Young, Educated, and Deep in Debt
I doubt anyone is opposed to education or advancing your knowledge in life. Who can oppose something so valuable? Now this lofty aspiration is great but becomes problematic especially when the cost of higher education has gotten so expensive. How expensive you ask? The fact that we have over $1 trillion in student loans outstanding tells us many students can only continue their educational endeavors via more debt. One of the most disturbing statistics is regarding young college graduates. These are students that have faced the highest tuition inflation and are also entering the weakest job market in a generation. This is an issue that cannot be ignored. Sure, we can turn a blind eye as we did with housing but this bubble is going to burst. We are already seeing fractures in the system and even people questioning the value of an education. Where do we go from here with the US college system?
The tough job market for recent graduates
One dramatic figure coming out from the employment side of things is the underutilization of those with college degrees:
“(Daily Trojan) Still, California’s unemployment rate remains the third highest in the country, and the L.A. area’s unemployment hovers above the statewide rate at 10.6 percent. The slow pace of job growth could have a direct impact on USC students. Employment rates for new college graduates are very low with nearly half of all college graduates under age 25 unemployed or employed in jobs that do not require a college degree, according to a Northeastern University study that looked at 2011 data.”
Keep in mind this is coming from a selective school that has tuition costs of more than $50,000 per year. It is an interesting figure that half of all college graduates under the age of 25 are either unemployed or are working in a field that doesn’t utilize their degree. This is something that needs to be addressed since the future of our nation will rest on the shoulders of young Americans. There have been a few studies examining future prospects of those entering weak employment markets and the drag on the economy can be deep and fundamental. There is definitely a structural shift going on. You will be hard pressed to find anyone going against education per se. Yet what is the actual value? Education for the sake of education can be had for free given the plethora of electronic options:
-TED talks that bring out experts in select fields
-Online learning environments like the Khan Academy
-Free open source courses
-Public libraries offering eBooks through online checkout
So there has to be more than simply the above. There is a socialization process that goes on in higher education and it also provides a signaling mechanism to the market. However, how much is this worth? If half of young college graduates are not utilizing their degree directly, then what exactly was the value of the college experience? Or more importantly, why go into massive debt for this outcome?
The massive growth of student debt
It is one thing to pursue higher education and come out with minimal debt. It is a completely different thing going into massive debt and then having a hard time finding a job that supports the level of loans you now carry. At the very least, there needs to be an option just like every other sector of debt to declare bankruptcy. Student debt now makes up a sizeable chunk of consumer debt:
The fact that student debt is such a sizeable portion of consumer debt is troubling. While households have been deleveraging from credit card debt and other revolving debt, the growth of student debt is incredible. The trend is apparent and you even have state funding decreasing for many state schools so many are simply rising the tuition cost. This is becoming a big deal because of the level of debt now being taken on.
The change is probably hitting faster than you think:
“(New York Times) The University of Phoenix, the nation’s largest for-profit university, is closing 115 of its brick-and-mortar locations, including 25 main campuses and 90 smaller satellite learning centers. The closings will affect some 13,000 students, about 4 percent of its student body of 328,000.”
Change is coming whether we want it or not. In an era of perpetual debt based bubbles, it is troubling to see so much debt being taken on for a college education.