The Student Indebtedness Dilemma

debtby James A. Bacon

The problem of student debt is finally getting high-level attention in Virginia, as evidenced by a panel discussion on the subject hosted in Richmond over the weekend. It’s less clear that anyone has a realistic idea of what to do about it.

Some one million Virginians owe a total of $30 billion in student debt. The indebtedness is disproportionately concentrated among African-Americans who tend to come from lower-income families, borrow more, take longer to graduate, are less likely to complete their degrees, are more likely to miss repayments, and are more likely to see their credit scores suffer as a consequence.

Although this was not a theme of the conference, as reported by the Richmond Times-Dispatch, I  would argue that, insofar as institutional racism is a reality today, the most oppressive institution in the United States is the system of higher education, which creates unrealistic expectations for poor, academically unprepared students and loads them up with life-crippling debt. While extremely liberal in ideology, higher ed is highly illiberal in practice, and it is creating a new class of indentured servants. Even in the early plantation economy of the American colonies, indentured servants could work off their debt in seven years. Student loan debt can last for decades.

Speaking at the Richmond event, Sen. Glen H. Sturtevant Jr., R-Midlothian, described his prospects as a Millennial with three young children. “By the time they’re ready to go to college, I’m going to be paying for them to go to college and still be paying off my student loan debt from when I went to law school.”

At least Sturtevant completed his law degree.

The underlying cause of student debt is the high cost of attending college. Due to escalating costs and stagnant contributions from the state, increases in college tuition and fees over decades have relentlessly outpaced the growth in household incomes of all but the most affluent Virginians. But that’s not all there is to the story. Colleges, driven by their commitment to racial and ethnic diversity, are especially aggressive in their recruitment of blacks with the consequence that blacks on average are less prepared academically than their peers, more likely to struggle, take longer to graduate (assuming they do graduate), and more likely to accumulate large debt obligations.

Another part of the problem is a powerful cultural belief that college is the only entry ticket to a middle-class life. Anne Holton, Virginia’s Secretary of Education, alluded to it in her panel remarks. “It’s a bit of a leap of faith,” she said, but research shows that the return on investment makes a degree worthwhile, resulting in up to $1 million in additional income in lifetime earnings.

Holton acknowledged that the $1 million figure is an average figure, and it does not apply evenly to everybody. Needless to say, a degree in engineering, computer science or business will lead to more remunerative employment prospects than a degree in education, social work, history or anthropology.

What Holton did not say (or was not quoted as saying) is that literally millions of jobs are going begging in the American economy that pay handsome middle-class wages and don’t require a four-year college degree…. Which brings us to a CNN Money story, referred to us by our friend Tim Wise (El Growler Grande), which says that the U.S. has a near-record 5.6 million job openings. American companies are looking for workers. The trouble is, they can’t find workers with the right skills — and those skills are not taught in four-year colleges.

While the number of students in college has increased from 15 million in 2000 to 20 million today (great news for the educational-industrial complex), what the economy needs is more truck drivers, electricians and plumbers. People may fret about the impact of self-driving Google cars on demand for drivers a decade from now, but the American Trucking Association says the economy could absorb 50,000 additional truck drivers today. The median annual wage for a trucker working for a private fleet is about $73,000.

Here in Virginia, 90% of all jobs in the future are forecast to require some education and training beyond high school but 50% to 65% will require less than a bachelor’s degree, according to “Workforce Credentials: The Pathway to Virginia’s New Middle Class,” a publication of the Virginia Community College System.

Put another way, for every one job that requires an advanced degree, there are two jobs that require a bachelor’s degree and seven jobs that require an associate’s degree or industry-recognized credential. The Virginia economy produces about 175,000 of those jobs each year.

Community college is cheaper than four-year residential colleges, it requires fewer years of study, and it provides degrees and/or credentials that lead to solid middle-class jobs. Lower-income students — especially those coming through school systems that did not provide them solid academic preparation — should consider an alternate, low-debt path to a middle-class life.

Nothing less than a wholesale reorientation of priorities is sufficient to fend off the social calamity of indebtedness.

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26 responses to “The Student Indebtedness Dilemma

  1. I give you a hard time on some of these issues and you well deserve it but I also try to give you due credit when you do deserve it and in this case – you hit the jackpot in my humble opinion – you got it right between the eyes.

    In general those who are trying to raise themselves up from lower income familial circumstance are often – financially illiterate and fall prey to to those who would take advantage and the current college loan system combined with higher ED – to include the FOR PROFITs .

