisions. The college game is rigged against students and sets them up for student loan debt.
What little required counseling there is by schools regarding student loans becomes not much more than a DUI class that someone must take. The online courses have shown little impact in turning students away from taking on the student loans. They just tick the box of a requirement associated with federal student loans.