Student Debt Rises 8% to $904 Billion
New figures from the Federal Reserve Bank of New York show that student loan debt has risen 8% from a year ago. Americans owed $904 billion in student loans at the end of March, as compared with the $679 billion they owed in credit card debt.
Overall, Americans are reducing their debt burden in a process called deleveraging: The Wall Street Journal says that total household debt, which includes mortgage, student, credit-card and auto loans, has declined by about 10% since mid-2008 when borrowing reached its height. As of March 31, total household debt was $11.44 trillion.
But student debt is going up, and quickly,
…in part due to higher tuitions, but also because alternative ways of paying for college—such as home-equity loans—have dried up. The Obama administration has expanded federal loan programs, which offer student loans at below-market rates. And, as usually happens in recession, college enrollments have surged as job openings have been scarce.
The Wall Street Journal also reports that more students are falling behind on their payments. Economists point out that this trend portends poorly for the future, as people postpone buying houses and starting families:
A rising number of student borrowers are behind on their payments; 9% of the total dollar amount of student loans is 90 days or more behind on a payment. Many new graduates are having trouble finding well-paying jobs even as payments come due, and a growing number of students are dropping out of school, meaning they are left with debts but no degree, recent research shows.
One student noted by the Wall Street Journal, 19-year-old Juan Urias, left a private institution, St. Joseph’s College in New York City, to transfer to LaGuardia Community College, where tuition is far cheaper. Financial aid now covers all of his tuition; had he stayed at the other school, he would have had to borrow about $5,000 and graduated (provided that he was able to finish in four years) with $20,000 in debt. “I know how bad it is going to be in the future. I can’t do it,” he says.
I teach at a small Jesuit college in Jersey City, New Jersey, that is similar to similar to St. Joseph’s: Small private nonprofit schools whose student bodies are from lower-income backgrounds have simply become too expensive compared to community colleges and what such private schools might offer — more attention to students, smaller classes — has become a disposable luxury.
Could college as we have known it become such a luxury?
I’m inclined to say that it has already become such in the US; that there is a growing division between those who attend college to learn, expand the life of the mind and such — the traditional goals of the 19th century notion of a liberal education that still drives a lot of American colleges’ and universities’ curricula — and those who attend college with the sole purpose of getting a job. Princeton University professor Anthony Grafton describes how the college system as we have known it is unraveling in a New York Review of Books review of College: What It Was, Is, and Should Be by Columbia University professor Andrew Delbanco.
What’s clear to everyone on both sides is that American higher education rests on shaky economic foundations. Since the campaign for Proposition 13 in California in the late 1970s, governors, regents, and voters in state after state have abandoned the old idea that higher education is a public good for which all should pay. Private universities flew high in the prosperity of the 1990s and 2000s—but the crash of 2008 has cut deeply into many endowments. Many trustees and administrators have lost their former confidence that future economic expansion would finance present expenses and the borrowing that sustained them. Large gifts are hard to find, though some universities continue to receive them. Big grants are becoming rare too, as government support for scientific research declines.
Both private and public universities have seized on the only source of income within their control, tuition payments, and pushed them higher, year after year—much higher than the rate of inflation, to say nothing of family incomes, which have been flat for a decade.
With reports about college graduates not finding employment, or only in jobs in the retail and service sectors that they did not have a college degree to get in the first place, Grafton says that “consumers will not remain willing to fund a system that loads them with debt and provides few visible financial benefits in return” and that some sort of “shake-up is coming.” To parents and to students, and to colleges officials — whose institutions will not survive without students in their classroom — college has become a matter of “profit and loss.”
Grafton’s pronouncements are fairly painful to read as someone who works at a school that is tuition-driven, that has struggled to maintain enrollments and that looks increasingly to the market in designing its educational programs. Truly, most if not all institutions of higher education are doing just these things. What I teach — Classics, ancient Greek and Latin — is strictly based in the humanities and it is interesting (well, that is one way to put it) to think of how such studies can exist alongside (if at all) far more professional fields. But students speak constantly about their financial burden of college to me and I don’t think it is right that they should graduate with so much debt: Idealism does not buy groceries.
I’m not quite sure what shape the “shake-up” Grafton refers to might take. Something about the current model of college education seems no longer to be working. I do think study of the humanities should be a part of students’ education but to what extent and in what form and format, I am not sure — but college needs to feel and to be worth it, if Americans are going to carry so many billions of dollars of debt.
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