    We’ve already seen this with payday loans, car title loans and For profit schools that relieve armed forces veterans of their GI benefits.

    these folks DO NEED GUIDANCE – stiff requirements on any loans that points them to the academics they need for real jobs in the economy.

    this article struck me:

    ” American Students Know Almost Nothing About Their College Loans

    People don’t know what they owe, how to repay it, and what the government can do to collect the debt.”

    http://goo.gl/9infzp

    Again – Congrats for an excellent and incisive commentary – that I have become accustomed to seeing from you!! Thank you!

  2. Larry makes some good points. But economic ignorance is much greater that not understanding the ins and outs of student loans. Basic economics that includes consumer economics, understanding of the market and associated regulation, and simple macro economics is not understood by most students graduating from any of our high schools — public or private. We try not to allow students to graduate without some ability to use a keyboard. But economic illiteracy seems acceptable too often.

  3. there are all dimensions of economic ignorance though – and you deal with the ones most fundamental first – and it does not need to be done on a race-based basis -either.. all it needs to do is address the basic issue that people do not understand debt – and in this case it’s not even about those who are at the financial margins – it involves a crap-load of people whose parents are not poor and ought to know better themselves.

    and the funny thing is – the POTUS has attempted to recommend legislative remedies to safeguard GI benefits, to make websites that allow folks to know what educational value is and to advocate for more community college and workforce training – and most all of it – opposed .. by those who would rather spend their time decrying the loan problem itself – with they themselves offering nothing to remedy other than clucking their tongues about the flaws of some kinds of people and govt in general.

    • If consumer economics were taught throughout a student’s educational experience, many more would understand the basics of debt; when it makes sense to take on debt; and when it is foolish to do so. A good example is how a person new to the age of majority to balance the need to establish credit against being burdened by credit card debt. Even if students learned to ask themselves and those they trust the right questions, we’d all be moving in a better direction.

      • we agree but why are students of families with with good educations and income taking this debt? I can understand low income folks that are new to college opportunity.

        I cannot understand college-educated parents with their offspring – these folks SHOULD be financially literate. it’s particularly more egregious.. given the fact that they ARE educated and consumer savvy.

        got any thoughts?

        • Now that is an excellent question. I suspect that a significant number of “well educated” families don’t really understand (or maybe it’s want to understand) economics and the impact major debt can have on a younger person’s life. But then, look at the number of supposedly savvy people who thought the real estate market could only go up and wound up upside down in their mortgages.

          • might I push further and ask if these are the same folks who talk about deficit and debt impoverishing the future of their offspring?

            😉

  4. This is a society that sells debt to students the way it sells them sneakers, pot, cocaine, free lunches, welfare, victim-hood, and ignorance called an education. Our society is being driven by out of control by its own “leaders.”

    • Thanks you, Reed, for saying it succinctly. As usual I will wander further into the weeds:

      We have four things coming together here: 1. a widespread belief (a correct belief, I think) that to get ahead in life today you need a college degree; 2. colleges that are too expensive and inefficient and educate our kids in things that often can’t get them good jobs; 3. college educational costs that are being heaped on the backs of the students themselves and/or their parents, not on taxpayers — in sharp contrast with the way we fund secondary education; and 4. the result — unequal societal access to the education every child needs.

      There are many, many things the government could provide that would be nice to have, but are not “needed.” If something is truly needed, however, like health, or education, and the government doesn’t either provide it, or provide equal opportunity access to it, we have to ask is government doing enough?

      A conservative yet fair approach to government requires us to offer an equal opportunity, not an equal outcome. Nobody is claiming here that everyone should go to college. But: is free community college education an opportunity we owe to all our young people today? Some people think so. We can debate what is ‘truly needed,’ and what assistance from the government is ‘enough,’ but to ignore the situation we’ve created by our massively-reinforced selling of the expectation of college, as we blithely heap these costs on the backs of students who, as a result, begin their productive lives handicapped with debt and often end up defaulting — is, frankly, immoral.

      • I agree with you.

        Perhaps what we lack now is integrity, morals, and courage.

        For example, as you suggest, it is immoral the take money (whether cash or debt proceeds) from students without providing them something of equal value in return, in this case an education and/or skill and/or attitude and character that is sufficient to pay off the debt should one be imposed and otherwise support oneself in our society.

        Saying that, I realize you cannot force someone to learn. But you can absolutely force them to prove that they are learning to a requisite standard. This used to be done regularly by insisting that each student PASS regular honest and rigorous tests that prove that that individual has to date mastered the subject at hand. And by insuring that otherwise they will fail to advance to the next level and will fail receive proof of success until they do so pass or find with our help other ways to profitably spend their time.

