​Snake oil and student loans

By JOSEPH LEVINE

The rising student debt crisis in the U.S. is not breaking news. From 2000 to 2016, the average annual cost of college has more than doubled, from around $15,000 a year to nearly $32,000. Over the past 20 years, only two other goods or services have risen as much as college: hospital services and college textbooks. Importantly, wages have been unable to keep up with these Everest-like spikes. Since 1989, the cost to attend a university has increased nearly eight times faster than wages. While the cost of a four-year degree exploded to $104,480, real median wages only rose from $54,042 to $59,039 between 1989 and 2016. As a result, many families have been pressured to take out student loans to send their kids to college. This is where it gets bad.

In 2020, Americans currently owe over $1.64 trillion in student loan debt, spread out among about 45 million borrowers. That’s about $587 billion more than the total U.S. credit card debt. Sixty-nine percent of seniors graduating with a four-year degree in 2019 had student loan debt, with 75% of graduates from private, nonprofit colleges (like Middlebury) having loans as of May 2018. As much as 14% of borrowers who go to nonprofit colleges will default on their loans within 12 years, leaving their credit scarred and crippling them financially for years to come.

But doesn’t the value of a college degree make up for the cost of the loans? This question requires a two-fold answer. Historically, obtaining a college degree led to a life of greater financial security than a life without one. College graduates received cultural and social capital in a way that put them at an economic advantage over their peers. However, the Federal Reserve Bank of St. Louis found in a recent study that the wealth premium (the increase in wealth because of having a degree) for recent college graduates is almost at zero. In other words, the value of a college degree may not actually be the investment it is purported to be as high costs and lack of job opportunity negate gains.

The second part of the question concerns the actual value of a college degree. College tuition costs and the demand for degrees keep increasing, so one would assume that this reflects the increasing value of a college degree. Unfortunately, the opposite is true. Current median pay for bachelor’s degree holders is below 1990 levels, yet college tuition fees have gone up 391%. As many as 40% of recent college graduates are unemployed or underemployed. For context, higher education tuition has outpaced healthcare costs about two-fold in that period — despite the marginal value of a college degree remaining stagnant.

As more people have become aware of the income gap between college and high school graduates, the demand for college degrees has skyrocketed. Colleges have taken advantage of this by jacking up their prices to obscene heights. This leaves people with a choice: forgo college and accept a lower living standard or take on insurmountable student loans with a limited chance at future prosperity. In both situations, the average student loses and colleges benefit.

At this point, you may be asking whether taking out student loans to go to Middlebury is worthwhile. It is a complicated question, but the answer is likely yes. Middlebury has a positive return on investment (ROI) over twenty years. This means that for most Middlebury alumni, their degree will earn them a job that will make the hefty tuition “worth it.” However, Middlebury is ranked 379th in the country in ROI, despite being ranked in the top 60 for tuition. Shouldn’t the price of a college reflect the value of its degree?

Obviously, college is more than just a measure of how much money a student will make with their degree. People are paying as much for the social aspects as for the academic opportunities. There is living in dorms, going to parties, eating in the dining hall and other experiences that, to some, make the value of college priceless. Regardless, that absolutely does not mean that colleges must raise prices eight times faster than wages, and twice as fast as healthcare costs. That is predatory.

I was fortunate enough that I did not have to borrow any money to go to college. But when I look around at my peers worrying about paying off their student loans — while colleges like Middlebury sit on their endowments and rake in mountains of tuition — it makes my blood boil. Millions of kids throughout America are being lured into borrowing money to pay for a degree that will never pay off. This is a system that benefits the rich and privileged while everyone else is left mired in debt and begging for a job. While student debt continues to metastasize, the federal government and colleges stand idle. And why wouldn’t they? They just keep collecting their interest and tuition fees, while American students are left wilting under economic stress.

Some politicians, like Bernie Sanders and Elizabeth Warren, have called for a cancellation of student debt. With both of their presidential campaigns falling short this year, that demand seems unlikely to materialize anytime soon. To address the immediacy of this crisis, the American people need to take it into their own hands. Some have called for Americans to come together and forge a debt strike. By refusing payments on student debt, the government may renegotiate the terms of the loans, making them more amenable. Regardless of the method, stemming the rise of college tuition can only happen if those buying college degrees take initiative and stake their claim on the value of their education. A movement against student debt is long overdue.

 

Joseph Levine is a member of the class of 2021.