The increased attention to student debt over the past year has prompted long-overdue discussions about just how many students are using loans to finance higher education. For the first time ever, student loan debt exceeds credit card debt. But increased attention also has brought about misconceptions that are neither helpful, nor productive. Let's take a look at what's fact and what's fiction about student loan debt.
1. College is no longer worth the money.
If you're a recent college graduate, you're probably scared. Headline after headline warns: "Welcome to the Real World 2010 College Graduates - Nobody Wants to Hire You." While the troubles some college graduates face are real -- and painful -- the media tend to use these troubles as provocative, but misleading evidence that a college degree is no longer worth it. It's true that the current job market is terrible for new college graduates. But the job market for college dropouts is even worse. Unlike college graduates, dropouts don't have a degree to count on and are unlikely to ever reap the benefits of their investment. College graduates generally bounce back the quickest after a recession because they have a degree that - imperfectly or not - indicates a certain level of skills and knowledge.
2. All student debt is bad.
Considering the uncertainty of employment, some suggest that students should just avoid (or minimize) borrowing completely. But this actually may force students to adopt behaviors that put them at risk for not finishing their degrees. For example, students might choose to delay enrollment after high school, enroll part time, or work full time during school as strategies to pay for school. But each of these behaviors requires students to juggle the competing demands of work and school and increases their chances of not graduating. This is a complex calculation, and students may not always make the best choices. Unfortunately, the consequences of choosing badly are becoming more severe.
3. Student debt is a problem only for college graduates.
College graduates are not the only students who have student loan debt to repay. Those who don't graduate also have to repay their loans. My new Education Sector report Degreeless in Debt: What Happens to Borrowers Who Drop Out found that these students face the worst of both worlds: they are saddled with loan payments and are more likely to be unemployed. If they have a job, they earn $5,000 less in median incomes than borrowers who graduated. Even worse, borrowers who drop out are four times more likely to default on their loans than borrowers who graduated.
4. For-profit colleges are the only culprits in the rise of student debt.
Critics frequently cite the shortcomings of for-profit colleges and with good reason -- the worst of them seem to churn out degrees, exploit unknowing students with predatory lending practices, and soak up federal aid dollars to increase revenue. Indeed, for-profit schools were consistently the worst culprit in my report: they accounted for most of the increase in student borrowing and the increase in borrowers who dropped out. But even as for-profit colleges constituted 9 percent of total enrollment, a quarter of federal financial aid dollars, and nearly half of borrowers who entered repayment in 2007 and defaulted by 2009, we cannot ignore what is happening to the rest of student borrowers in other sectors. The trend that should be imprinted in everyone's minds is that more borrowers dropped out in every institution sector. Nobody is off the hook.
5. Schools have no control over whether students default on their loans.
Colleges often cite the risk factors to dropping out -- delaying enrollment, enrolling part time, or working full time -- as excuses for high student loan default rates. But these risk factors are not static traits. They are behaviors, choices students make, in significant response to rising college prices. There are plenty of things that colleges can do (and have already done) to control costs. They can use technology to redesign courses. They can take advantage of the open-learning courses from Carnegie Mellon and MIT. They can reorganize their administrative offices. But they can also do a much better job informing students of their choices. The Center for Community College Student Engagement recently found that only 26 percent of entering students said a college staff member talked to them about their outside commitments to help them decide what courses to take. Schools should be relentless with student mentoring, proactive about teaching their students how to manage their money, and develop default prevention plans for students most at risk for dropping out. All of these efforts could go a long way toward encouraging students to enroll full time and persist.
Secondly, unless a person is going to a graduate or professional school, why not consider going to a public university. Live at home and work part-time. With the money you save on a four year degree, you can pretty much fund a graduate degree. In the long run, you will be better off.
I think people need to start taking a hard, realistical look at the cost / benefit of a college degree. There are other ways to get an education than going to a out-of-state, private college for big-time bucks. While the name of an 'big name' school might look impressive on your resume out of school, after a year or two in the 'real world', your professional accomplishments mean far more than the collge you graduated from.
Private loans get to play both sides. They can't be charged off in a bankruptcy because they are "student" loans and WANT to be designated as student loans in that case. But when it's time that they act like student loans-- put them off while unemployed or to return to school- they want to be considered private loans. That double dipping is unfair, as is the predatory lending aimed at 20 year olds!!
