The next great American crisis

College loans are becomingly increasingly unsustainable

The recent collapse of the financial sector was only felt by most after it happened. Today, we face yet another financial crisis that is quietly creeping up on us. And I’m not talking about a double-dip recession or a renewed threat from Wall Street. I’m talking about college loans, especially when combined with the current 9.8 percent unemployment rate. Like mortgages, the financial product that played a large role in the more recent collapse, college loans are widespread. Approximately two thirds of all college students graduate with college loans, and in 2008, The Project on Student Debt estimates that 206,000 students graduated with debts of $40,000 or greater. And the situation is not improving; total student loan debt in the United States is increasing at a rate of about $2,853.88 every second.

College loans are also becoming more and more necessary for many families as they send their children off to school. Since 1982, the median family income has increased by about 23 percent, yet college tuition and fees have gone up by nearly four times that. The need for college loans is only exacerbated by the difficult economy that Americans face today. Many parents, having lost their jobs but unwilling to surrender their children’s dreams, turn to college loans as the only way to hopefully provide a bright future for their children.

But is this sustainable? As students rack up increasing amounts of debt to pay for the skyrocketing costs of a college education, the unemployment rate remains stuck at 9.8 percent. Their entire lives, students are told that a college degree is not just the best way to be successful, but, in today’s world, the only way. Yet greater numbers of students are graduating and finding that there are no jobs waiting for them. And while they’re out looking for jobs, the groups that loaned them money are looking to be repaid. Without higher levels of employment, it is not far-fetched to presume that college loans will be continue to become increasingly difficult to obtain, effectively preventing plenty of perfectly capable young people from going to college simply because they cannot pay. While this is certainly a tragedy for the generations who may suffer this fate, it would also be catastrophic to the United States as a country. The U.S. currently ranks 10th among industrial countries for number of adults with college degrees; if it hopes to maintain or improve this position, the college loan crisis must be averted.

Yet it is not clear how to derail this occurrence. It is impractical to expect the government to substantially increase aid, as the states themselves are struggling to balance their budgets and the U.S. begins to turn an eye to cutting its trillion dollar deficit. Perhaps the area that needs to be looked at is that of the schools themselves. Why have college costs ballooned so dramatically in the last 30 years? Increased costs of labor, fuel, and new technology to remain competitive are a few explanations. MSN cites increased numbers of students attending college, which means increased financial aid, increased costs associated with housing, tuition, and faculty. While this might be the case, more students means more sources of income for the college, in spite of financial aid. Overall, for families with incomes in the lowest 20 percent, the net cost of a year at a public university was 55 percent of median income from 2007-2008; in 1999-2000, it was only 39 percent.

The one solution that has grown in popularity is that of online classes. In fall of 2008, more than 25 percent of students took at least one online class, an increase of 17 percent from a year earlier. This was also a greater increase than the 12 percent jump from 2006-2007. Comparatively, the entire population of students attending college grew by 1.2 percent. The appeal of online classes lies in their ability to cut costs. With an online class taken from the comfort of one’s home, there is no need to pay for housing or a commute, nor do the colleges need to pay for as much classroom space. The greatest hurdle lies in the view of many educators that online classes do not have the same legitimacy or are not as effective as real-life classes. This is reflected at MIT, where the Open CourseWare (OCW) program offers what is essentially the equivalent of a four-year education, but no degree can be earned. Other problems include that online classes can take more time to prepare and may require more self-motivation from students (although I don’t think that last point is a bad thing).

Yet, there is hope. A 2009 study commissioned by the U.S. Department of Education showed that, on average, students taking online classes actually learned more than their real-life counterparts. A later study, however, found that among the classes included in the study, the trend only appeared in classes that were a mixture of online and face-to-face. In those that were entirely online, there was no difference. But the fact that there was no trend in the entirely online classes is not a bad thing, for it shows that online classes are in fact just as effective as real-life classes. Although more research certainly needs to be conducted in this area, online classes show the greatest promise in solving the college loan crisis.

It used to be that the huge burden of college loans was worth it. It was an investment that would eventually provide the investor with a higher return in net income. While many college graduates undoubtedly struggle to pay off these loans, college graduates are still better off than those who are less educated. While the national unemployment rate hovers at 9.8 percent, those with a bachelors degree or higher enjoy only a 4.7 percent unemployment rate. Those with an associates degree or some college education have an 8.5 percent unemployment rate, those with only a high school diploma are at 10.1 percent, and those who have dropped out of high school are at 15.3 percent. So while college is certainly more expensive than it was, it is better than having no job at all. However, if college is to remain accessible to the American public, more research should be done into online classes and other alternative models of higher education. The current model is too expensive, and should therefore be replaced. Hopefully, the growing popularity of online classes will lead to a revolution among institutions of higher education that make a college education more affordable, but just as valuable, for the average American.