Sunday, June 9, 2013

Crimes against the youth: student loans and what we can do about them

Nowadays, you often hear young people (in their teens and twenties) being given the advice, “College isn’t for everyone! You might be much better off skipping college and avoiding those huge student loans. Think carefully about whether college will be worth your while.”

I hate this advice. Not because I think every person should go to college. I recognize that there are perfectly acceptable life choices that don’t include college, and that college may not even be particularly helpful for some careers. No, I hate this advice because it’s usually given by people who have been to college, at an earlier time when it was more affordable. It’s like telling someone, ‘you wouldn’t have enjoyed that cake anyway’ after you take the last piece. 

Actually, it’s worse than that, because nobody denies that college is a stimulating, enriching experience for most people. No one is suggesting that young people won’t discover new interests and develop useful skills and contacts at college. There's also no doubt that societies benefit from having a well-educated populace. The advice to bypass college is purely an economic calculation. So let’s look at some numbers.

In 2010, the total unemployment rate among high school graduates who did not go to college was 10.3%. For people with at least a bachelor’s degree, that number was only 4.7%. In April of this year, those figures were 7.5% and 3.9%, respectively. Things have definitely been improving for everyone, but people with a college degree still have a definite edge in getting a job.

What about pay?

For these figures, I went to the Bureau of Labor Statistics. In 2013, the median salary of a 25 year old with a high school diploma but no college was $651/week. For a person with a college degree, the median weekly salary was $1095.

So far, it sounds like a college education is a huge asset. Why would anyone discourage someone from getting one? Two words: student loans.

Colleges and universities have been increasing in price more than any other commodity, at two to three times the rate of inflation. For the 2012-2013 school year, a student could expect to pay over $20,000/year at an in-state public college and over $40,000 at a private college. These numbers are averages for moderately priced schools in each category. 

Not too many poor or middle class kids have $80,000 (and in many cases, far more than that) lying around to pay for college. Obviously, everyone hopes their kids will get grants and scholarships, and some universities are working to help lower income families send their kids to college. Many Ivy League and elite schools waive tuition for families earning under $60,000/year. However, you still have to be accepted to those schools, which isn’t easy. For most students, the only way to get all the way to a bachelor’s degree is to take out some loans, and that changes the equation dramatically. 

While it’s true that college grads get more jobs and more pay at those jobs, that doesn’t mean that recent college graduates are getting the kinds of jobs they want. In one small study, only half of students who graduated from a U.S. college in 2011 or 2012 were employed full time. Many of those that were employed settled for unfavorable work hours, low wages and few benefits. One third felt that their college degree had little if anything to do with that job. Meanwhile, unlike high school grads, the college grads are starting their careers saddled with loans. Each year, 60% of college students borrow money for school. Most owe close to $25,000 but many owe far more and some owe more than $200,000. College graduates might be making more money than their bachelor-less peers, but not enough more to compensate for those loans. Forty-one percent of borrowers miss some payments within the first five years.

So here’s the choice faced by many young people today: skip college and take your chances with higher unemployment and lower pay, or take out loans that you may never be able to repay. Either choice is a loss, not only for the individual, but for society as well. Young people who are encumbered by huge loans make far fewer major purchases (house or car) than they would have otherwise done. They put off marriage or moving into their own homes. And that doesn't even count the loss of potential that results from discouraging a whole generation of talented people from pursuing their interests. 

I consider it to be a crime against the youth in this country that we put them in this position. But it doesn't have to be this way. 

Senator Elizabeth Warren has proposed a bill to set the interest rate for student loans at 0.75%, which incidentally is the same rate the U.S. government charges the big banks. I think that’s a great idea and I hope it passes, but I think we should go even further. Let’s make higher education free. Why not? Lots of other countries do it. The University of California system was practically free until 1969.

Just how much would it cost to provide free universal college educations? One study estimates that, based on the number of students enrolled in public universities in 2009, the total cost of providing free public college would be $128 billion per year. That figure assumes that the 2009 ratio of 40% enrollment in cheaper community colleges holds steady. 

I think 128 billion is a low estimate, both because more people overall would attend college if it were free, and because more students would go straight to a four-year school rather than starting at community college. So let’s increase it by 50% and round it off to an even 200 billion. Where could we possibly come up with that kind of money? 

Here’s an idea. How about taking the money out of the military budget? If that makes you uncomfortable, take a look at this chart:

In 2011, the U.S. spent over $960 billion on defense. That’s more than the next fourteen biggest spenders combined. If we cut our defense spending by 20%, we could afford free universal higher education and we’d still be outspending the next highest military spender (China) by four to one. 

If you don’t like that idea, I’m sure there are programs you wouldn’t mind cutting or eliminating in favor of providing opportunities for the people who will one day be in charge of everything. It’s a matter of priorities, and it’s long past time we set ours straight. 

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