What's truly perverse is that the largest driver for higher college costs (and thus debt) is the federal government's willingness to throw vast sums of money at college education (both for grants and loans) with zero accountability either from the schools or the students who borrow that money. That's part of the reasons the GAO recently reported that outstanding federally-insured student loans were performing horrifically and posed a significant risk for losing a lot of taxpayer money (think Fannie Mae and Freddie Mac on a smaller scale).
I stated (with somewhat different wording) that spending large sums of money on a college education without a high chance of a good job upon graduation was a losing gamble. As usual, you misconstrue what I say.
I am quite aware of the various "studies" showing that those who attend college make more money than those who don't. The methodology is seriously flawed, which I described previously on this forum. Also, all these studies can do is show correlations, and correlations don't imply causal relationships.
I actually agree with you regarding the second paragraph, and the lack of accountability that you have described is part of what has turned a college education from one of the best investments available into a very high risk gamble. The fact that so many college graduates are unable to pay off their student loans should clue you in to the fact that that education might not be as valuable as you would like to think.
You maintain that getting a degree doesn't pay off. That puts you squarely with the flat-earthers and the Obama birthers. Sorry.
1) College costs are rising far faster than inflation. Its another bubble caused by
bad economic policy: too many subsidies, too easy to get college loans. Nobody student/parent should be $100k+
in debt for a degree in a field that pays $30/yr. Allowing loans for these degrees at that cost is ridiculous. No bank will give you a loan for a $100,000+ without collateral, big down payment or big earnings. Some common sense needs to apply here.
2) It will be very difficult to get a degree and sit for 3 years as a Barista for Starbucks or part time work and think you will be competitive with new grads. Subject matter changes quickly and you will not be a preferred candidate.
3) The cost of college is not fairly priced (worth it) in today's market. Costs have to come down to reality
1) If you want to get your $100k worth for college, don't get a degree in a field that only pays $30k/yr. That means avoiding liberal arts degrees (unless you plan to go to law school, which is another dicey proposition) or degrees that are effectively service-based (computer hardware or maintenance). Students who get those degrees are subsidizing those who get more useful degrees - it doesn't take $100k/student to pay for the facilities that crank out a liberal arts major, but it costs more than that to crank out engineers. Fortunately for the latter, they get charged the same rate. Take advantage of it.
3) The pricing of college is based on supply and demand - fairness has nothing more to do with it than the pricing of cigarettes, cars, and housing. Costs do not have to come down (and will not) until supply rises (likely via those oh-so-evil for-profit colleges) or demand falls (probably only realistic of companies are again allowed to use aptitude tests).
2. All student debt that doesn't lead to a good job or other significant payoff is bad. There is really no way around this.
3. This is absolutely true. If you're not almost positive you have what it takes to graduate, then don't go.
4. For-profit college provide a near worthless product. As such, they are always a bad choice. Debt is debt, but at least a legitimate college gives you something in return for it.
5. Schools will have more of their students default on debt if they charge more. I don't see schools rushing to lower prices to prevent defaults. Schools will also have more of their students default if their degrees are seen as worthless. Academic standards continue to be eroded to the point where many college graduates can't write coherently or solve simple algebra problems. Low academic standards absolutely devalue an institution's degrees. Colleges don't care how many students default, because they get paid regardless.
As noted by numerous studies and even the census bureau (http://usgovinfo.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=usgovinfo&cdn=newsissues&tm=44&f=10&su=p284.13.342.ip_&tt=2&bt=1&bts=1&zu=http%3A//www.census.gov/prod/2002pubs/p23-210.pdf), "high school graduates can expect, on average, to earn $1.2 million; those with a bachelor's degree, $2.1 million; and people with a master's degree, $2.5 million."
That's right, on average, the typical college grade will earn an extra million dollars over the course of a career compared with someone without a degree. That's average, thus the benefits vastly outweigh the costs for all but a tiny sliver of the degree-seeking population.
The rest of his points are simply irrelevant to the subject at hand.
You are also making the error of ascribing a causation (more education causes higher earnings), when all you really have is a correlation. College graduates also tend to be white or Asian, come from middle class or wealthy homes, and live in areas where both costs and incomes are higher. I have yet to see a study that accounts for these, and other, confounding variables.
I have tried to refrain from insulting you personally, but your childish remarks show a maturity level much lower than that of the "lazy young adults" against whom you love to rail. If this is the best you can come up with, it is your comments that can be safely ignored.