We report this week on the local reaction to the spike in student loan interest rates. But no matter what politicians and talking heads would have you believe, this is a problem that extends far beyond the events of the past few days.
The cost of a U.S. college degree has positively soared over the years. By one estimate, the cost of college has ballooned by 1,120 percent over the past three decades.
This would be less vexing if the relative value of a degree hadn’t decreased as costs rose. A college education is considered a minimum requirement for many entry-level jobs. It’s been said a college degree confers the same status and prospects as a high school diploma may have in the past. For many students, graduate school and high student loan debt are taken as a part of life.
Nationally, our citizens carry more than $1 trillion of student loan debt. This figure – much more so than interest rates – is the true trouble.
Rep. Paul Tonko is right to call for both a short- and long-term plan to combat student loan interest rates that would otherwise effectively cut the productive lives of an entire generation short. But he and his colleagues are failing to see the forest for the trees.
The overall cost of higher education in America has become absurd in recent years. The average cost of tuition, room and board in the 2010-11 school year was pegged at $13,564 at public institutions, $36,252 at private not-for-profit institutions and $23,495 at private for-profit institutions. Add to this the fact many colleges institute sweeping but useless general education requirements that fill a student’s entire freshman year, often necessitating more than four years of schooling.
It’s easy to see how a student unsupported by parents or scholarships (support that is in short supply in both cases) could rack up quite the bill. And unfortunately, a shocking 46 percent of U.S. college students fail to earn a diploma within six years of entering school, compounding the issue.
The end result is that there is an economic disaster of gargantuan proportions brewing. Once the graduates of today age and replace today’s workforce, how will they possibly drive the economy if a sizable chunk of their paycheck is still going to loan payments 10, 20 or even 30 years after graduation? We’re talking about trillions of dollars that won’t go towards consumer spending, startup capital or retirement savings.
The only solutions to this crisis, therefore, are to increase the value of an education markedly, or to decrease its cost. Once having dealt with this interest rate debacle, our leaders must continue to crack down on predatory colleges and non-accredited institutions; rein in wasteful spending at public colleges; simplify and streamline the college loan process in a way similar to what has been done in the credit card industry; and last but not least, work to better our primary education schools so that a true college curriculum can be taught to college freshmen.
It will be no easy task, but neither is entering adult life with a six-figure bill to pay down.
