Personal finance expert Laura Rowley writes of a 2009 Northeastern University graduate who is now paying off $200,000 in student loans (link here, via Yahoo! Finance):
Kelli Space, 23, graduated from Northeastern University in 2009 with a bachelor’s in sociology — and a whopping $200,000 in student loan debt. Space, who lives with her parents and works full-time, put up a Web site called TwoHundredThou.com soliciting donations to help meet her debt obligation, which is $891 a month. That number jumps to $1,600 next November.
…Space is just one example — albeit an extreme one — of a student loan bubble that may be about to burst. Over the last decade, private lenders, abetted by college financial aid offices, eagerly handed young people hundreds of thousands of dollars to earn bachelor’s degrees.
Rowley paints a scenario “remarkably like the subprime mortgage crisis.” Student loan debt has ballooned four-fold over the past decade, and student loan defaults have skyrocketed as college graduates struggle to find decent jobs amid the terrible economy.
The bigger picture
As Rowley’s article makes clear, borrowing $200,000 toward a bachelor’s degree counts among the most extreme cases. But we have been ignoring this student loan monster for too long, and it is coming back to bite us. Furthermore, exorbitant student loan debt is just a part of the growing crisis surrounding the financial viability of higher education, as I have written in previous posts, such as here (higher ed generally) and here (legal education).
A moral issue
The years following the end of the Second World War in 1945 marked a period of remarkable growth for higher education in America, and with it came a growing understanding that it was in the nation’s best interest to make college affordable and accessible for students who were capable of doing the work. It started with the GI Bill, a financial aid program for returning veterans that helped to create the heart of America’s middle class. Various grant and scholarship programs sponsored by universities and the government, many of which were based on financial need, would become available to students in general.
Since the early 1980s, however, we have retreated from the idea of providing scholarship assistance sufficient to help financially needy students attend college without taking on tremendous debt. Student loans have supplanted grants and scholarships as the primary form of financial aid.
This is plain wrong. Front loading the costs of getting started in life is a horrible idea and makes for atrocious public policy. Even with the struggling economy, America remains one of the world’s richest nations. We should not be placing the burden of funding higher education on students. Instead, let’s use a fair and just tax system to ask them to give back, but only after they’ve become successful in their jobs and careers.
This and related issues are addressed in my short article, “The Looming 21st Century Generation Gap: Economic Challenges Facing Younger Workers,” in the Winter 2010 issue of Perspectives on Work.