America's indentured graduates
Adults often complain about mixed signals they get from teens, but what about the messages teens get? Here's one with major life implications: Go to college, but graduate with a load of debt. Oh yeah, like that makes getting a degree look real attractive.
The economic health of America's information-driven society depends on how well it educates its young people. So it can't afford to shrug off the mounting student-debt problem with a mere "whatever."
The financial situation facing college graduates today is not what it was in their parents' time. Now, about two-thirds of college students are borrowing; three decades ago, just a third were. And in recent years, the amount of student borrowing has soared. Graduating seniors faced an average of $9,250 in loans a decade ago. Now it's more than twice that, $19,200 (a 58 percent increase after inflation).
The majority of graduates are still able to repay their loans. And it's true that higher earning power for someone with a four-year degree makes this possible. But the trends point toward a worsening situation that needs attention.
Tuition keeps rising. The College Board reports average tuition and fees at public, four-year colleges – adjusted for inflation – are up 35 percent from five years ago. Private college tuition and fees are up 2 percent – also adjusted for inflation – over last year.
While the federal government has increased its student aid over time, that amount has to cover many more students. Individuals are getting less, and having to make up for that with greater borrowing. Indeed, the crunch is forcing many students into private (sometimes risky) loans. Such borrowing grew by 30 percent in just one year (2004-05).
Look beyond the statistical averages, and student debt appears even more worrisome. The fastest growing group of borrowers is the big-ticket group ($20,000 and up). If you think they just need to get a part-time job, they're already doing that – 3 out of 4 full-time students have jobs. Meanwhile, some graduates say they're putting off marriage and children and forgoing careers in teaching or public service because of debt. They're anxious about money and aren't saving.
It's no wonder then that Democrats made college affordability one of their main campaign promises. They say they'll increase federal grants and the tax deductibility of tuition, and cut interest rates on federal student loans. This is smart politics and music to the ears of any parent or student, but can Democrats find a way to pay for such a plan?
Others are focusing on repayment, which now works like a rigid fixed-rate mortgage. The Project On Student Debt is urging the Department of Education to amend its payment rules to relate to income and family size, and wisely, the department appears to be listening.
Such changes tackle pieces of college costs, but they leave unchallenged a more fundamental issue: Should college, so necessary in today's economy, become as freely available as K-12?
Some people say free, high-standard Internet universities can be created with an endowment of just a few million dollars. Bill Gates, are you listening?