[Vision2020] A Dangerous ‘New Normal’ in College Debt

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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March 8, 2013
A Dangerous ‘New Normal’ in College Debt By CHARLES M. BLOW

We are reaching a crisis point in this country’s higher education system.

As college tuitions rise and state and local funding for higher education
falls — along with median household incomes — students are taking on
staggering levels of debt. And many can’t find jobs that pay well enough to
quickly pay off the debt. This has long-term implications for our society
and our economy, as that debt begins to affect when and if young people
start families or enter the housing market.

The student debt crisis may become a dangerous “new normal,” according to a
report <http://www.sheeo.org/sites/default/files/publications/SHEF-FY12.pdf>this
week by the nonprofit State Higher Education Executive Officers
Association:

“In the ‘new normal,’ retirement and health care costs simultaneously drive
up the cost of higher education, and compete with education for limited
public resources. The ‘new normal’ no longer expects to see a recovery of
state support for higher education such as occurred repeatedly in the last
half of the 20th century. The ‘new normal’ expects students and their
families to continue to make increasingly greater financial sacrifices in
order to complete a postsecondary education. The ‘new normal’ expects
schools and colleges to find ways of increasing productivity and absorb
ever-larger budget cuts, while increasing degree production without, we
hope, compromising quality.”

In constant dollars, state and local educational appropriations per
full-time student reached their high in 2001, at $8,670. In 2012, those
appropriations fell by nearly one third, to just $5,896.

The cost of tuition, on the other hand, has increased dramatically.
According to a September report by CNN
Money<http://money.cnn.com/2012/09/17/pf/college/college-costs-obama/index.html>:
“Over the past decade, average annual tuition for a year of community
college has risen 40 percent to $3,122, according to the College Board, a
nonprofit group that runs the SAT exam. At four-year public universities,
the cost has risen 68 percent to $7,692 a year.”

Meanwhile, a September Census
report<http://www.census.gov/prod/2012pubs/p60-243.pdf>shows, median
household incomes fell by nearly 7 percent from 2001 to
2011. And there are now more Americans living in poverty than at any time
since record-keeping began more than half a century ago.

This confluence of trends has led to higher borrowing by students.

An analysis<http://www.newyorkfed.org/newsevents/mediaadvisory/2013/Lee022813.pdf>last
month by Donghoon Lee, an economist at the Federal Reserve Bank of New
York, found that “student debt is the only kind of household debt that
continued to rise through the Great Recession” and is now the “second
largest balance after mortgage debt.”

According to Mr. Lee, student loan debt is fast approaching a trillion
dollars, up from less than $400 billion in 2004, and both the number of
borrowers and the average balance per borrower have “increased by 70
percent between 2004 and 2012 (7 percent per year).”A September Pew
Research Center
report<http://www.pewsocialtrends.org/2012/09/26/a-record-one-in-five-households-now-owe-student-loan-debt/>found
that “a record one-in-five households now owe student loan debt.”

That report also found that student loan debt as a share of household
income was 24 percent for families in the lowest income quintile. That was
at least twice the share of any other quintile.

As the report put it, “The relative burden of student loan debt is greatest
for households in the bottom fifth of the income spectrum, even though
members of such households are less likely than those in other groups to
attend college in the first place.”

And many of those graduates can’t find work or are underemployed, and they
struggle to pay back their own personal mountain of debt.

A January report<http://centerforcollegeaffordability.org/uploads/Underemployed&>from
the Center for College Affordability and Productivity found that
“about 48 percent of employed U.S. college graduates are in jobs that the
Bureau of Labor Statistics suggests requires less than a four-year college
education.” That number included 37 percent in occupations requiring no
more than a high school diploma.

For example, the report pointed out that “in 1970, fewer than 1 percent of
taxi drivers and 2 percent of firefighters had college degrees, while now
more than 15 percent do in both jobs.”

And yet, this country needs a more knowledgeable work force to be
competitive. While the number of college graduates in America is
increasing, that number is growing even faster in some other countries.
And, as the Organization for Economic Co-operation and Development noted in
2011, “The U.S. is the only country where attainment levels among those
just entering the labor market (25- to 34-year-olds) do not exceed those
about to leave the labor market (55- to 64-year-olds).”

Our national educational aspirations and the debt crisis that they’re
creating are colliding. We are on an unsustainable track. This will not end
well.

•

I invite you to join me on Facebook
<http://www.facebook.com/CharlesMBlow>and follow me on
Twitter <http://twitter.com/CharlesMBlow>, or e-mail me at
chblow at nytimes.com.




-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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