Loan bubble may burst
According to the Institute for College Access and Success Project on Student Debt, college students who borrow loans will graduate with about $26,600 of debt. According to Gordon Wadsworth, author of The College Trap, college tuition has increased over 2.5 times the rate of inflation since 1985. Clearly, America has a problem with tuition price increases and student debt.
The U.S. is trapped in a student loan bubble, which is susceptible to burst. Like the housing bubble, it is caused by carelessly gifting loans to students who won’t graduate and will fail to pay them back. This phenomenon was described earlier this month by professor Richard Vedder of Ohio University at the Students For Liberty Pittsburgh Regional Conference at Duquesne University. Students are taking longer to graduate, and many are failing to complete their education.
Vedder stated that students are being encouraged by many public universities to take a fifth or sixth year to receive their bachelor’s degree, and 34 of all students percent do so. This prolonged time in college increases their debt and raises tuition because of increased demand.
Ironically, as Vedder points out in a Bloomberg article, “Elite private schools can cost far less relative to public schools, not only because of the top schools’ generous aid, but also because students mostly graduate in the advertised four years, while those at state schools don’t.” Many elite universities push students to complete degrees in four years and deny aid after the initial four years. Vedder calculated that this push caused a median of 87 percent of students in elite universities to graduate in four years, while a sad 25 percent graduated in this allotted time in public universities.
This decreasing graduation rate and increasing debt can be attributed to the idea that a person must go to college to be successful. This idea is far from true. During his speech, Vedder stressed, “We have more janitors with bachelor’s degrees than chemists with bachelor’s degrees.” While this may be hard to believe, the Bureau of Labor Statistics revealed that 115,000 janitors, 83,000 bartenders, and 323,000 restaurant servers have bachelor’s degrees.
Student loans have constantly increased the demand for education, attracting a large number of people who may not be truly suited for college. After all, academics are not for all and, until recently, were seen as an option among many others. In return, the cost of college education has also begun to exponentially increase, as those who drop out or take additional years make it more expensive for others to attend college and graduate in four years.
By offering subsidized loans to almost anyone and making students believe that college is necessary, the government may be hurting young adults by making college seem like an inevitability instead of an option.