Education and Student Debt

A few days ago, I wrote about the increasing tendency to rank colleges on the basis of alumni earnings, as if higher education is simply another venue for job training.

In the comments, people pointed out the importance of earning power, especially in light of the staggering expense of a college education.

Believe me, I get that.

Nothing I wrote was intended to justify the increasing costs of a university education and the resulting sky-high levels of student debt. Indeed, to the extent that we are pricing education out of the reach of many, we are sabotaging the educational mission I was defending.

Student debt is not only a huge problem for recent graduates; it is dragging down the economy. As Matt Impink and I wrote in an article for the Chronicle of Higher Education,

Student debt constrains individual decision-making in a number of ways, and its growth affects the entire economy. For example, people paying back student loans are less likely to start businesses. Considering that 60 percent of new private-­sector jobs are created by small businesses, diminishing the ability to create businesses does considerable harm to the economy.

Debt loads also affect overall consumption. According to research by the Federal Reserve Bank of New York, fewer 30-year-olds in general have bought homes since the recession, but the decline has been steeper for people with a history of student-loan debt and has continued even as the housing market has recovered. In an economy that depends upon the ability and willingness of consumers to purchase homes, furniture, automobiles, and other goods, a debt load that effectively precludes such purchases poses a real problem.

The Consumer Financial Protection Bureau has found that three-quarters of the overall shortfall in household formation can be attributed to younger adults, ages 18 to 34. In 2011, 1.3 million more Americans in this age group lived with their parents than in 2007. Although it is impossible to determine the relative contribution of student-loan debt and the economic downturn to that phenomenon, student debt is clearly implicated. Any program that reduces the need to borrow can only improve the situation.

According to a report from Zillow, the relatively few millennials who are thriving economically are the ones whose parents are able to subsidize college tuition or a down payment on a home. Help with education and buying a home were the two primary ways in which the original GI Bill created upward social mobility. Estimates are that each new household leads to $145,000 of economic impact. If student debt is keeping just a third of those two million young Americans from living on their own — a reasonable, if undocumented, assumption — that adds up to a $100-billion loss or delay in economic activity.

Student debt is an enormous issue for the country. The Democratic presidential candidates have all addressed it; Senator Elizabeth Warren has proposed measures to ameliorate it.

If any of the Republican presidential candidates have paused their attacks on immigrants, reproductive choice and various kinds of “losers” in order to address student debt levels and their impact on either young people or the economy, I’ve missed it.


  1. Sure wish we could have convinced Elizabeth Warren to run for President.

    The Republicans supposedly learned four years ago that they needed to stop pandering to the rich and the evangelical extremists. They are proving that until their older generation completely dies off they are destined to keep repeating a very ugly history.

  2. I think a college education should serve 2 purposes: 1) to a acquire marketable skills and 2) to awaken a desire for learning. The simple fact is we don’t have the money to continue the spending trend we are on. It just doesn’t make sense to me to add more spending. The course we are on means that eventually lenders to the US are going to demand higher interest rates and that will drive up rates all down the line making it even harder to buy a house a car or an education.

  3. The student loan debt can be crippling to those who chose to be something other than engineers or MBAs.

  4. Student debt has an impact on every facet of young peoples’ lives. Establishing businesses and buying homes are the biggest areas, but many others are affected. Think about how much better the economy would be if millennials and Gen Yers had more money for eating out, attending cultural events, sporting events, or traveling.
    My son attended a conference recently on philanthropic giving and millennials were bashed for low levels of giving. It is difficult to donate money when a person is deeply in debt.
    Higher education should not be a perk for wealthy families only.

  5. I should add that my son is in grad school and is a millennial himself. I am not unbiased in this area.

  6. Student loans benefit the debt industry. Affordable education benefits the rest of us. Maybe colleges and universities need to find a way to be on the other side of this equation.

  7. The price of ignorance (witness many of the supporters of Trump, et. al.) far exceeds the cost of education. We have become way too focused on education as a means to a specific career, marginalizing the societal good of a liberal education. It’s high time we divert some of the money we spend on weapons systems (the bloated F-35 project comes to mind) and use those funds to really invest in our future generations. It’s infinitely better to think/negotiate our way out of crisis rather than quickly resort to military action.

  8. Student loan debt contributesl to the teacher shortage here and in other states. It is just impossible to survive on a teacher’s salary and pay back student loans.

  9. To me there are similarities between our higher (actually it’s no longer higher IMO, it’s baseline for most) education and health care industries.

    Both are out of control cost wise because there is so little pressure for them to be affordable. Those who control the country can still afford them. Those who can’t, can’t influence them.

    In a sane country it would be recognized that not having both of them available for everyone is unaffordable for everyone.

