One of the latest political footballs is the college debt crisis. In 2017, the average student debt for a college graduate was $39,400. In fact, the estimated total student debt outstanding hovers around $1.48 trillion. In comparison, when I graduated with my MBA in 1998, the total debt that I held was roughly $16,000. And that was for a bachelor’s degree and a masters degree. No one debates the fact that starting out of the blocks with nearly $40,000 in debt, before even accepting their first job, puts recent graduates and their families at a disadvantage. Some candidates for President are proposing abolishing or forgiving this debt – which at first blush sounds great, but will not solve the crisis at all.
Basic law of contracts states you agree to something, you sign legally binding documents, it is a contract and must be fulfilled by both parties. For instance, if you have a car loan, you get the car, and are obligated to pay until the debt is paid off. If you fail to do so, they can repossess the car. The same principle apples with mortgages – don’t pay, they will take the house. However, with college debt, one cannot ‘take back’ the education; instead, the lender is out that money. This is why these loans have higher interest rates, for all you Bernie Sanders fans out there. And while it is tempting to say who cares, fight the power and all that, the fact is that someone, somewhere, has to pay. The lenders will get their money back through higher interest rates to others, or by simply not making as many loans – which can potentially deprive another student of her or his chance to attend college.
To me, the bigger problem is twofold: Tuition increases out of line with inflation, and ultra-specialized majors that do not have good employment prospects. On average, tuition rises 8% annually – meaning that it doubles every 8 years. Compare this to the latest 12 months inflation rate of 2.5% and you can see where the problem lies. Let’s also look at some majors offered by a local university: Early Modern World, Italian Studies, Gender Studies, Modern Culture and Media. These are all fascinating and I am not saying that they are unimportant or shouldn’t be taught, but a major in these areas becomes so ‘niche’ that employment opportunities are limited. High school students are not being conditioned to look at their education as an investment – which is, ultimately, what it is.
Great. We all agree that there is a problem, and it’s huge. Now, what about solutions? It would seem that the first step in this, is to get the costs of tuition under control. To me, it is unconscionable that tuition goes up an average of 8% a year, greatly outpacing inflation. Since almost every college or university gets some kind of federal funding, I want to see a candidate advocate for holding public college and university tuition increases to the last measured increase in inflation. In other words, if inflation for the past year was 3%, then that is the cap that tuition can rise, barring unusual circumstances – for instance if the school bought a Hadron Collider, doubled enrollment and had to build more dorms, etc. Note that the only acceptable waivers would be for academics – no raising tuition to build the football team a bigger stadium.
Another step that should be taken: While I wholeheartedly disagree with discharging all of the debt, I think that interest payments should be reduced for those who are keeping up with their payments; this will help them pay the balance faster and mitigate risk to the lender.
We also need candidates who will address the bigger elephant in the room – marketability of majors. Each college and university getting federal funds should be required to have a proper career center – not just a posterboard with business cards tacked to it. At this career center there should be verified data, by major and by graduating class, of starting salaries. This way, students could see that if they are borrowing $100,000+ for a degree that starts you out at $30,000, maybe that is not the best investment.
This also needs to extend to the high school level – when I was a high school student, there were all the resources in the world available for students going to ‘name’ schools (read: expensive) but not much for those going to local schools. If we educate students, empower them to see themselves as customers purchasing a product instead of chasing a big name, and couple that with mandates to keep tuition increases in pace with inflation, we can start to tame this beast.
I challenge any current officeholder, or someone hoping to one day hold office, to tell me, and us, how simply cancelling college debt is better than what I have laid out here.
Read More 990WBOB
Unbiased, Unfiltered. WBOB's Original Reads feature our brightest and boldest personalities, offering their two-cents on the goings on of news, sports, politics, entertainment, and business. -- Are our opinions always PC? Nope. Are they always perfect? Nah. But, are they always 100% authentic? Absolutely!