There is a pervasive image in society today of the deeply indebted, unemployed philosophy major living in his parents' basement. Or the young woman working at the local coffee shop with a degree in English and $50,000 in student loans to pay back. Or the struggling painter with a degree in art history, no job and crushing loan payments.
Certainly some of those stories are true. Yet they are the exception, not the rule, and they tend to skew the larger view of the issue of student debt. Much of the problem is at for-profit institutions, some community colleges and certain four-year institutions, where many students get loans but don't earn a degree. Getting a degree from an institution such as CU, even if it takes some debt to do so, pays off in the long run.
Media reports blare the statistic that the total balance of student loan debt passed the $1 trillion mark a couple of years ago, prompting apples-to-oranges comparisons with the subprime mortgage crisis. But the truism I state in nearly every speech I make still holds: An investment in a college degree is perhaps the best investment a person ever makes, one that pays dividends over a lifetime. In most every case, the economic return alone is worth the investment (even if it takes a reasonable amount of debt), not to mention the tangential benefits of a college degree.
According to a recent Brookings Institute report on student debt, some 58 percent of those who have debt have $10,000 or less. Another 18 percent have between $10,000 and $20,000. So three-quarters of graduates with debt have less than $20,000.
The numbers at CU paint a similar picture. In FY 2013, about 62 percent of students across our system had debt, compared with the national average of 68 percent. For students who have debt, the average debt after graduation was about $25,860, compared with $27,850 nationally. The picture is even better for resident students, whose average debt load is even less. Equally important is that the default rate of CU graduates was 3.8 percent (10 percent nationally). That tells me our graduates are getting jobs and paying off their loans.
While the number of student borrowers is increasing along with the amount they borrow, the Brookings study also found that "the monthly payment burden faced by student loan borrowers has stayed about the same or even lessened over the past two decades. The median borrower has consistently spent three to four percent of their monthly income on student loan repayments since 1992."
All this is not to suggest everything is sweetness and light, or that borrowing guarantees a ticket to a better life.
The most significant problem is the student who takes on debt but never earns a degree. Some colleges and universities excel at getting students in the door but do poorly at graduating them. It is immoral and wrong to load up a student with a pile of debt but have them leave without a degree. Unfortunately, this story is far more common than that of the indebted graduate living in the basement.
Still other colleges spend as much time remediating students as they do moving them toward a degree, also a travesty. Students should have to show they could do the work before they are even enrolled. And as we saw in the news this week about proprietary institutions such as Corinthian Colleges Inc., which the U.S. Department of Education has set on a path to closing, inflated jobs claims and too-easy-to-get student loans are a recipe for disaster.
Rising tuition at public universities resulting from diminished state investment (Colorado ranks 48th nationally in higher education funding) is certainly a driver in the increase in loans. Yet even with higher costs, the increase in lifetime earnings that comes with a degree still outweighs tuition costs (and debt incurred).
Students and families having eyes wide open helps considerably in paying for a college degree. They need to carefully consider the investment/return equation on their major, as well as the school they choose. They need to be savvy and diligent about loans, grants and scholarships. They need to do all they can to borrow less for college, spend less while there and also supplement their income (read: get a job). And it might seem obvious, but students need to use loans to finance their education, not cars or other lifestyle purchases. Loans may be easy to get, but students should rely on them only when absolutely necessary.
While there are always exceptions, large student loan burdens are rare, not the norm, particularly at CU. The return on investment, even if it takes loans to finance that investment, is well worth it over a working lifetime. There are certainly issues to be addressed relating to student loans, but the sky is not falling. Nor are basements filling up with recent graduates.
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