Writing about the pros and cons of getting a college education seems ridiculous at this point in our country's history. After all, statistics clearly show that without a college degree, it is almost impossible not to be in poverty. However, in this paper, I am going to focus on the conflict between the information claiming a college education is the gateway to a better life, and the experience of many recent college graduates. To do so, I will have to make use of some very rough statistics. This shortcoming will have to be forgiven, though, because of the difficulty in acquiring honest information about the reality faced by graduates. This should not be unexpected since the institutions that supply such data are also looking to boost their enrollment. The idea that the average American student can work their way through college has grown increasingly more ridiculous over the past quarter century. Today, attending college is four times as expensive as it was in 1982. This inflation in the cost of attendance is reflected by the $875 billion in student debt presently held by Americans.
Before moving further, I want to define some important terms that were completely new to me before researching the subject of student debt:
Loan deferment - “postponement of a loan's repayment. There are many reasons why someone might seek to defer a loan, including a return to school, economic hardship, or unemployment.”
Loan delinquency: “a failure to make loan payments when they are due. Extended delinquency can result in loan default.”
Loan default: “the failure to repay a loan according to the terms agreed to in the promissory note. A lender may take legal action to get the money back.”
Clarifying those terms is necessary to understand the seriousness of the statistics found in a report by the Journal of Higher Education called “Delinquency: The Untold Story of Student Loan Borrowing.” According to that report, “for every student loan borrower who defaults, at least two more become delinquent without default.” Not only is that true, but 23% of people with student debt are avoiding delinquency and loan defaults by requesting forbearance of a deferral of their loan payments. A deferral prevents stop interest from compounding on subsidized federal loans, but unsubsidized loans continue to grow. Forbearance does not provide any reprieve from compiling interest.
So, the number of graduates who are delinquent is double the number of people who are currently defaulting on their loans. That means the number of students who will default on their loans is increasing rapidly. Meanwhile, 23% of students have growing debt. All this is especially troubling because, unlike a mortgage or credit card debt, declaring bankruptcy cannot remove student debt. College graduates are not stupid. So, if they could pay afford to pay off their student debt, they would certainly do so to avoid all of the terrifying consequences of defaulting on a student loan. How can these statistics be explained?
To show how this supposedly unexpected trend came to be, I will have to make use of some less exact statistics than the Journal of Higher Education provides. However, I do not believe that exact data is necessary to understand how college graduates are being set up for financial disaster. The average debt for an student graduating with a bachelor's degree in 2009 was $24,000. Using a student debt repayment calculator, with an interest rate set at 6.8%, I found that the average student will have a monthly bill of roughly $275 for ten years to pay off their loans. The site where I found this calculator says that student loan payments should ideally take up no more than 8% of a graduates annual salary. So, the average student should make $41,428 a year after graduation
That figure is absurd. At the University of Michigan, 10% of undergraduates are pursuing a degree in psychology. Even the most optimistic figures I found claim that annual wages for psychology graduates average around $35,000 a year – after two years of employment. So, not only is the figure too low to meet their financial needs, it also does not take unemployment into account. With the unemployment rate for recent college graduates near 9%, it's hard to see how this statistic could improve any time in the near future. These statistics are grim, but even more discouraging information is available. The second year annual salary for after two years of employment for an English major is $37,800 – well short of the recommended amount.
If the argument that people majoring in psychology and English are taking a risk because they want a job that is difficult to obtain, perhaps the average pay of teaching school graduates will put this crisis in perspective. Elementary education graduates can expect to make $31,600 a year and secondary education students should plan to make around $35,100 a year. With paychecks like these – again, remember these are very optimistic estimates – graduates who get exactly the job they went to college for are still expected to fall behind their loan payments in droves.
Our country, is filled with smart young people with degrees that did not turn into jobs. Many of the graduates that I have spent time with cannot even afford the cost of their rent because student loan payments take such a large portion of their income. If they are lucky, their parents send them a check to make up the difference. Those who are less fortunate simply stop paying their loans. The statistics in the Journal of Higher Education show that the number of graduates in that situation is growing fast. I'm not sure how that problem can be solved, but I think a good start might be to stop telling everyone that they should go to college. Clearly, it isn't working out well for at least 23% of people who try it. As discouraging as that may be, it's better to let them know before they bury themselves in debt.
Educational institutions may think that they need to continue raising tuition rates, but either a higher level of budget austerity come into effect or more financial assistance must be extended to low-income students. Otherwise, those students will spend the rest of their lives paying off the interest from their insurmountable debt. The status quo benefits no one but the institutions loaning the money. If college cannot be made truly affordable, then I believe it is time to stop sending so many people to college.
The middle class is shrinking, and it's not because fewer people are qualified for middle class jobs. It's because there are fewer middle class jobs to go around. In high school, students are told to follow their dreams because if they work hard they can do anything. Once they get to college, the same people perpetuating that lie are taking thousands of dollars of students' borrowed money. That is predatory and completely unethical. So, until the economy improves, or the higher education bubble resets, I would recommend that our country start holding institutions accountable for their misleading, self-serving rhetoric.
