Student Debt: A New American Reality

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The narrative surrounding success and education in America is simple: work hard in school, and you can attend a good college. Work hard in college, and you can get a good job. Work hard at your job, and you can earn enough to make it — to achieve the American Dream.

Over the last few decades, however, this romanticized notion of higher education has grown less promising.  The price of tuition, room, board, textbooks, and fees has risen. Interest rates on college loans have reached unreasonable levels. The burden of student debt is a new American reality that must be combatted.

Recent trends give plenty of cause for concern. Since 1985, the consumer price index has risen by 115%; over the same period, the price of college has inflated by almost 500%. Even textbook prices have skyrocketed —  increasing over 1,000% since 1977. This has led to levels of debt that were unheard of just a few decades ago. The Class of 2015 is the most indebted class in American history with an average debt load exceeding $35,000 upon graduation. And for many, it’s far higher.

The surge in the price tag for a college degree comes at time in which America is experiencing the highest level of income inequality since 1928 — a trend that disproportionately impacts young people. In concert, these forces perpetuate systemic socioeconomic inequity. And their magnitude has entrenched a un-equality of opportunity unprecedented for the United States.

College loans—which collectively total over $1.2 trillion—are higher than America’s credit card debt. As graduates seek to enter the workforce, debt weighs them down: it discourages risk-taking, stifles entrepreneurship, and prevents them from saving, investing, or consuming. In the aggregate, it places a potentially dangerous drag on the economy. According to many analysts, the student loan debt could be the next bubble to burst — resembling the infamous housing collapse of 2008.

So obviously there’s a problem, but what can be done?

Education has taken a back seat to more controversial issues such as immigration in the current election cycle. But the campaign has provided an impetus for a few novel ideas on reform.

Secretary Clinton has proposed making college debt-free (but not tuition free) by incentivizing colleges to cut costs, mandating that students work up to ten hours per week, and permitting current loan holders to refinance and more easily. Senator Sanders, the self-declared democratic socialist of Vermont, wants to take this one step further. His proposal includes ensuring that public tuition is free for all. His proposal is slated to cost approximately $75 billion per year, which he seeks to offset with a tax on financial transactions in the stock market — dubbed the Wall Street Speculation Tax. In both cases, ambiguity is ripe. Senator Sanders omits subsidies for expenses beyond tuition, and the affect of his policy on other rising costs is unclear. Moreover, Secretary Clinton has not specified how the expected family contribution would be determined for individual households — making it anyone’s guess whether the new costs would be affordable.  

These two proposals call for sending more money into the system. To her credit, Secretary Clinton’s plan calls on universities to work with the government in order to cut costs and make the system more efficient. However, it is unclear whether or not her plan can realistically make higher education debt free. Senator Sanders’ plan is simpler and more egalitarian, demonstrating an approach that attempts to implement some level of equality. Under his plan (similar to the public school system model), the poor student and the offspring of a billionaire would pay exactly the same price for their college tuitions: nothing.

Republicans have been less forward with their education plans, but Senator Marco Rubio of Florida has proposed a solution that is, if anything, unique. His nuanced position is a welcome addition to an election cycle that is largely focusing on other flashier issues. Under his plan, young people could apply for “student investment plans” in which investors essentially “purchase” a student’s degree for a number of years after graduation. The investors would look at the major of the student, the university, and grades – essentially, they would try to determine how much money the student will be making after school. With this information in mind, they would offer a percentage of income that the student would pay for a certain number of years after graduation. This total cost could be higher or lower than the actual cost of tuition. Rubio’s plan also calls for increasing access to vocational training and encouraging students to pursue online degrees.

However, some organizations have noted that this plan could actually be more expensive for students in the long run, and that it would disproportionately hurt students majoring in fields with lower earning potential. Apparently, Rubio wasn’t kidding around when he said that he wanted to see more welders and less philosophers (even though philosophy majors actually make more than welders). His plan is not without its flaws, but it is certainly unique.

All of these plans have elements of validity and elements of weakness. However, one thing is definitely worth noting: this whole issue comes back to the classic philosophical divide between the conservative and liberal wings of the political spectrum. The Democrats envision the government spending more, and the Republicans envision the private sector spending (and earning) more. Sanders and Clinton call for government spending to fill the gap, while plans such as Rubio’s aim to turn education into another speculative and incentive-based financial institution. In my view, education should not be a way for the rich to make even more money off of the backs of desperate young people who want a degree, but if the free market can play a positive role, maybe it’s an uncomfortable means to an ultimately valuable end.

Regardless of which plan (or lack thereof) the country adopts, there are a few things that we should consider. First, education is an investment in more than the individual: society stands to benefit in compounding ways when students are educated. Second, the financial burden placed on young people today is far greater than that in decades past, and policy adjustments should reflect that reality. Lastly, rising college costs have made quality education a privilege — one that poor Americans are growing less capable of affording. As self-fulfilling cycles of wealth and income inequality weigh down our economy, it is more than our students who are impacted — but our collective commitment to social mobility.

For many Americans, college is a developmental and defining time. Young people yearn for it, and older people remember it fondly. Ultimately, we must remember that an investment in education is a surefire means to improve society, and it’s worth the cost. The gains America stands to make from investing in education extend beyond economic payback. An education affords us a more socially conscious and well-rounded citizenry. College gives people a time to examine themselves, examine the world, and examine their place within it. I can’t think of a more sound investment.

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