Hello College Debt, Goodbye Risk

A New York Times story on graduates weighed down with college debt makes the case for last week’s column.

Once again, The New York Times is playing catch-up with Patch.com.

On Sunday, The Times had a front-page story about the growing burdens of college loans, three days after ran on the same subject. The paper did a wee bit more legwork for their gazillion-word story – my research consisted mainly of talking to a friend at the deli counter at the Giant supermarket – so I’ll leave the term “copycat” out of this discussion.

The lead of The Times story was about a young Ohio college graduate who owes $120,000 in loans and is working two jobs to pay the $900-a-month bill. Her mother is taking out life insurance on her because if anything happens to her daughter, she couldn’t pay the loans for which she co-signed. 

A decade ago, 58 percent of families didn’t have to take out loans to send their child to public colleges and universities. By 2008-2009, only 7 percent could say the same.

The Times story shows there is plenty of blame to go around. Too many colleges emphasize the long-term investment aspect of having a college degree and play down the debt students will be left with. Some of the students admitted they failed to ask enough questions about how much debt they were incurring. The situation sounds eerily like the complaints about lenders and borrowers of risky mortgages before the housing bubble burst.

State and local spending per college student, when adjusted for inflation, is at its lowest in 25 years, according to The Times. State legislators, in turn, say universities are inefficient and bloated. The price of tuition has outpaced inflation, increasing even faster than medical spending.  

The result is so many young people getting out of college with the equivalent of a mortgage but no house to show for it. One 24-year-old told The Times she dropped out of Bowling Green State University with $70,000 in debt and wasn’t going back. “It makes me puke to think about borrowing more money,” she said.

Many of those commenting on last week’s column had little sympathy for such students – variations of you-made-your-bed-now-lie-in-it were all the rage. But I think there’s some selective amnesia going on.

How many of those commenting had formative experiences in the first years after graduating from college where they lived on a shoestring budget in order to take a low-paying job they loved, follow a dream, work for a cause or have a life-changing adventure? It might have been a short window of freedom before the responsibilities of kids and mortgages, but it can have a lasting influence on their lives. 

The graduates The Times wrote about can’t even afford to move out of their parents’ homes. 

I fear I’m seeing the Ghost of Christmas Future. When my kids were little, we started a Pennsylvania Tuition Account for each one. We contributed to it each year but not enough so they’ll be able to avoid taking out loans. Right now, both boys have enough money in their accounts to go to college for about 1½ years – just so long as they don’t eat or sleep.  

