The College Student Debt Machine: A National Disgrace
With so much consumer and mortgage debt having been accumulated in the U.S. over the past 10-20 years, it was inevitable that those who have become addicted to credit would create a separate feel-good category that they like to call “good debt.” Student loans are often touted as being “good debt.” In this regard, Mr. ToughMoneyLove believes that our colleges and universities have not received enough of the blame for promoting student loans as “good debt’ and for making students and parents alike feel all warm and fuzzy about going off to college riding on a staggering pile of student loans.
The actual data on college tuition and student borrowing paints a clear picture of the disgraceful role played by colleges and universities in the student loan industry. I have reproduced three charts published by the National Center for Public Policy and Higher Education. The first chart tracks the increase in tuition and fees since 1982 at our colleges as compared to other components of our economy. (You can click the images to enlarge.)
As you can see, tuition and fees have shown a relentless increase over time at a rate that is four times greater than increases in the consumer price index and three times faster than increases in family incomes. Colleges have been called to the carpet on this many times. I have yet to hear or read any plausible explanation or justification for why this should happen and why it should be allowed to happen. Colleges expect us just to accept this as the way it is. I don’t.
The next chart (labeled Figure 6) shows the number of college students using Federal Stafford loans. The increase is from 4.1 million borrowers in 1997-1998 to 6.1 million borrowers in 2006-2007, a 50% increase in just ten years.
Finally, the chart labeled Fig. 7 shows that total student borrowing in dollars as grown from $41 billion in 1997-1998 to $85 billion in 2007-2008, a 100% increase!
To summarize, colleges and universities have inflated their budgets at a pace that makes our federal government appear almost conservative in comparison. They have fed their massive budget increases by loading up more and more of our young adults with similarly dramatic increases in debt that has to repaid when they leave school.
By the way, college graduate and professional programs are just as bad if not worse. I have in the past written about cash-cow MBA programs and law schools that lure students in with unrealistic expectations and unfulfilled promises of riches at graduation.
Do you think it is mere coincidence that students who graduated from colleges over the past ten years have become so comfortable with debt? This is what they were taught in college. Because so many were sucked into this college debt addiction as maturing adults, they think that debt and credit is no big deal. These are the same college grads (MBA’s in particular) who have been running things on Wall Street, designing all kinds of new debt instruments to leverage then crash and burn.
At least our colleges could offer courses such as “Debt and Credit: Forget What You Learned Here” or “Budgeting for Life: Don’t Do What We Do.” Have you seen any course offerings like this? Heck, I would volunteer to teach them.
All of this is just plain shameful. I don’t know why parents, students, and voters tolerate this. Parents and students could vote with their tuition money by not attending private colleges that overprice and underdeliver. Parents and voters could demand that their state’s public colleges and universities adopt and adhere to sound financial plans. How about we ask colleges to at least not lead the nation in hyper-inflationary increases? Let the health care industry move into first place. We will go after it next.
Your turn readers. Does this not bother you?