The College Debt Gets Deeper

It's now growing faster than we envisioned.

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Back in 2011 I wrote a column regarding the growing college debt. At the time, the amount surpassed the $1T threshold, representing an acceleration of borrowing. For the first time ever, Americans owed more on college loans as opposed to credit cards, which is a frightening thought.

This led to a movement of young people in Occupy Wall Street to demand a means to lesson the financial hardship. Then, during the 2016 presidential election, the Democrats embraced the idea of expunging the college debt completely and let the American taxpayer assume the cost. Fortunately, this didn't happen, and students remain on the hook for their own loans.

Today, according to a Consumer Federation of America analysis of U.S. Department of Education data, the number of people defaulting on their student loans is steadily on the rise. More than 3,000 borrowers default on their loans EVERY DAY. In 2016, 42.4 million American students owed $1.3T in loans. To make matters worse, the number of defaults grew from 3.6M in 2015 to 4.2M in 2016. (Click for report).

Such financial woes leave a black mark on credit records, making it harder to get a good paying job, or purchasing a house, condo, or automobile. It should therefore come as no surprise that more and more Millennials are staying home, and fewer are driving.

Americans place a lot of emphasis on education but we should be mindful of the fact that attending college is not a right, but a privilege. During the Depression years prior to World War II, there was no more than 1.4 million college level students attending approximately 1.7 thousand institutions of higher education. Today, according to the Digest of Education Statistics, over 19.1 million students attend 4.4 thousand colleges, a quantum increase. Since the 1960s alone, when colleges experienced an influx of students seeking refuge from the Vietnam war, enrollment has more than doubled.

Back in the Depression, money was scarce and, as such, it was common for all of the members of a family to work, often sacrificing higher education in the process. Back then, a high school diploma was considered a prestigious achievement. Even a junior high diploma was prized as some people could not afford to rise above this level.

Regardless of what school counselors tell students, COLLEGE IS NOT FOR EVERYONE. Other institutions offer fine programs which lead to good paying jobs, such as trade schools and the military. Yet, these are typically pooh-poohed by the counselors which performs a disservice to students.

Let us also consider the spiraling cost of colleges. Although this is hard to pin down with precise certainty, the lion's share of costs for college operations appears to be in salaries and benefits (such as health insurance, pensions, etc.), and with cost-of-living adjustments and a competitive market place, labor costs are growing unabated.

Between rising college costs and the ability for students to pay for it, college enrollment has recently plateaued, but the Department of Education expects a slight bump to slowly grow over the next ten years. Regardless, the economic reality is that colleges cannot continue to operate as business as usual. we will likely see a downsizing of faculty and trimmed operating costs in the next few years.

As for the students, there is no panacea on the horizon for the debts they incur. And that is just the point, they incurred it, not the American taxpayer. It was their decision to go to college, not the public's. This is why I continue to say higher education is a privilege, most certainly not a right. At some point, they have to learn what it means to earn your way through life. If you cannot afford it, there are other options available to you. Again, COLLEGE IS NOT FOR EVERYONE.

Keep the Faith!

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Tim Bryce is a freelance writer and management consultant in the Tampa Bay area of Florida.

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Copyright © 2017 by Tim Bryce. All rights reserved.

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