In the US the size of the outstanding student debt bubble is second only to mortgages. It is increasing in size, shows no sign of contracting, and worse, political solutions to the problem will only make it worse. To cap it all, the entire system is a socialist game and little to do with a capitalist free society.
First some data, culled from a Comment piece in today’s US print edition of the Wall Street Journal titled, “Clinton’s Bailout for the College-Industrial Complex.” Total debt now equals $1.3tn. Yes, trillion. The article reports, “The average four-year education at some public colleges, including tuition and fees, can surpass $200,000 for out of state students.”
From the article:
- Two thirds of students now borrow to pay for their education, up from 45% in 1993, according to a New York Times analysis of Federal Data
- At the end of 2014 the average student-loan borrower owed $26,700, according to analysts at the New York Fed
- At the same time, 4% of students owed more than $100,000.
The author of the article, Charles Sykes, author of “Fail U: The False Promise of Higher Education”, asked “Where has all this money gone?” And he nicely explains all the lovely new buildings and support staff etc. added over recent years.
The reason why student debt is out of control is heavily driven by government subsidies. The US policy of “education for all”, originally conceived in terms of opportunity, has been executed, misconstrued and abused into “everyone should go to college.” I read an article a year or two ago in the UK Daily Telegraph newspaper site that reminded us that universities were never designed for all; they were designed for those among us who had the talents who could excel. Yes, everyone has (or should have) equal opportunity to attend. But that ideal is very different from giving money away to children and young adults who are not suited to college.
The article highlights some more disturbing data:
- Some 40% of students fail to get a degree within six years
- The drop-out rate, whereby students end up leaving after determining that they went to the wrong college, is near all time highs
In summary the system is inefficient in several ways, and the ‘disease’ is now systemic only a major overhaul of the system or a disaster, most likely a financial melt down, will fix it. No political leader cares to seek a solution.
- The process by which students select colleges and studies are now well aligned and neither are they (an old problem, to be fair) well aligned to industry needs
- Subsidies have distorted the price/cost mechanism and led to a price/subsidy spiral
- Social policy, seeking to encourage the idea that everyone should go to collage rather than seek a professional or vocational qualification also distorts the demand/supply aspect of the market
Overall capitalism has been twisted into a mess in the ‘interests’ of the people. Time we wised up:
- College is not for all
- Have colleges increase their oversight and curriculum and programs led by more industrialists
- Align public funding to those students who qualify properly for their chosen studies, and not given away freely to anyone just because they feel like going
- Align public funding with “college completes” as opposed to “student sign-up”. This will delay payment but encourage colleges to select students who really will finish the degree
- The current debt should be mutualized at a student level so that industry’s and benefactors can cover the cost of the debt by buying future shares in individual productivity
- For those students lumbered with debt for courses and studies no insist wants, you are in your own
- Try to implement these programs at state level, not Federal level, where folks are never the jobs, careers and homes of the students and employers
This is a hot and ongoing topic. Even my son wrote a paper on this topic that was selected for publication. Some of his ideas are listed above. See If I Were In Charge. Even some of the students understand the issues better than the politicians.