College Debt is the Scourge of the American Economy
It would be great if Congress could get its act together by July 1 to avert a doubling of the interest rate on federal student loans. But even if current legislation passes, it will put only a tiny dent in the huge problem of college debt.
What we really need is a stronger, longer-term approach focused on driving down the costs of college so that students need to borrow less in order to afford it.
Since 1982, the price of college tuition and fees has increased by 570%. That’s almost twice the rate of increase in medical care and 4.5 times growth in the Consumer Price Index. Most recently, as the rise has steepened, student aid has shifted from a focus on scholarships and grants to loans. For a variety of reasons, many students borrowed more than they could realistically expect to repay. As a result, total outstanding college debt in the U.S. now exceeds $870 billion. It surpasses credit card ($693 billion) and auto loan ($730 billion) balances. Nearly one of every six adults has outstanding student debt, with an average balance of $23,300. Debt is highest among 30-39 year olds, who owe an average of $28,500.
In the short term, we can (and should) do what we can to ensure that students who want to go to college have the resources they need to do so. But we will never catch up unless we implement serious strategies to push down that rising curve. That’s a tall order, but if there ever was a challenge that American ingenuity, public – private investments, and good policy can tackle, this is it.
To members of Congress and the president and all the candidates who aspire thereto: here are three suggestions about what you can do right now to get serious about college debt.
1) Move decisions about higher education out of the shouting match over discretionary spending and into earnest bipartisan deliberations about future economic growth. Any good business person will tell you that there are some forms of capital you cannot neglect if you want to remain competitive. Human capital is one of those – in fact it may be the most important. To put it in election year terms: there will be no Jobs Jobs Jobs if there is no skilled workforce to fill them.
It is amazing that the greatest economy on earth has no coherent plan for economic growth that includes a strategy to develop and maintain its human capital. Decisions about higher education should be made in the context of such a strategy, not piecemeal fashion in a budget free-for-all.
2) We love to hear you celebrate the promise of American ingenuity. You can add some great examples of higher-ed innovation to your refrain. Many creative folks are working in the private and public sectors to improve college affordability, and they have found ways to drive down costs and improve learning outcomes simultaneously. You can find them in:
They’ve been researched and supported by leading educational foundations such as William and Flora Hewlett and Bill and Melinda Gates; non-profits like the National Center for Academic Transformation; and others. Many are licensed through the Creative Commons so that they can be shared, replicated, and remixed.
The groundwork has been laid. Can we count on you to implement policies to help bring these innovations to scale and encourage new ones?
3) The high cost of college is but one symptom of a system that is not operating efficiently. Another symptom is that employers are no longer confident that the end product is what they are looking for. Recruiters and other HR professionals say that a college degree – while necessary to even get in the door for an interview for an increasing number of jobs – doesn’t necessarily guarantee that the holder has the required skills and experience. We need a revamped set of post-secondary credentials that assure mastery of 21st century competencies. These credentials can include badges, stackable certificates, industry-recognized certifications, competency-based degrees, and more. Can we count on you to encourage publicly-supported higher ed institutions and the business community to work together to get our system in line with new realities?
No, this isn’t pie in the sky. It’s the kind of challenge that begs for a market-oriented approach in which government, non-profits, and the business sector align their investments to make change happen. The pieces are all there, but can we — will we — connect the dots?