Jill Teehan: Guest opinion
Special to The Aspen Times
Aspen, CO, Colorado
I pay my student loans on the 15th of every month. This month, as I clicked the “PAY NOW” icon, I took in the numbers. Two thousand dollars clicked away, and a six-digit amount still was outstanding. With 30 more years of repayment, I will be close to retirement by the time my education is paid in full.
This price tag is my responsibility, one I accept and take seriously. Nonetheless, in light of the soaring cost of higher education and our nation’s debt, I took a look at what the mounting student debt will mean for our children’s future. It’s not good.
In 2010, American student debt reached $1 trillion. To put that number in perspective, consider this: LeBron James earns $45 million a year playing basketball. James would have to play in the NBA for 22,000 years to earn $1 trillion. Apart from home foreclosure debt, student debt exceeds all other forms of American consumer debt. One statistic says that student debt is increasing in the U.S. at about $2,800 per second.
I’m worried about this. If you are a current or soon-to-be college student, a graduate with debt, or a parent, you should be, too.
Students with loans delay buying homes because they cannot afford them or are unable to obtain financing. They delay starting families, saving for retirement and saving for their own children’s education. They frequently move back home with their parents and rely on them for money. Young adults who delay families take longer to invest in their local education system. They decline to accept important but lower-paying jobs because of their looming debt.
This means they are often less happy and more stressed, which strains our national morale and our health care system. And our society loses talent in professions where we need it, such as teaching (low-paying) or medicine (too expensive).
Moreover, students sinking in college loans will teach the next generation that college might not be a sound investment after all. This threatens the middle class. Our economy is dramatically shifting toward an innovation and ideas-based market. We need highly capable American innovators rising through our higher-education system. We must make those opportunities available to the middle class, which relies on student loans to attend college.
So what’s causing the rise in student debt? For one, higher education costs are inflating at unsustainable rates. Based on the Consumer Price Index, the cost of college has doubled since 2000. The University of Colorado announced a tuition increase this year despite the struggling economy. In response, government and private lenders have made more and more money available.
The problem is that this bottomless availability of funds has in part caused the inflation in costs. Because they do not pay the price when their students default on debt, colleges have little incentive to keep down tuition rates. Immune from bankruptcy claims, private lenders freely loan tuition and living-expense money with little risk. With endless borrowing ability, students themselves do not demand that tuition prices stay consistent with standard inflation rates.
Moreover, as students – and parents – demand college amenities that have little impact on the quality of education (fancy dorms and gymnasiums, for example), colleges are pressured to stay competitive, which results in tuition increases.
Another reason for the increased student debt is the high default rates among borrowers. Traditionally, there has been little to no screening to assess a borrower’s likelihood to pay back student debt. Taxpayers and students who responsibly pay their loans absorb the cost.
Myriad factors explain these default rates. Students who complete university in today’s economy often cannot find jobs – or jobs that pay enough to meet loan obligations. Many students who assume debt do not graduate. For others, their American education has not prepared them to be academically or professionally competitive.
To address this mounting debt problem, we should give colleges a stake in the debt game. We should screen borrowers for their likelihood to pay back student debt, just like we screen other types of borrowers. To stimulate the first-time homebuyer market, we should enable students with education loan interest to transfer that obligation to a home mortgage. And we must ensure that the students we send to college are truly prepared for its rigor and seriousness.
There is no question that a college education can be a path to a brighter future. That’s certainly been true for me. Nonetheless, no opportunity comes without a price. As I click “PAY NOW” next month, I will feel my routine unease.
But next month, I also will think about the larger social and economic stresses created by student debt. Hopefully my (very pricey) education has prepared me to generate, and act on, solutions to this growing problem.
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