College attendance used to be synonymous with success. “Go to college and you’ll be set for life” they would say. Entering undergrad in fall of 2006, this was as true as ever, or so we were told. Four years later, a bleak picture became the reality as the double whammy of a massive recession paired with an influx of degrees. As if overnight, a college degree went from being your ticket to freedom to your shackles of economic slavery.
This isn’t just my observation though. By 2008, as reported by U.S. News & World Report, lifetime earnings of college graduates had plummeted by 70%. College Board had once boasted that a college graduate would earn around a million dollars more than their less educated counterparts in their lifetime. By the time U.S. News reported midway through my degree, that number had dropped to just $300,000. Nearly a decade later, that margin is far less.
Ironically, while the pure economic value of a degree has decreased, the cost of attendance has steadily climbed. In North Carolina for instance, the last 15 years has seen a 400% increase in the cost of in-state tuition. Up until the last two academic years, the number of graduates with degrees was growing, while costing more than ever, returning less and less on their investment. It’s an economically insane principle.
It’s catching up to us though. As of the beginning of 2017, U.S. student loan debt had climbed to $1.28 trillion from just $300 billion a decade ago, with no slowing down in sight. That’s divided among 44.2 million Americans living with student loans. That’s one-third of the working population of our country. When they left school last spring, the average student had more than $37,000 in loans.
It’s really worse though. In April of last year, The Wall Street Journal reported that 43% of those with federal student loans “were either behind or received permission to postpone payments due to economic hardship.” This is extremely troubling for a number of reasons, namely that student loans are now the largest pool of loans, passing auto and credit card loans, and that the federal government is on the hook for those debts.
The student loan bubble is on the horizon.
A total collapse could be a saving grace though. Right now, America’s economy is crippled by student loans. Upon graduation, students aren’t starting small businesses or beginning their lives financially. Instead, they are playing things safe because their financial picture leaves no room for risk.
When students use up their debt capacity on student loans, they can’t commit it elsewhere. “Given the importance of an entrepreneur’s personal debt capacity in financing a start-up business, student loan debt, which cannot be discharged via bankruptcy, can have lasting effects later in life and may impact the ability of future small-business owners to raise capital,” the study says.” – New York Times
If loans hit the reset button, that could counterintuitively reinvigorate the economy. As long as our young entrepreneurs can’t, or won’t, start new businesses and create positive outcomes, our country’s potential is extremely limited.
Until the situation changes, parents and future students should take a long hard look at the college decision. The factors in favor of a degree seem far less beneficial than they have been portrayed over the past several decades. The solution is undoubtedly found outside of the conventional wisdom of simply attending college after high school.
Indeed, perhaps it is time to look harder at skilled labor, trade schools, and even pure entrepreneurship. What if high school graduates took out a $37,000 loan to start their own business? Even if they failed, they would have a true education for the debt. If they succeeded, our country would rise to new heights. Something simply must done because college is crippling America.