Wednesday, May 16, 2012

The High Cost of Higher Education

The United States seems to be breaking trillion dollar barriers on a fairly regular basis these days, so often that many such milestones go unremarked.  Our latest post-trillion dollar status achievement in the area of student loan debt is worth noting, however, as it signifies a trend that shows no signs of reversing itself.  Indeed, with $100 billion in education loans being taken out last year alone, the numbers are only getting higher.
Higher education costs have increased at a rate three times that of inflation over the last two decades, with average increase in college tuition hovering over four percent annually. Reliance on government-backed higher education loans has likewise increased. With more young people being encouraged to pursue higher education we seem caught in an expensive upward supply and demand cycle.

Yet many of the premises on which this cycle spins are faulty, starting with the idea that more formal education is always a good thing. There is no question that college degrees, in the long run, produce higher earnings. However, with college graduates swelling the work force ranks and taking jobs for which they are over-qualified, we could soon see these earnings disparities begin to close. According to the Associated Press, fifty percent of college graduates aged 25 and under are either unemployed or working in jobs that do not require a college degree. One-third of those of all ages who hold bachelor’s degree are in jobs that do not require their credentials.

Even more worrisome are estimates put out by the Bureau of Labor Statistics for the coming years. Only three of the top twenty occupations BLS projects to grow between 2010-2020 - registered nurses, elementary school teachers and post-secondary teachers – require four years or more of post-high school education.

We could be seeing the results of massive over-consumption of higher education, which, it turns out, is really not for everyone and sometimes can be downright harmful. Students who were not necessarily suited to college in the first place often find themselves saddled with student loan debt but no degree to show for it. An astounding eighty percent of first-time community college students will not finish their two-year programs within three years while forty percent of first-time students in four-year programs will not finish within six years. The majority of these students will never finish, period. They will, however, still have the debt accumulated while funding their educational explorations.

In this they are very much like their college-educated peers. The average college graduate carries a debt burden of around $25,000, not an outrageous investment in one’s own human capital. But for every student who went through on a sports or academic scholarship or whose parents paid for school there are students who borrowed far more than the cost of a new car. Stories abound of art majors who owe $100,000 in student loans or social workers who attended schools where the tuition was twice what they now make in a year. These young people may well spend the rest of their lives paying for their educations and be forced to put off buying homes and starting families.

Help in keeping young people out of debt is not likely to come from educational institutions, which make a hefty profit of about forty-one percent off of each student. Advocates of higher education are more likely to pressure the government to make more funds available and at lower interest rates. In fact, President Obama and his presumptive Republican challenger, Mitt Romney, both support the continuation of the 3.4 percent government-backed student loan interest rate.

This seems a hair of the dog solution that encourages more consumption of that which caused the problem in the first place. Anything that is subsidized increases in cost and there is a strong argument that the abundance of low-cost student credit has contributed significantly to the upward spiral in tuition and other college costs that make it nearly impossible for students to follow the traditional path of working their way through. Cheap loans also often lead to borrowing more than is needed. Yesterday’s starving college student has been replaced by today’s bar-hopping partier. How much of the comfortable college lifestyle currently enjoyed will have to be paid for tomorrow?

Fortunately, students and their parents have more control over this situation than they have been led to believe. There are many options in both educational programs and directions and all deserve consideration. Community colleges and technical and professional schools may provide reasonable alternatives more in line with some young adults’ talents and interests. High school grads might also reasonably take a couple of years off to get a better idea of what they want from life and education. Spending some time in the working world can have the two-fold benefit of teaching them what they do or do not want to do with the rest of their lives as well as allowing them to save some money toward college costs and lower the amount they might need to borrow.

Those who do head right to college have a moral obligation to choose their majors wisely, live frugally and take their educations seriously. Much of an individual’s college education is subsidized by the public through taxes which help fund public institutions, provide federal grant money and underwrite discounted loan rates. In addition to their parents, who usually sacrifice much of their own convenience and comfort in order to support their children’s educational aspirations, college students owe a debt to the public at large. Under those circumstances fewer parties and more Ramen noodle dinners seem a fair exchange.

Audrey Pietrucha is a member of the executive board of Vermonters for Liberty. She can be reached at vermontliberty@gmail.com