Wednesday, March 27, 2013
Student Debt Hits Home
By Jeremy St. Clair
An article in the New York Times about the danger of the new normal in college debt caught my interest because I’m a college student.
The author of the article, Charles M. Blow, believes that college students are reaching a crisis point in the United States college education system; with the price of tuition rising, many students have a large amount of debt. This has serious implications for our society and the economy.
A report by the State Higher Education Executive Officers Associations says the debt of college student is coming dangerously close to becoming the new normal. Because of this, healthcare and retirement compete with education over limited resources. Also the new normal does not expect there to be a recovery of the declined funding for higher education. It expects families to make great financial risks in order for college students to have a better life after their education. It also puts expectations on schools and college to find ways to increase their productivity.
The cost of tuition at community college has increased dramatically and has risen 40 percent to $3,122, according to the College Board, which runs the SAT Exam. At four year public universities, the cost has risen 68 percent to $7,692 a year. A September census report, meanwhile, shows median household incomes fell nearly 7 percent from 2001 to 2011 and more Americans are living in poverty. This causes more and more students to borrow money.
An analysis done by Donghoon Lee, an economist at the Federal Reserve Bank of New York found “student debt is the only kind of household debt that continued to rise through the Great Recession.” This is now the second largest household debt after mortgage debt. He calculates loan debt is approaching a trillion dollars, up from less than four billion in 2004. The average balance of borrowers increased by 70 percent between 2004 and 2012. A Pew Research Report said student loan debt as a share of household income was 24 percent for families in the lowest income bracket.
The Pew report stated “The relative burden of student loan debt is greatest for households in the bottom fifth of the income spectrum.” Many of the graduates can’t find work or jobs and then are unable to pay back the money they owe. A report from January from the Center for College Affordability and Productivity found “48 percent of employed US college graduates are in jobs that the Bureau of Labor Statistics suggests requires less than a four year college education.”
The United States needs a more knowledgeable work force to be competitive, Charles Blow argues. “While the number of college graduates in America is increasing, that number is growing even faster in some other countries,” he wrote. All of this relates to me because I am a college student and this may become an issue for me.