As today's youth chart their future, they face a dilemma. The skills afforded by an excellent college education have never been more important, but the costs of getting that education have never been so high.
Ironically, the primary public policy response to this dilemma — government sponsored student loans — may actually exacerbate the underlying problem of runaway college costs.
In today's Deseret News, Celia Baker explores the contours of our nation's student debt crisis. Easily obtainable student loans, offered at decent rates, have helped millions of students pay for college costs.
But the burden of indebtedness incurred by young borrowers, often with questionable results, can crush hope and opportunity.
Total indebtedness from student loans has now mushroomed to over a trillion dollars according to the Consumer Finance Protection Bureau. The average indebtedness for college graduates is now more than $24,000. And almost 30 percent of student loan debtors dropped out of college, never realizing the benefit of the degree for which they borrowed.
Although student loans come with advantages of relatively low rates and opportunities for deferment and consolidation, they have some particularly onerous terms, the worst of which is that they cannot be discharged in bankruptcy.
This enormous financial burden seems to be mounting without corresponding benefit. Even as more high school graduates take advantage of student loans, a smaller percentage of them complete post-secondary degrees within eight years of graduation, according to the Population Studies Center at the University of Michigan.
And the learning of many college graduates actually stagnates during college, according to a thorough analysis of results from the Collegiate Learning Assessment. In their book "Academically Adrift," Richard Arum, at New York University, and Josipa Roksa at the University of Virginia, document that a full third of college seniors show no gains in critical thinking, analytic reasoning, writing ability or problem solving after four years of college. They attribute this drift to lack of rigor and low expectations.
So what does the increase in student loans produce? Perhaps the best-documented result from the influx of student loan money into higher education is inflated college costs.
Former Secretary of Education William Bennett once explained how increasing student loans has "enabled colleges and universities blithely to raise tuitions, confident that federal loan subsidies would help cushion the increase." Simple economics suggests that if a third party eases a budgetary constraint on consumption for a demanded good or service that the costs of that good will increase.
Easy credit inflates prices and distorts investment. The increased flow of money into colleges and universities through the vehicle of borrowed money has demonstrably not gone to improvements in student instruction. Instead it has gone into expenditures intended to recruit and retain students, such as capital expenditures on student life amenities. For example, several colleges have used increased funds to invest in such non-essentials as water parks. At private colleges, the real increases in per pupil expenditures on instruction have significantly lagged behind per pupil increases in student services, faculty research and administration.
The former president of Harvard University, Derek Bok, has commented:
"Universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires."
Generous student loans were intended to help low-income and middle class students afford higher education. Access to adequate funding is certainly a significant concern, but the real barriers to college education are preparation and cost. Unfortunately, the easy credit that is leaving so many young people burdened with debt is also a key culprit in driving college costs up and may be a factor in pushing quality and rigor down. Colleges, universities and policymakers need to find better ways to make college accessible and affordable without relying on distortionary lending practices.
Copyright 2015, Deseret News Publishing Company