Higher Education & Student Loans

On July 1, Congress allowed student loan interest rates to double, from 3.4 to 6.8 percent (Fox News). While they may go back and fix the problem it is just the latest example of the ineptitude of this Congress and our government in general. Education is constantly touted as the key to our future economic prospects in the increasingly competitive global economy and yet our government doesn’t seem to take education very seriously at all. We still have No Child Left Behind as the law of the land, undermining the quality of education of far too many children in America. We have shifted the onus dramatically from scholarships and federal aid to student loans as the mechanism for funding college education. And as our public school populations become more and more diverse, little is being done to reform curriculum and pedagogical practices to address these concerns; while the Supreme Court appears poised to end any and all affirmative action programs.

So where does that leave us? The reality today is that there are not enough quality jobs for the students graduating from college. This could be the tail end of the latest financial crisis or it could be the new economic reality, where the middle class is crunched and we really want fewer, not more, kids going to college. If that is the case, the latest legal decisions and legislative action make sense. In a more competitive environment, the elite class and race will do everything they can to give their children a competitive advantage. Unfortunately, this is not best for the country for a number of reasons including 1) A crowding out of too many quality students who don’t happen to be progeny of the elites, 2) A less educated public that serves the powerful but not democracy (which depends on an informed, educated public – a line I am tired of writing, but one that seems more relevant than ever today) and 3) A less diverse decision-making body (made up of college grads), which tends to undermine innovation, new ideas and new solutions to our most pressing issues.

Beyond the increased cost of attending college, is the problem of the debt acquired while in school. As I wrote in an article I recently published on the matter, students now must question the rationality of even getting a college education if they have the opportunity to make money in other ventures (like online or in the world of computing). Given that 50% of recent college grads are either under (25%) or unemployed (25%), the opportunity cost of attending college is going up. This is further amplified by the higher interest rate on subsidized loans, which increase the cost of college more than the estimated $2,600 a year, given the 10 to 30 years of accruing interest students will pay. The debt that students leave college with today is often the size of a first mortgage and more and more are defaulting on their loan repayment, given the dire economic outlook, at least in the short to medium term. As I mentioned in a previous post, debt forgiveness is a sensible policy to give the economy a bolt and push us back toward sustainable growth and employment. Of course, it would also push up inflation rates and the elite stranglehold on government means this is a very unlikely scenario, like most that would actually help the common American today.

But that doesn’t mean we shouldn’t push for a bill to at least consider this issue. Watching what has been occurring in the Middle East the past couple years reminds us that democracy can still work for the people if they demand it.

For those who are interested, Democracy for America has a great series of infographics on student loan debt today: Link.