        Secondly, we must lower costs to students by insisting that higher education will not and should not provide them a continuous holiday or entertainment in lieu of a good educations earned thought hard work. And, in so doing, we should do our reasonable best to insure that each individual has a fair chance and second chance at finding the place or circumstances where he or she can succeed should they apply themselves.

        This requires integrity, will, morals and courage. Qualities that we need to regain if we are to be a serious people and culture again.

        What is unreasonable about that?

        • re: ” This requires integrity, will, morals and courage. Qualities that we need to regain if we are to be a serious people and culture again.

          What is unreasonable about that?”

          nothing at all if that is the actual reality and not a viewpoint.

          people have been saying that for along time… generations …in fact.. right?

          for me – it’s a half glass proposition… a conundrum … and ultimately a condition of humanity that is bigger than any one of us…or even a group of us…

          and getting physically beheaded at the hands of some kinds of heathens versus getting fiscally beheaded at the hands of other heathens a duplicitous dilemma of truly epic dimensions!

          of course it’s all do-gooders at the core of it – whether those who would help those in need of education or freedom from dogma!

          • Reed Fawell 3rd

            Have no idea what you might be trying to say.

            It might help if you would try to define:

            “Integrity”
            “Will”
            “Morals”
            “Courage”
            “Dogma”
            “Freedom from Dogma”
            “Actual reality” versus “Viewpoint”

            Then perhaps your point or lack of it might come into view.

            Regarding:

            “and getting physically beheaded at the hands of some kinds of heathens versus getting fiscally beheaded at the hands of other heathens a duplicitous dilemma of truly epic dimensions!”

            If you delete the words “a duplicitous dilemma of truly epic dimensions!” and then, after you have cleared up that mess, if you then suggest that both “fiscal and physical beheadings” are highly immoral, namely EVIL ACTS, then I would agree with those words as a general matter. And suggest, for example, that Bernie Sanders is a prime culprit should you bring the idea down to earth .

  5. K-12 is no longer the standard – K-14 is.

    but all along we’ve ignored the fact that the second important path is to an occupation in the 21st century economy – as a direct goal and consequences of our public education system.

    Jim Bacon NOW “gets” it.

    But too many still believe that it’s a 4yr degree or a fail.

    I am NOT a believer that the govt should heap all things good and proper on folks… that’s a bad, bad idea for a lot of different reasons.

    but at the same time the current conjunctive political ideology polluting our thinking is what is destroying our ability to deal rationally with simple things we should be all in favor of.. and instead we seem to want to not agree about anything – any more.

    Most students should be pointed to community college these days – some as a destination – others as a waystation – but the point is – you can’t expect to get a job in the 21st century economy with a high school education and expect to be able to support a family and not need entitlements…

    we can’t be this dumb.

    • The concept makes sense. But the implementation would be yet another national disaster. Today, most community/junior colleges are generally efficient and effective. Kids and adults alike learn and advance their education and skills. Tuition is relatively inexpensive. And taxpayers don’t spend huge amounts of money on these schools.

      If community colleges (or tech colleges) were free of tuition, they’d suck the blood out of taxpayers; focus on growing jobs and expanding their mission; increase payroll and become another big draw on taxpayers. Many of those in government continue to be the enemy of those they claim to serve.

  6. re: the concept – not any/all “free”.

    for instance, graduate – get a job in the field you got scholarship in – and the money is forgiven.

    if not -then you owe.

    don’t give scholarships to begin with except for things like occupational certificates… such as nursing or car tech… etc.

    in other words STOP what we are doing right now with unrestricted,wide open loans for ANY field of study.

    this is another one of those areas TMT – where your solution seems to be to freeze the status quo – continue the bad practices but allow no more rather than reform.

    am I wrong? you have no faith that reform will work so just stop?

    • Larry, you too are defending the status quo – the consistent increases in costs paid by taxpayers (one way or another) incurred by the education industry – public and private. When Fairfax County Public Schools, which is complaining about losing experienced teachers, no longer proposes what amounts to a 4.5% wage increase for non-teaching staff and, instead, proposes a 1.3% staff raise (like federal employees and the military) and staff RIFs, I’ll talk to you about expanding access to post K-12 education.

      The existing system is a jobs program and is not dedicated to educating students. Why do you want to prevent reform?

      • TMT – I support CHANGE – to what we are doing now – that’s not status quo guy.

        I think we should CHANGE the student loan system AND the use of loans for Community College.

        how can that be status quo, guy?

        and YES I’d change other ways to reduce the costs to taxpayers…

        I support reforms – any/all to reduce costs to taxpayers…

        • You don’t support real change because you want to expand the wasteful education spending to two-year community or technical colleges. If four-year colleges aren’t working well, why expand the spending problems to what is working well? All we would get with your approach is more overly expensive educational institutions that would be in need of reform.

