Like you, I think four years sure go by pretty quickly, right? Since my early days as a staffer, then lobbyist, I measure my time in this business not with a normal calendar, but by the terms of Ohio governors. The predictability of a four or eight-year term gives me a better sense of direction. I truly compartmentalize my memories by who held that office at that time. Now, it’s been 32 years and man how time flies! I just blinked and found myself attending the college graduation of my daughter Brittany last week. She’s in Ohio for a few months then hopes to head off to Savannah, Georgia for graduate school. (I don’t need to tell you how proud I am!)
This joyous occasion served as the inspiration for this blog – college debt. When I was asked by a few of you what I’d write about, shockingly no one seemed excited about this topic. Personally, it fires me up as it may ultimately strangle our kids, zap their motivation, and ruin their trust in the American education system. All they ever heard from their parents, teachers, and society was to get a higher education… we sold them this dream and sadly may have introduced them to a new form of indentured servitude. Let me explain:
According to the National Center for Education Statistics in 2011, there were 21,575,000 students enrolled in institutions of higher education. Women, just like my daughter, made up 57% of that population.
If we look back to 1950, 2,444,900 students were enrolled in U.S. colleges and only 29% were women. By 1960, women attending college increased to 35%. By 1970, women accounted for 40%, and finally, by 1980, women in college surpassed men and were more reflective of the national population at 51%. It’s projected that by 2020 women will account for 60% of the population on our college campuses. In a very short time, many more women will be controlling US businesses and ultimately the political process.
So did our young men, in their baggy pants, fall flat on their faces while racing to enroll? Did their tilted baseball caps block their vision? Or did their love of sleeping in until the afternoon hours prevent them from joining the rest of the world? Was it the elimination of the draft? Perhaps they just decided going to college wasn’t worth the obscene debt that would be imposed on them. (I have a son in college too!) I am not sure of the cause but it is evident that something is going on.
Decades ago, a college education was quite inexpensive and it was practically an automatic invitation to join the middle class. When I graduated from college in 1976, the US average annual total cost of college was $2,275. But today all of that has changed.
I finished my education in 1980 with a Masters Degree and a total debt of $2,300.00. And yes, I was a TA in grad school on a full ride. My undergrad debt worked out to $575 per year. Loan payments for ten years, at today’s loan terms, of 3.4% would have been $22.74 bucks a month! Inflating that loan amount to 2011’s terms makes it total $6,267.41 with a corresponding payment of $61.98. Absolutely nothing in comparison to what our kids will pay!
I found a gold mine of research at The National Center for Education Statistics site. Their data banks have table after table of analysis covering a wide variety of factors. One such table shows that in 2011, the average four-year student in the United States paid $7,136 for tuition, $4,820 for a room and $3,958 board for a grand total of $15,918. Ohio on the other hand, averaged $8,501 for tuition, $5,308 for a room and $4,154 for board putting our average total at $17,964. Now compare that to Floridians who paid $3,700 for tuition, $5,420 for a room and $3,634 for board for a total of $12,774. This means that in 2011, Ohio students paid 12% more than the national average and 40% more than the average student in Florida.
The latest financial statistics collected by NCES on the type of aid given to full-time students documents that in 2009-2010; nearly 81.3% of students had some form of aid. Students received a combination of loans and grants. The students received 46.15% federal grants, 28.6%state or local grants, 33.2% institutional grants and over 51% had loans. The average student borrowed $7,013 that year. The average student, from 2006 to 2010, accumulated $25,521 in college loans. That is a monthly payment of $252.37 for 10 years.
One recent graduate from OSU informed me that she has nearly $90,000 in loans. Her payments start in six months and carry a payment of $889.97 per month for a term of 120 months. Annually that calculates to $10,679.64 in payments. In real terms, this young woman will need to earn at least $14,832 before taxes just to service the note. Now add monthly payments of $300 for a car payment, rent of $700, car insurance $100, clothes $100, $400 food, $150 gas, $200 for entertainment including the internet, $150 cell phone, $150 for utilities and $120 for health care. She would need to pay 28% in taxes so her required starting income to pay just to pay those obligations would be $54,332. And she’s not able to save a dime yet. It’s no wonder more adult children are moving back in with Mom & Dad!
To add insult to injury, The National Association of Colleges and Employers Salary Survey 2012 concludes that the average 2011 starting salary was $41,701. Yeah, right. As I looked at the study of the Top Five Industries who employed 782,000 of the 2011 college students with bachelor degrees, a startling 67% had a starting salary of less than $33,000. Shockingly, when I just analyzed the average starting salary for that group, I found that the number was even lower, around $30,868. Looking at it from the eyes of the former OSU student with an average starting salary of $30,868, and a required annual payment of $10,679.64 for student loans, she would quickly conclude that 34% of their starting income will go to pay down debt.
What is sure to add additional pain to our children is that even as default rates are on the rise, Congress may increase the interest rate paid by student borrowers from 3.4% to 6.8% within four weeks to curtail national spending, and yet the national debt will still skyrocket. Does that seem fair to you?
The national debt is $15.7 trillion, that equates to $50,286 per every man, woman, and child or $138,522 per taxpayer. Who actually is left holding the bag? It’s our new class of indentured servants.
Personal debt for all US Citizens is $15.9 trillion, which includes $13.4 trillion in mortgage debt, $813 billion in credit card debt, and $870 billion in student loan debt.
Of that personal debt, over 94% can be discharged in a bankruptcy… only student loans CAN NOT be discharged.
For more than a century, the U.S. bankruptcy code has offered financially distressed individuals and businesses an opportunity to expunge their debts and start over. But this “fresh start” isn’t an option for most borrowers with student loans.
In 1998, Congress enacted legislation that prohibits borrowers from discharging federal student loans in bankruptcy unless they could prove “undue hardship.” In 2005, it extended the standard to private student loans. Bankruptcy attorneys say this standard is almost impossible to meet.
So to our graduating classes of 2012, I say good luck and start looking at the guy with the baggy pants and tilted hat in a different light! Will today’s leaders contemplate the value of higher education vs. the cost of the debt it takes to achieve one and work towards an affordable solution… or will they keep “passing the buck” to this younger generation?