Mark Albright May 18, 2012 at 04:36 PM
Hear, hear, Jennifer! The terrible stigma in the U.S. of holding a blue-collar job is simply not a factor in many other countries around the world. The dignity of earning an honest day's living and the lesson that people should not peg their self-esteem on a job title or salary ought to be celebrated as core values by our society. The notion that "a college education will always pay for itself in the long run" is proving more and more to be a quaint throwback to an era when the U.S. was a formidable manufacturing power. The fortunes of the middle class used to rise in what was considered an inexorable march of progress - the realization of the American dream. We have now awakened from that dream and many hard-working folks have nothing to show for years' worth of struggling and saving.
Andrew Wilt May 18, 2012 at 07:07 PM
Jonathan, no sermons, just solutions: 1 - We need a national strike to force the government to stop fighting very costly and completely unnecessary wars whose only beneficiaries are the defense contractors. The money for these wars can be used to fund worthy students' college tuition costs if indeed taxpayers dollars should be used for this purpose. 2 - Along the same lines, we need to slowly but surely cut defense spending, this money can be reallocated for educational purposes across the boards, not only at the college level. Presently the US military budget is equal to the military budgets of the next 15 nations combined. This is outrageous and completely unacceptable. 3 - Along with 1 and 2 we can begin to shut down some of the military bases we have in 135 of the 180+ nations on the planet. The savings would be staggering, empire building is expensive. 4 - If we're no longer meddling in the affairs of other countries as we have been for decades, we can shut down the Department of Homeland Security and their TSA cretins as terrorism will subside. More money will be saved.
Rosemary B May 18, 2012 at 08:44 PM
Sorry to disappoint you, Andrew, but the scenario you paint above is a fantasy and I doubt the Muslim extremists/terrorists will be going along with it.
Kelly May 18, 2012 at 09:04 PM
Wow I find your choice or words interesting......." a school they DESERVE to go to" so not any school is good enough, its the school you DESERVE to go to. Thats a new concept for me. My kids were very smart and did and could get into any school. We did however guide and advise them as to what they could afford. THey have great jobs and are now taxpayers. THey could have gone to different schools, maybe even more "prestigious"schools but they got a great education that was affordable and at this moment have no debt. So my solution is still don't take on debt you can't afford to repay. You don't "deserve" it!
Daryl Nerl (Editor) May 18, 2012 at 10:59 PM
I'd never do that Rosemary. Then you would just throw the C word at me, right?
Tommy Walters May 19, 2012 at 11:04 PM
Well I mean, he makes a good point I think! If it is true that our military budget is equal to that of the next 15 nations combined... I mean... that's a little overboard? I don't know, don't you think we could find ANY of that money to reallocate?
Rosemary B May 20, 2012 at 12:11 AM
I'm sorry, but what C word are you referring to? I was asking a serious question. Of course I think it would lead to a lot of wasteful spending because a lot of students who probably don't belong in college would go and waste a lot of time and money. Unless some serious testing, beyond SAT's, took place to sort out the serious from the not so serious. And that would cause all sorts of trouble with what advantages then richer kids have over the poor and then how on earth would you level that playing field?
thesilentmajority May 20, 2012 at 05:33 AM
Solutions?? There have been some solutions offered by others on this forum. College is a business decision http://www.usnews.com/education/best-colleges/paying-for-college/articles/2012/05/16/mark-cuban-college-is-a-business-decision Students today(along with their parents) need to be “smart”consumers when shopping for the higher eduction they desire or need. They also need to be realistic in their choice of field of study. Somebody mentioned STEM fields. We need to steer more students into these type of career choices; science, technology, engineering & math. I wish more students would enter finance and economics, maybe that would help more people be able to deal with the realities of how to manage the monetary costs of managing their lives and our country. http://news.investors.com/article/588637/201110191813/college-has-been-oversold.htm?p=full The author of this story makes the key point I think some on this forum are trying to make. “Going to college is not enough. You also have to study the right subjects. And American students are not studying the fields with the greatest economic potential.” The amount of college graduates has increased 50% over the last 25 years but that increase is not reflected in STEM fields. The number of college grads in these fields remain flat. Are these not the fields where we would see the innovation and economic advances that will take us into the future?
thesilentmajority May 20, 2012 at 05:37 AM
cont'd Instead college grads today are choosing to earn degrees in visual & performing arts, psychology, and communication & journalism. The number of students in these subjects has doubled in the past 25 years. It sounds nice to say all young people today deserve to go to the school of their choice but should we be subsidizing those that are choosing fields that don't drive innovation & economic growth? It would be nice if we could all take a low- paying job we loved, follow a dream,work for a cause or send every deserving student to the elite college of their choice if these types of pursuits actually paid off. Unfortunately we need to balance all of that with a dose of reality. Every student needs to weigh the cost of their education with the potential economic benefits they will reap after they've earned their degree before they make that decision to go to an expensive school and take on that school loan.
thesilentmajority May 20, 2012 at 07:19 AM
