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Tuesday, September 25, 2012

The Cost of Higher Learning

As a student I am painfully aware of the personal costs of paying for college. As someone who is low income, and hasn't had the benefit of being able to borrow money from my parents for college, I know what it's like to be staring at a mountain of future debt. unlike some people. I know many who are in my position, and have even graduated to end up not using the degree they worked so hard for, and paid so much for.

The Atlantic had an excellent article that spelled out the situation that many prospective college grads fear. It boils down to one question.

Will I be able to find a job when I graduate?

Now there a couple of points in that article I don't agree with, in that I don't think the degrees are worthless. Higher learning should never be considered worthless. Educational pursuits are what help create the thinkers, artists, and academics that are necessary for cultural advancement. But in this corporate consumer society those educational pursuits have been swept to the wayside in favor of careers in high finance.

 Credit:Mark Kantrowitz
There's obviously a great financial incentive to work for places like Goldman Sachs. This graph from the Huffington post shows the number of students that graduated with six figure debt.

But for those who are not good with numbers, or are not thrilled with the idea of working for high finance, or those whose careers have been impacted by the recession, these numbers are scary.

My wife's biggest fear, is graduating with her medical secretary degree, and not being able to find work, and not being able to afford the 20+ grand of student loans she alone has had to borrow. She's also afraid of being in default.
Credit: Yewon Kang/Medill

According to a study by the Department of Education, the national student loan default rate continues to rise. Along with the unemployment rate. In 2008 the default rate for students was up to 7.2%. That's up from 6.7% the year before, and 5.2% in 2006. This trend doesn't show any signs of changing.  As unemployment continues to stay more or less at the current rate for those with a Bachelors degree or higher, at least until the 2012 election is over, we will continue to see the default rate climb as more and more students, hoping to climb the income ladder, face tougher times.

One of the bigger drivers of debt, and default are the prevalence of for profit colleges. Places like Full Sail University that have given contributions to the Romney campaign, ITT Technical Institute, and University of Phoenix.These schools charge very high tuition amounts that force students, like myself to borrow from private banks who also lobby the government to keep Federal student loan money, flowing into their pockets. University of Phoenix, which is owned by the Apollo group, gave $75,000 to Mitt Romney's Super-PAC: Restore our future. While James Heavener, CEO of Full Sail, gave $85,000 to Restore our future. It's fair to note that Full Sails' co-chair Ed Haddock had also contributed $60,000 to Barack Obama's campaign in 2008, and John Sperling, founder of the Apollo group itself, has so far donated $47,800 to Democratic congressional races. Though the for profit schools are mainly backing Mitt Romney this time, it appears their influence will be felt no matter who is in charge.

Now onto my story:

It was 2004 when I decided to go to ITT Tech hoping to get my shiny new degree. I borrowed about $3,000 from a private bank to afford tuition, a *big* mistake on my part. Nearly a year into my education I lost my job, and couldn't find another. In the end I went into default. Working crappy job to crappy job for the next few years I paid when I could, but that wasn't often, so the interest rate nearly tripled my loan.
Source: Federal Reserve Bank of New York
Credit: Lam Thuy Vo/NPR

So here I am, $9,000 in private loan debt, that can't be refinanced, cannot be discharged, and due to my financial situation, cannot be settled. Because the banks own it.

But I'm not alone. NPR has some amazing statistics on just how much debt students have amassed nationally. It's huge. It even surpasses the much maligned auto bailouts, and even credit card debt.

So with all of this debt, and all of these defaults, one has to wonder if getting an education is really worth it? To that I say, Yes. Here's why: As the world gets more technologically advanced, the hard labor jobs will continue to disappear, in fact many have, either from technology or outsourcing. Even though manufacturing in America is making a comeback, many of those jobs are demanding skilled workers to fill them. Now I need to make an important distinction. Education doesn't mean going to a college specifically. Trade schools are also considered places of higher learning.

So even with all the problems, debts, and fears, I still believe education is the best path towards the middle class lifestyle. I am sure that with time and pressure, we can force our political establishment to look at the problems of rising tuition, debt, and default, as well as unemployment for grads, and unscrupulous debt collectors and challenge them to fix these glaring problems that face every prospective student, and graduate that has put in the time, money, and effort to try and better their lives.

And this isn't to say we can't find solutions. In many European countries education is cheap, In Norway it's even free. In 2010 Norway was named the top nation in the world for highest quality of life for an eighth year in a row. It's not surprising to see that countries that have publicly funded colleges are often ones with higher wages, and standards of living. These countries are great examples of the importance of education as well as how much more they value education. If America were to take a more European approach to education to reduce the debt and costs for students the return on investment would be an increase in economic activity. Students that graduate without a mountain of debt are able to start their lives sooner and do things such as buy house, start a family, and make more discretionary purchases of high value items.

Students who graduate with mountains of debt hold off on doing those things in an effort to pay those debts. Worse yet, are the students that graduate with triple digit debts and cannot obtain a career in their field, those people are left with few options other than being stuck in lower wage jobs, unable to participate in economic activities that spur job creation. They often become immobile, unable to start businesses and are ultimately only able to pay interest on those gigantic loan balances.

We have solutions available to us, and we have examples of what works and what does not work. All we need is the political will and pressure to be able to effect change on the establishment. It's a hard sell because  there are moneyed interests in Washington that are perfectly happy with the status quo, and they have the ability to buy our politicians.

But people power can win over corporate power. It just takes time.

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