Government to Blame for Student Debt Crisis in U.S.
July 16, 2018 • 374 views
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Hundreds of thousands of students across the United States are impacted by varying levels of student loan debt. Virtually everyone knows someone that caries the burden of paying down a metaphorical mountain of student debt. The biggest problem with this situation is that graduates do not get a job that pays a great enough wage to pay down the debt in a timely manner. Many students don’t even get a job that is within their field of study.
Higher education has always been a very positive thing for society historically. People have pushed innovation in a plethora of fields, which has propelled us to our current achievements today. Degrees of all kinds have allowed people to push the limits of human capability and understanding of the world. A more educated society will make more informed voting decisions, create higher levels of average wealth, and push innovations in various fields of study.
High school graduates face an interesting decision today—should I enroll in college, figure out what interests me, and obtain thousands of dollars in debt, or should I enter the workforce and educate myself through other informal means—the internet, library, community classes, etc.? The financial opportunity cost of waiting to enter the workforce is already great, and this effect is much worse when factoring in thousands of dollars of debt.
Many degrees are rendered useless in the modern workforce. This forces students to potentially not study what they want, but rather something that is practical when regarding the present job market. The truth of today’s market is this—undergraduate degrees in things like psychology, sociology, fine arts, and communications might give developmental impacts the student, but the potential pay associated with the field of study is lower than the degree is worth. There is often few employment opportunities for these types of degrees, so commonly college graduates will work in a field completely unrelated to their college studies.
Struggling to pay tuition has been a somewhat recent problem. In 1976 the minimum wage in South Dakota was $2.00 per hour while in-state tuition rates at Black Hills State University averaged $584 for one year’s tuition and fees. (https://files.eric.ed.gov/fulltext/ED119552.pdf) (https://www.dol.gov/whd/state/stateMinWageHis.htm) If a student worked 4 hour shifts at a minimum wage job, it would take 73 total shifts to pay for a year’s worth of in-state tuition at BHSU. Contrasting this with today’s minimum wage of $8.65 and BHSU’s 2018-2019 in-state tuition rate of $8,733, a student would have to work approximately 252 4-hour shifts to pay for a year’s tuition. This is a 245% increase from 1976 to 2018.
It is nearly impossible to graduate without debt unless the student has support from family, qualifies for federal/state grants, or earns scholarships. If the value of a degree doesn’t match the cost, why would anyone want to get that degree? What changed from the days where a student could pay their own way through school?
The simple answer is government involvement. This most likely will create controversy with some because the government looks like a good guy in this situation. Giving everyone the ability to attend school by giving them loans with relatively low interest rates seem like an overall good thing for society does it not? Well, the road to hell is paved with good intentions. The U.S. first made tuition begin to increase by implementing the Federal Family Education Loans (FFEL). This program ended in June of 2010, but the government sill provides assistance to students with federal and state direct loans. This seems beneficial because it allows those without any financial backing to attend school and not have to work a part time job. After 1965, enrollment centers became flooded with people wanting an education that they could now afford thanks to the U.S. government. The Universities, seeing an influx in enrollment under government subsides, raised tuition rates so that additional buildings, technology, and staff could be implemented into schools. Tuition has steadily increased since 1965 and regardless of the low interest rates, students have much difficulty repaying these loans in a timely manner. If the government stopped giving loans, and tuition rates remained the same, no private entity would loan out the money because the default risk would be too high.
The cost of tuition today should actually be going down, not up. More students are attending college, so the cost per student should be decreasing. Technology is also able to automate much of the jobs that were once necessary, lowering the cost to the universities. Tuition rates are being bid up so much that the federally guaranteed loans are having an inverse of the desired effect on potential students. A push for equality has in fact created inequality—especially inequality of useful degrees.
The solution to this problem is one that many wouldn’t like initially. The federal and state government needs to remove their involvement with Universities. By doing this, the Universities would immediately lose their main source of revenue. The Universities would then realize that they would need to cut excessive spending in order to stay afloat. Cutting spending means temporarily defunding staff, seizing any physical campus expansion, and cutting off some research projects. All of which sounds profoundly negative, but over time these problems would be taken care of. Financially successful student alumni have been proven to be generous when it comes to donating to their alma mater, which would take care of the lack of funding to certain areas. There would be a drastic cut to tuition at first, down to a point where private entities wouldn’t be too afraid of the default risk.
Decreasing costs at the source, rather than expecting the job market to pay for the obnoxious student debt, is a far more effective solution. This allows students to study what the please, without overly worrying about how much their degree will be worth to a potential employer. The main concern of people opposed to this solution would be that less fortunate students wouldn’t be able to attend school. Students would be able to pay for their tuition similarly to life before 1965, by working a part-time or summer job.