          It’s not dissimilar to the choices made by Obama on healthcare. Faced with a choice of cutting costs or expanding access, the President chose the latter. And now we see many people who can get access through the ACA cannot afford it. Drive out costs first in education before “free access” is expanded.

          • I don’t support “real change”? I beg your pardon.

            I do very much support real change – no question about it – and you KNOW IT….

            that’s insulting.. when most of what I’ve had to say here over and over – is advocate change.. not status quo.. unlike you who finds reason to oppose just about everything.. freeze in place because you either don’t know what to do or you can’t stand the idea of changes you don’t like.

            I would CHANGE THE WAY we do student loans- I’ve said that many times – and yet you have the arrogance to say I have not because you in your mind it’s not “real”.

            jesus… tmt – have you gone over the edge here?

          • Larry, we’ve seen many reports that the ACA has expanded coverage, but many people cannot afford the deductibles. In part, this occurred because Obama and the then-Democratic Congress elected first to expand coverage, rather than drive out costs. The result is expanded coverage, but still extremely high costs, in part because the President made deals with many major health care industry segments.

            Obama could have elected the other approach – drive out costs first; then expand coverage. What would have happened? We do not know because it didn’t happen.

            The very same holds true for education. You want to expand free coverage from 12 years to 14, but retain the same cost structure. I predict the result would be more and more drain on the economy. I say cut costs first; then talk about expanding free access to post HS education. Let’s see some blood in the streets.

  7. re: Reed said: ” Have no idea what you might be trying to say.”

    actually you sound like you did because you not only repeated it – you re-phrased it to your liking when you said: ” …. “fiscal and physical beheadings” – see that was my goal – to say something you’d read and agree with…

    😉

    success!

  8. As a follow up, there is an article on the internet today that in Texas, US Marshals have arrested people for not paying student loans.

    Arrested as criminals!

  9. totally okay with the law going after folks who owe $1500 from 1986…
    and actually totally okay with the Feds going after any student loan scofflaw… they are taxpayer dollars they owe.

  10. re: ” Larry, we’ve seen many reports that the ACA has expanded coverage, but many people cannot afford the deductibles. In part, this occurred because Obama and the then-Democratic Congress elected first to expand coverage, rather than drive out costs. The result is expanded coverage, but still extremely high costs, in part because the President made deals with many major health care industry segments.”

    total ideological blather and YOU KNOW IT.

    do you think these folks who “cannot afford’ still like their COVERED preventative services as well as the fact they are NOW protected from bankruptcy?

    and how much time has the feckless GOP had to come up with their better plan – ?

    once again you are justifying obstruction – with no alternatives of your own – congrats.

    “Obama could have elected the other approach – drive out costs first; then expand coverage. What would have happened? We do not know because it didn’t happen.”

    he invited the GOP to help create the legislation and they did the same thing they have done for immigration and things.. obstruction… without alternatives.

    “The very same holds true for education. You want to expand free coverage from 12 years to 14, but retain the same cost structure. I predict the result would be more and more drain on the economy. I say cut costs first; then talk about expanding free access to post HS education. Let’s see some blood in the streets.”

    TMT – I want people to get JOBS – to pay taxes, take care of their families and not need entitlements and the only way for that to happen is more folks out of high school educated to the level they need to be to compete for 21 st century jobs.

    every person that fails to get sufficient education – YOU PAY FOR just like YOU PAY for folks who use ERs …

    your philosophy is obstruction of what you don’t like – and tying disparate issues together into one giant gridlock and obstruction until you get your way… that’s a FAIL… you become the reason that nothing can be done… and people are forced to go around you.

    that’s not something to be proud of guy.

    we have serious problems that need to be addressed. nothing we do is going to fix it all at once in perfect order.

    we have to chip away at it.. and in this case – totally separate from “free” high school – that you cite as the reason why you oppose reform and changes to student loans … REALLY?

    we have to stop giving student loans to folks who are wasting that money on “education” that won’t get them a job in the economy – to not try to reform it is just downright irresponsible… in my view.

    they ALREADY have FREE community college – TMT – don’t you see that? what I advocate is that the loans be RESTRICTED ONLY to occupational certs and higher Ed that leads to degrees that are in demand in the economy.

    I would also require community service as a condition of getting the loans…

    your approach ??? come on guy… you are better than this.

    • Larry, my last words on this one. You have greater trust in governmental institutions to do the right thing than I do. This is not to suggest I have strong faith that private institutions necessarily perform better, but at least they have private money at risk. Federal, state and local government regularly go to Vegas on taxpayer money.

      Cheers,
      TMT

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