If there was any question about whether college students in the US were getting wise to the fact that their degrees may not be worth the $35K (on average) they’re paying for them, that question was answered earlier this year with one hilarious graduation cap:
Yes, “Game of Loans,” and as the student debt bubble balloons into the trillions, the federal government has come to realize that, to quote Bill Ackman, there’s “no way” students are ever going to pay back all of this debt, which is why the Obama administration is promoting (and we mean explicitly promoting) IBR programs that in many cases ensure former students will have at least a portion of their student debt forgiven thereby guaranteeing taxpayer losses on government higher education loans will run into the tens and probably hundreds of billions of dollars.
Assessing what role students have played in this is akin to asking what role potential homeowners played in the housing bubble. That is, the government has held up certain ideals (i.e. the right to homeownership and the right to pursue post secondary education) as inalienable and so while there’s an extent to which people have to be accountable for the money they borrow, when you pitch these things as being on par with John Locke’s natural rights and then move to effectively subsidize them by either driving interest rates into the ground or passing out trillions in loans to students who you know have no hope of paying it all back, you create a scenario whereby borrowers can then claim they were misled, mistreated, and ultimately defrauded.
That was the case with the housing bubble and, thanks to the fact that today’s college graduates are entering a job market that despite all the rosy rhetoric, is actually nothing more than a bartender creation machine, former students are now looking with disdain at the tens of thousands in student loans they must now figure out how to pay back while bringing in less than the median national yearly income which is itself largely insufficient when it comes to servicing large lines of credit.
It is with all of the above in mind that we bring you the following from WSJ who reports that two thirds of students who graduated in the last nine years and whose debt matches or exceeds the national average do not believe their degree was worth the cost. Here’s more:
Recent college graduates are significantly less likely to believe their education was worth the cost compared with older alumni and one of the main reasons is student debt, which is delaying millennials from buying homes and starting families and businesses.The insight into the generational divide comes courtesy of the second annual Gallup-Purdue Index, which polled more than 30,000 college graduates during the first six months of this year.Former Indiana Governor Mitch Daniels created the survey when he became president of Purdue University in 2013 in an effort to better understand the value of a college education from the people who should know best—alumni.The steep decline in the perception of whether a degree was worth the cost startled Brandon Busteed, Gallup’s executive director for education and workforce development.Overall, 52% of graduates of public schools “strongly agreed” that their education was worth the expense, compared with 47% of private-school graduates. Among graduates of private for-profit universities, just 26% felt the same.About two-thirds of college students graduate with debt, with an average load of about $35,000.According to the Index, only 33% of alumni who graduated between 2006 and 2015 with that amount of debt strongly agreed that their university education was worth the cost.
On the one hand, this suggests that going forward, students may demand some combination of the following three things, i) lower tuition, ii) better coordination between those who design curriculums and employers, and hopefully iii) efforts to create a more robust jobs market characterized by rising wage growth and real opportunity for graduates.
Unfortunately, the more likely outcome will be that demand for higher education will simply dry up, thereby creating an even larger divide between the skills set of America's youth and that of job seekers around the globe. But don't take our word for it, just ask Gallup’s executive director for education and workforce development Brandon Busteed who spoke to The Journal:
“When you look at recent graduates with student loans it gets really ugly, really fast. If alumni don’t feel they’re getting their money’s worth, we risk this tidal wave of demand for higher education crashing down.”