Daryl N Kids born into a poor or middle class family are unlucky? Why would you think kids in this situation would think they are unlucky? I think you just insulted a whole class of people. As somebody who was in this type of situation as a kid, I never felt I was “unlucky” to be born into my poor/middle class family. If anything, I felt lucky because it helped me learn to take a realistic view on the value of education, earning potential and living within my means. It taught me to work hard, to pursue an education(one I could afford) in a profession that had a realistic potential for job security & earnings, the value of saving as much money as I could and how to live with the least amount of debt I possibly could(no school, car or credit card debt here!). As a high school grad in the 80's my parents had no money to help me pursue my secondary education but this in no way prevented me for making a better life for myself and my family now than my parents could provide for me as a kid. I actually believe my child is at a disadvantage today because they don't get to experience the economic struggles I saw my family go through as a child.
Rosemary B May 20, 2012 at 12:00 PM
Very well said! With a 19 yr old in community college and a daughter who is about to enter her senior yr in High School we have been having those discussions a lot at our house. I do wish their were more, let's call them, "No Frills" colleges out there. We don't really need the fancy food courts and the crazy nice fitness centers and we can do with out sports programs altogether. Just give us an affordable place where kids can come out with a degree and start on their futures without incurring a ton of debt!
John May 20, 2012 at 12:07 PM
The issue here is about 2 things; Greed on the part of colleges, and fiscal incompetence on the parent/student. Colleges are no better than the real estate brokers 5 years ago, enticing people into buying a product they can I'll afford. Not even as bad as a car salesman selling ou a car you cannot afford, or a real estate agent selling you a home you cannot afford. The only thing they do is lock you into a fixed cost. Colleges do one step worse, and get you in and raise tuition annually. Part two is the parent. If Johnnie doesn't know what he wants to do, recommend Community college. If Johnnie's GPA in high school was 2.0, suggest trade school. Of you and Johnnie have nothing is savings, then taking on a $24,000 burden is quite overwhelming. Although this may be an average, this also takes into account the families who have fiscally planned for education...so I believe this number to be considerably higher. Parents, learn to tell your children "no"!!! Placing them and you with a $50,000 debt for a bachelors I simply ludicrous. I personally have 6 nieces and nephews with an average $62,000 in debt, and each averaging @ $39,000 of annual income. They pay $750/month on this loan. Ludicrous!
Kathleen Parsons May 24, 2012 at 03:25 PM
Parents need to educate themselves on the cost of the intended college and set parameters for their kids before they apply. Joelle, I was citing a statistic that says the average student loan debt is around $24,000 - NOT the cost of attendance. I have two kids that graduated college and one who just finished his first year. I have a very good idea of how much college costs. All three of our kids went to, or are attending private colleges. The college search now is not like it was 20 or 30 years ago. The information is out there on what colleges cost and the average amount of grants and financial aid available. My older two kids colleges cost just over the amount of attending PSU in-state because they chose colleges that gave very good merit aid. The sticker price for one college was $42,000 but 96% of the students were awarded some type of financial aid. Their loans when they graduated were around $7,000 each. Parents need to tell their kids the amount they can afford, up front, before visits, before they set their hearts on some very expensive college. Thirty years ago when my generation was going to college, the cost was about the same as a community college and it was do-able for a person to put themselves through college. That is not the case today and it does a HS student a huge disservice if parents do not educate themselves and give their children clear guidance on expenses.
John May 25, 2012 at 01:29 AM
Kathleen, I concur completely! But colleges who charge $42,000 are at as much fault as those parents. C'mon, $42,000/yr for a chelors degree? Would you give an 18 year old a $168,000 check? But then I look at it from the college perspective. If parents are stupid enough to pay, then colleges had might as well charge it! 96% get aid, but the aid doesn't cover 96% of the $42,000. FAFSA claims that a person making $200,000/yr can afford $28,000, which is 67% of just the tuition. And how many make $200,000/yr?
voice of reason May 25, 2012 at 01:57 AM
My Son attended University in Ottawa Canada, total cost was 32k, got an immediate job with a global company making in excess of 80k due to the fact he was American, Internationally educated and fluent in English, French and Spanish. Now my Daughter is attending University in Montreal at a cost of 4 years for 34k
Kathleen Parsons May 25, 2012 at 03:07 AM
John, The sticker price of private colleges is one thing, what people pay is entirely different. Merit aid is not need based aid. We saved enough for a PSU (in-state) education and that's about what we paid. No way were we willing or able to pay full price. When the acceptance offers and financial aid statements come in, the real price is all there. The avg. grant at my son's college was $18,000. I'm not sure what parents are thinking allowing kids to take out more loans then they can reasonably pay back or perhaps hocking their own future.
Jonathan Gerard May 25, 2012 at 03:39 AM
I'm wondering if the tone of this discussion reflects the different cultural values of the writers. There are parents who sacrifice everything they have for their children's education. I know people who borrow $50,000 just for their wedding. Some people borrow a fortune to pay for a vacation. No one should borrow more than they can pay back but if a parent feels that the best education (and opportunity) their child can get is at a school with a very high cost (as is true with most quality four-year undergraduate liberal arts programs) then I am sympathetic to their struggle to balance what's the most important thing to mortgage future earnings against. In a different time, California did consider extending free public education through a bachelor's degree. Once we only paid for education through eighth grade. A new world required that we require our schools be available through grade 12. We can't afford free public college for all qualified students right now but it is not an unreasonable goal--at least for those who put education near the top of their life's values. I do. And so I feel less condemnatory towards parents who acquire huge college debt on their child's behalf. Very few people are frugal about everything. Some overspend on clothes, some on food, some on cars, etc. Let's put this discussion in perspective and recognize that people who "overspend" on education shouldn't be condemned as much as more materialistic over-spenders.