    They’re like country clubs only necessary.

    In both cases the impact of their out of control costs is only tolerable to a growing segment of the population through the use of debt for many and bankruptcy for some.

    Of course there’s hardly a more lucrative business than the debt industry, even considering the bankruptcies.

    So we have the Republican caused national war and tax cut and bank bailout debt, healthcare and education debt and credit card debt. On top of that it’s necessary to change our entire energy system from fuel based technology to capital (debt) based and to adapt civilization’s infrastructure to a brand new climate.

    There’s going to be a whole generation soon who’s entire life’s work is going to be devoted to paying for the past. The banks essentially will own them like indentured servants. Yes those same banks that we went into debt to bailout from their last greedfest.

    These problems are so “sticky” that Republican Presidential candidates have to make up problems to avoid them.

  10. AgingLGrl, I agree with your choices.

    There is one other shortfall for the future for people with high student debt, namely retirement. There has been a decline in defined benefit pensions. The expectation is people will save to fund their retirements. If they are paying off loans there will be no or little left for retirement accounts.

  11. How have the Democratic candidates addressed student loan debt? Saying let’s waive a magic wand and make college “free” is not addressing the every increasing tuition and other costs that have exceeded the inflation rate for the last 2 or 3 decades. All they’re doing is talking about who pays the bill. The taxpayers paying the bill doesn’t do anything to address the underlying problem.

  12. Paul; President Obama explained this…regarding community colleges which may or may not work for universities. The current low income tax rate on the 1% would return to the rate when Bush lowered it plus closing tax loopholes on businesses would provide tax dollars needed. As long as you and your Republican cronies are in charge of Congress, this is less likely to happen…which is why we need to vote as many Republicans out of office as possible in EVERY election. It takes more than the president to accomplish forward movement for this country.

  13. “The taxpayers paying the bill doesn’t do anything to address the underlying problem.”

    I don’t agree with this at all. For instance Medicare and CMS are the only forces effectively managing health care costs.

  14. When discussing education (i.e., higher education) and student debt, the first thing that is paramount for me is looking at the data, the dollar numbers on a spreadsheet outlining the annual college tuition costs over a long period of time. If viewing the dollar amounts of ever-increasing college tuition on a spreadsheet does not prompt you first to look to the colleges/universities for answers, then your focus is on the wrong thing.

    From the National Center of Education Statistics, a data table illustrating “average undergraduate tuition and fees and room and board rates charged for full-time students in degree-granting postsecondary institutions, by level and control of institution: 1963-64 through 2012-13”

    Fortunately, data tables are not emotional and not partisan.

  15. I also agree with Paul. The cost of higher education is sky rocketing. I also agree with Bernie it should be “Free”. These are not mutually exclusive goals.

    However, Paul just to ask how has Governor Pence and the Super Majority Republican House and Senate addressed the problem of cost here in Indiana???

    John Gregg could propose an expansion and commitment to Junior College System like other states have. However, Gregg will run on “Look at I am just like Mike Pence”, but I have a mustache.

  16. Universities were deliberately starved to inflate their tuition to make it look ‘competitive’ with for profit colleges. If the money dolled out to these ‘schools’ were instead used to fund the state universities, it WOULD provide a rock solid alternative. But instead we have lobbyists. And they can fix you up with a consultant to give you an opinion on that for a mere……

  17. To me the idea of free community college starts to necessary education is as great a starting point to a monumental problem as Medicare and ACA were to health care.

    Once that exists all of the forces will be aligned to allow natural progress in everything contributing to the problem and solution.

  18. When professionals are still paying student loans off when they have entered their fifties, you know they are not saving for retirement and, certainly, are not able to help their own children with college costs.
    The increasing number of administrators in colleges and universities along with the cultural expectation that all higher education should take place away from home contributes to the problem. Add to that the cultural expectation that graduate degrees attained at the same institution as an undergraduate earned his/her degree are somehow lacking and you have a recipe for more accumulated debt.
    Also consider that businesses in general have worked hard to foist off specialized training to publicly funded or student funded education.
    Free public education was the norm for decades. If specialized training was required, the business/trade groups did it on their own dime. Now, a HS diploma will get you a minimum wage job that makes it nearly impossible to live day to day, let alone go to college/trade school. Those who have the drive, luck, good health and intelligence to make it without staggering debt are very much the exception, not the norm.
    In the meantime, we have venture capitalists and hedge fund managers using for-profit educational institutions to pad the portfolios of the wealthiest 1% by sucking every dime out of students, including lots of vets, for non-existent “guaranteed” jobs.
    Vouchers, charters and all the others schemes to undercut public education and provide public money to private institutions almost guarantees that in the next generation, education will once again become an entitlement for the well-to-do (a smaller and smaller population), something that generations prior sacrificed so much to access.

