Tuesday, September 10, 2013

Back to School, Back to Debt

Ah, back to school. Fall air, cozy sweaters, and crippling student loan debt. Last year we talked about how USA colleges are actually increasing the income gap, and higher education is losing most rights to call itself a stepping stone.

Occucards.com brings us more detail on this problem:
Since 1980, the cost of a college education in the U.S. has risen 900%, many times higher than inflation. Over the same period, federal student aid programs, such as Pell Grants, have shrunk from covering approximately 70% of total public college costs to only 34%. As a result, more and more students have been forced to take out loans to pay for school, loans that have become much harder, if not impossible, to pay back. The average student today graduates with $25,000 of debt, and default rates are as high as one in three.
How has it gotten so out of control?  Well it seems our economic incentives are misaligned: "Private lending corporations have turned higher education financing into a predatory lending system where they—and the government—make more money when a borrower defaults."  1/3 students are defaulting, and when you default you can end up paying back way more then the original amount of your loan, over 50% more than the balance of your original loan!  And if you don't pay voluntarily, collectors can garnish your wages, social security and disability benefits, and tax returns.  You can't even declare bankruptcy to avoid student loan debt.  Most students who default DO pay back their loan eventually (85%), but their credit rating, job prospects and housing situation may be far pushed into poverty by that time.

What can we do? Well, we could just stop going to college.  Most high school diplomas don't grant a livable wage, but there's always technical school or online universities.  Some students are also protesting for tuition freezes or returning bankruptcy protections to student borrowers. Most drastic, we could consider moving the USA to a public university system like Canada.  They still have plenty of schools in the Global Top 300 (while USA school rankings have been declining since 2003):

However, USA colleges still dominate the top 100, so even at our worst, we're still pretty good.  The bigger question is, what's best for the students?

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