Jonathan Gerard May 25, 2012 at 03:42 AM
They treasure education more than treasure. I think there are much worse sins of overspending.
ron May 25, 2012 at 12:24 PM
Very true, if your going to over spend do it on something important like education, at least you will have your priorities in proper order.
Kelly May 25, 2012 at 12:49 PM
Seriously??? I wouldn't overspend on education, a wedding, or even my kids braces, as a matter of fact the only thing I can think I would overspend on would be to keep them alive in a devastating accident. Education is a commodity and can be purchased and found a an affordable price......I'm a bargain shopper! I also don't accept what the college wants to give me, I negotiate with them and it works!
Carol May 25, 2012 at 01:05 PM
I agree with you completely. The problem lies in the fact that many of the people (students and parents) who now complain about their college debt don't have the balance that you speak of. They still have their $50K+ weddings, BMWs, $200 blue jeans, etc. No one prioritizes. The prevailing attitude today is "I deserve it", as stated in previous posts. In general, the baby boom generation and their successors (of which I am part of) have lost the values and ethics of their parents.
Andrew Wilt May 25, 2012 at 06:06 PM
NPR has this following relevant article on their web site as of 2:00 p.m. Friday May the 25th: http://www.npr.org/blogs/money/2012/05/22/153316565/the-price-of-college-tuition-in-1-graphic
John May 25, 2012 at 11:20 PM
Carol, you hit the nail on the head! If you choose to put yourself in debt, you deserve to be in debt, nomatter what the reason. The fact is we justify whatever we choose to do and then complain. I disagree with some on this blog, as I have put 4 children through school. Education costs continue to skyrocket in an econonmy that cannot deliver. For every graduate like that of "Voice of Reason" where your child found a job paying 3 x the cost of education, there are hundreds, probably thousands who remain underwater for years. I have to believe that is EXTREMELy rare, based upon the fact that the average student graduates with $24,000 in debt. Education is and has become the second greatest burden on a family, next to owning a home. Those who wish to put themselves in severe debt, especially those with multiple children deserve what they get. I appreciate the discussion...great points by all!
Bob Zahm May 26, 2012 at 04:31 AM
Tommy - you're not an "idealist teenager". You are someone who believes they should have whatever they want, damn the expense. Well, that's just not going to happen. People tried that path in the past decade and all it led to to was an a debt bubble that has now hobbled the economy and future job prospects for many. When applying to college, sure, go for the best you can think of. But when the aid offers come back and you're short 50-100k over the course of your expected studies, you're going to have to look elsewhere. Go to a cheaper school for 4 years. Go to a cheaper school for 2 years and re-apply as a transfer student. Take more AP courses to get college credit. But please don't act like society owes you and education of your choice.
Bob Zahm May 26, 2012 at 04:35 AM
@Daryl - the issue about college affordability has always been with us -- it's just that in the past, people accepted that if they didn't get aid and they didn't have the money to pay for their first choice school, they found an alternative. One of my college classmates spent two years at a community college and then applied / was accepted as a transfer student to the State University from which we both graduated. I believe the terrible message that has already been delivered is that "if you want something, you should have it." It's that sense of entitlement which has driven huge gov't spending programs. It's also that sense of entitlement which has to end.
Bob Zahm May 26, 2012 at 04:37 AM
@Rosemary - many successful European countries have had that model - and they're now moving away from it through the introduction of college fees - UK and Germany. So, the problem of affordability of college education is not just a US issue.
Bob Zahm May 26, 2012 at 04:38 AM
@Kelly - 100% agree. No one "deserves" anything other than a fair chance. The US has been about equal opportunity, not about equal incomes, equal living standards, etc.
Bob Zahm May 26, 2012 at 04:40 AM
@J. Schubert - have you looked at college campuses lately? Many of them are like all-included health spas with amazing work out facilities, dinning facilities, and boarding facilities. One of the big drivers of college tuition has been the need to pay for the facilities spending used to compete with other schools.
John Schubert May 26, 2012 at 11:38 AM
Bob Zahm, in general I agree, although I'd like to see a breakdown of the costs. (My suspicion is that academics and administration are the big cost driver.) I have this same discussion with my fellow Swarthmore alumni all the time -- and you've hit the nail on the head with the word "compete." Colleges compete for good students. An awesome campus tour can close the sale. Years ago, a friend of mine was working on a $100 million building campaign for Swarthmore -- and I asked her, "When is the place luxurious enough?" The best colleges find it difficult to stop this race.
John Schubert May 26, 2012 at 11:38 AM
By law, Pennsylvania community colleges can only charge one third of their cost of business to tuition. That's one reason community college is such a great deal. But given the wrecking-ball mentality of our state budget slashers today, one has to ask: (a) what will the future look like for community colleges, and (b) what would happen if demand for their services increased hugely? I don't know the answer to either of those questions, but I'm not sure I'd like it.


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