Whenever things go bad, people start pointing fingers. You have seen fingers pointed at Wall Street, big oil companies, and Washington. The truth is that we have all played a small part in this recession. However, I want to talk about the detriment that our universities are having on our economy and society.
At a macro level, economics is the study of production, distribution, and consumption of goods and services. To have a strong economy, you need people capable of producing and purchasing goods. Are our universities creating producers and purchasers of goods?
The first item I want to talk about is the increased cost of tuition over time:
College tuition is increasing at an exponential rate. This is causing an increase in college debt. The average student debt went from $12,750 in 1996 to $23,200 in 2008, nearly doubling. In just four years (2004 to 2008), there was a 24% increase in debt. In 2008, 67% of students graduating from four year colleges and universities had student loans.
It used to be that if you got a college degree, you were guaranteed a job. The cost was little for school and the benefit great. The cost is no longer little and the guarantee for a job is gone. Unemployment is high right now, despite numerous job openings. The big problem is that we have few people with the skill set needed for the jobs that are available (mainly technical skills).
There is a new lower class and middle class developing. The new lower class contains people who spent a lot of money on a degree they cannot do anything with or that is for a low paying job. Many social workers now have masters degrees and while that helps them make a difference, financially, it puts them in a tough spot. Even if they file for bankruptcy, that does not relieve them of their college debt typically.
The new middle class are being called by some as HENRY’s (High Earning Not Rich Yet). HENRY’s are people with nice paying jobs, but loads of student debt; student debt has even surpassed credit card debt. Because they are high earners, they are paying high taxes. With the combination of high taxes and high school loan payments, the new middle class has decreased purchasing power. Many can take up to 20 years to pay off all of their school debt.
I do believe there is a need for a great education at a low cost that has to be filled. Public universities, like the federal government, have a spending problem. Their simple solution to making their budget is to pass their cost onto their students, who really have no power. Before, I mentioned that there was a 24% increase in tuition costs in a four year span. Do you think a freshmen student in 2004 saw a 24% increase in value in his degree by the time he was a senior? Public universities need to stop spending money on items that do not add value and provide a basic education that prepares students for the real world.
I do not see long-term growth in our country without tackling the costs of universities. Our young adults are starting life behind financially with degrees that are offering declining value.