  19. Feeling a need to go back to the original question of out-sized, exorbitant public college/university tuition, why and upon what basis of public accountability are our public/state universities/colleges justifying the continued sky-rocketing tuition fees? Why have public college/university tuition fees pushed so far beyond the affordability of the state students for which they were founded to serve? Think about this.

  20. BSH, the good professor in Nancy’s contribution offers the explanation the it’s not possible to improve productivity in education. I personally do not buy that.

    I think that what’s closer to the truth is that there’s been little reason to improve productivity as the people who can afford it love the concept of elite (read expensive) schools and the others simply aren’t taken into account.

    Perhaps now that the 800 lb gorilla of massive student debt is in the room educators will start paying attention.

  21. @JD, your comments are spot on, hit the nail on its head, and resonate with those who are aware of the thinly-concealed truths underlying the K-12 public education reform movement. In fact, if you’ll notice, the public school education reform movement is confined largely to urban school districts where a huge number of the parents might best be described as low-information and more likely to accept whatever the experts from afar (i.e., Michael Bloomberg and his deep pockets) and the experts from within (i.e., the individual School Board members as in accepting Michael Bloomberg’s $50K campaign donations per individual candidate ) prescribe as the answer to improving the district’s education failures. I’d say that if Michael Bloomberg donated $50K to individual IPS School Board election candidates, that Michael Bloomberg expected something in return and that something was not an invitation to an annual ‘Meet and Greet Your Teacher’ event.

    If the above doesn’t tweak your understanding of education reform, the public monies thrown at private groups, then allow this story from Chicago where Mayor Rahm Emanuel presents himself as a satisfied city official standing in the background as Magic Johnson accepts his contract with the City of Chicago locking in the establishment of Johnson’s ‘for-profit’ charter schools receiving massive public funds.

  22. This is the fault of both Republicans and Democrats. Both organizations have had decades to address the rising costs (nevermind decades to address many other issues as well) of education. The only candidate really addressing the issue is Sanders. Clinton will not rock the status quo. She is the status quo. A big part of the problem is politicians from both parties have willfully dismissed the needs of voters and have catered to the needs,wants and desires of lobbyists looking out for the vested interests of monied organizations. Look how Obama used Max Baucus to successfully develop the Heritage Foundation ACA –along with the CEO of Wellstone I might add.. Or,closer to the subject at hand,how VP Biden was a key supporter for making it impossible to file bankruptcy on student loans. Come to think of it,I guess we can thank VP Biden for Clarence Thomas,as well. With politicos such as Biden,who needs Republicans?

  23. One of the things driving the lack of reform are the debt buyers. They purchase accounts for tiny amounts and then dun the former student forever. They grab tax refunds. There is little to no bankruptcy relief, either. BK Courts very stringently construe hardship, which is the only basis for relief.

    It is very shortsighted of those politicians who are not in favor of relief. I don’t know if they don’t care or are incapable of understanding the ripple effect of lack of debt relief.

  24. We can’t expect higher education to make the changes. They need to cut costs, but to expect them (mostly administrators) to cut those costs would be an impossible task and probably not really an incentive. They are making their money. I was sitting in class where there was 32 students. The class cost around $1000 per student….32,000 off of that one class being taught by an adjunct professor who I’ve heard around a $1000 to maybe $2000 to teach that class.

    Then I look around and while I am happy that the rooms are so clean I was also amused that the bathrooms, the classes, and the SPEA/Business building were having all of what I thought were perfectly wonderful bathrooms being completely redone…maybe there was infrastructure issues, it appeared mostly cosmetic and not necessary. I do understand that my tuition is paying for infrastructure and maintenance, just like the $20 pill for tylenol in the hospital helps pays for my salary and maintenance, but things must change.

    My daughter who is adopted would love a sister or a brother but I just incurred a $47000 graduate loan and I am 47….another child is out of the question with that debt load and knowing that we would like to be able to help (not pay for all) of her college which will be in 10 years….I am member of the ever shrinking and really disappearing middle class

  25. RN; the cosmetic “improvements” in restrooms were more than likely part of the budget that would have been cut if not spent for something/anything to keep getting the money. Infrastructure is probably in another budget section which is already spent for whatever incidentals are included in that budget.

    I learned this budgeting form while acting as temporary secretary for the fiscal section of Division of Community Services for the City during the mid-1970’s. Needing to complete a supply order I checked the cabinet to see what was needed; found shelves (plural) full of boxes of paperclips, large and small – totaling hundreds of thousands of paperclips that probably still haven’t been used. Asked the CFO about this and was told…they would have had part of their supply budget cut if it wasn’t spent on something/anything to keep getting the money.

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