Civilization, Whither Art Thou

Wages and Benefits: Part 2

It seems to me that part of the problem of my generation is student loans.  The Chronicle of Higher Education released a  blurb stating that student loan debt has now surpassed credit card debt in the country.  According to the Chronicle the Federal Reserve calculates that student loans surpassed credit card debt by $3.2 billion.  That's quite a bit (in a few years it will likely be great than 1% higher than credit card debt).  In fact, many economists say that there has been a "tuition bubble" that was caused by the ease at which students were receiving student loans (see this Google search).  There are the naysayers; but what we do know is that tuition has inflated by over 400% in the last 10 years (since 1993).  We also know that student loan debt has neared $1 trillion with $864 billion in federal student loan debt.   

So let's take a trip down memory lane.  In the year of my birth, 1982, if I wanted to go to a public 4-year institution I could expect to pay $2,236 in tuition and fees (this is in 2012-2013 constant dollars¹).  Tuition went up a little in 1983 and 1984, but stayed pretty constant in 1985.  So after I finished my fourth year I owed about $9,800 in student loans (in today's dollars).  But what about today?  Well in the 2012-2013 academic year the tuition at a 4-year public institution was right around $8,000.  In other words, one year at that school costs close to as much as 4 years in the early 80's.  Over any given 4 year interval for the past 10 years the tuition has jumped by at least $600 and sometimes close to a $1,000.  So if we assume that it stays this way we can estimate that someone starting college in 2012-2013 at a public 4-year would owe $33,200 in tuition and fees.

Let's recap.  The individual who started college in 1982 owes $9.800 in today's dollars while the student who started in 2012 owes $33,200 in today's dollars.  Just to make a point about constant dollars, in the dollars of 1982 the 80's graduate owed $4,316.  But let's get back to the recap.  This means that relative to each other the graduate today has over three times as much debt to deal with.  According to a number of sources we aren't too far off with our estimate, the average student loan debt is close to $29,000 for 2012.  For more stats and even more information on student loans go here.

Alright.  So there are some of the statistics.  But what does this mean?  Well, let's take the last article into consideration.  Say you get a bachelor's degree in something like art or music or worse you don't complete your degree.  Now you're in the real world and you don't have student loans to pay for your life.  You need to get a job.  So you start looking around.  You quickly notice that there aren't any jobs you qualify for.  You either need to go back to school to complete some certificate program, or take prereq's for some program, or just plain start over.  Your other option is work an hourly job for one of the many corporations of the country (all of which pay near minimum wage, even to holders of Bachelor's degrees).  We saw in the last article that the money you earn is less than what it was before and now you have three to four times the debt to pay off.  Where does this leave you?

Up a creek without a paddle is where.  How do you pay off your excessive student loans with less money than other generations?  You can't.  And that's one of the reasons why enrollment is down.  Potential students are realizing that if they go to a community college and then enter an accelerated program at a for-profit single-focus institution they can save time and money compared to the traditional four-year approach.  They have also learned to bargain.  Here is a quote from the ex-President of Guilford College, North Carolina, as reported by the Chronicle:

"I have never seen savvier kids or savvier parents than the ones we are getting now," Mr. Chabotar said. "They are bargaining all over the place. It’s like going to the used-car dealership."

This bargaining has been steadily creeping up at private institutions.  Today over 44% of tuition is discounted at private institutions to meet enrollment demands according to the Chronicle.  So what is happening?  Why are these schools allowing this to happen?  Clearly students, and parents, are frustrated with tuition rates and are fighting back.  But does this benefit the students?  That is the question we need to answer as a society.  What is needed, monetarily, for a solid education.  I personally learned chemistry just fine in lecture with a chalk board, that's it.  Once we can answer that question we desperately need to find out how to fund colleges in an efficient manner that allows citizens to afford a college education in the same manner that others have in the past (say 1982).

In the end, though, the picture is clear.  We today have more student debt with lower pay.  That may be frustrating citizens and pushing them away from institutions of learning.  To draw students back in, institutions seem to be catering to the whims of the masses and destroying what education is all about.  We'll continue this in the next post. 

1.  Constant dollars means that the money is constant across time.  So if we went back in time and still used dollars as if they were worth the same thing today how much would we spend.  For example, if an apple today costs a dollar, then it might cost thirteen cents in today's dollars back in 1980.  For a more thorough discussion see this article on Wikipedia.

If you would like to continue reading more, the previous article is called Hobby Lobby US Supreme Court Decision, the next article is called Minimum Wage and Benefits: Post 1.