Student Debt Non-Crisis
Student debt is a complex issue by any standard. There is a great body of evidence to suggest that the growth of public subsidies and guaranteed loans, far from making college cheaper, have in fact increased the cost above what would be considered natural levels of increase over the passage of time. Instead of talking about that, which is all too easy to investigate, the question of whether or not the recent average of $25,250 is a burden is more intriguing and far more important to look in to.
I don’t see this debt level to be very crushing, but it seems that every day you can find articles lamenting the fact that students are buried under this “mountain”. Not only are student loans made with long repayment periods and low interest rates, there are a number of options available for their repayment to be made by third parties or “forgiven”. I don’t like the idea of forgiveness because just like guaranteed loans and subsidies, they distance the consumer from the actual cost. There is another option that is common, and it is “third party” repayment. This may seems semantic, but it isn’t.
If one joins the military or becomes a teacher (etc.) there are many options for loans to be repaid. Consider that this is really part of your wage, unlike the government forgiving your loans because you have done something or another. This isn’t without it’s problems, but it’s a far better option than outright forgiving loans, simply because in these cases, if you leave military service or your teaching post, the repayment stops and you have to start paying. If loans are forgiven, usually it’s upon reaching a specific time period of employment and the costs are not born by the entity employing you, but by third parties, usually the tax payer.
Consider the number we are talking about, $25,250. That’s not that much, for an extra $305, you can buy one of these. If you don’t click links (like me) that’s a 2012 Ford F-150 STX, and it retails for $25,555. No one is out there lamenting the crushing weight of new car debt are they? Maybe you are thinking that newly minted college students are not going to take out a $25,000 loan for a new car, you are probably right. Lets go with the more likely scenario of a used car loan, The average size of a used car loan in 2011 was $17,404, assuming our college students are going to be shooting a bit lower, let take an arbitrary $5,000ish dollars off and call it $12,000, roughly half the amount of the average student debt in the US.
Used car loans are usually for a term of 36 months, so over that period, the loan should be paid off, compared to the $25,250 student loan burden, paid off over 10 years (more with a deferment or forbearance and any of that sort of thing) the monthly payments will be higher, and the average lifespan of your used car may only be in the range of 5-7 years after you buy it. That means that unlike your “crushing” student loan debt, which you only need borrow once, you are going to be looking for another car not so far into the future, and likely taking out a new loan for it. Education won’t wear out that easily.
So yes, college is needlessly expensive, so it follows that student debt is needlessly high, but doesn’t automatically follow that the average size of student debt is too burdensome. Especially when you remember it’s not a recurring cost, unlike car loans possibly every 7-10 years.
I’m all in favor of reducing the cost of college, but the answer isn’t to take tax dollars and shower college students with them. We need to do something to return colleges to a place where market forces can act and force prices down. Education is a commodity, like anything else, and subsidizing any commodity, will not make it cheaper, it will only hide the real cost. It would also be nice to have honesty make an appearance in the discussion about the cost and value of higher education, but I’m not going to hold my breath, after-all, there is no honesty what-so-ever in the discussion over the cost of birth control. ($9/mo. at Wal-Mart and Target with no health insurance)