How Can College Graduates Overcome the Debt?

If the P-12 education system is all about preparing its students for success in adulthood, then college preparation is obviously a must. In the fall of 2012, 66 percent of high school graduates from that year were enrolled in college, and that number does not include students that waited longer to enroll or non-traditional adult students. It seems that P-12 classrooms are getting more students ready for the academic demands of a college education – but what about the financial commitment?

A study by the Urban Institute found that almost 300,000 Americans with master’s degrees were on public relief, along with 30,000 with doctorates. The average debt of a college graduate is $35,200 and that can take decades to pay off.

Making College Affordable

Currently, there is a call for a more affordable college education, which makes sense. It comes on the heels of a recession that undercut the value of a college education. Even those with a college degree were not immune to the financial hit that the economy took and those still paying off their student loans were often left without the very job they had always assumed would pay off their educational debts. A look at the way college loans are distributed and administered was certainly in the cards as the latest generation of college graduates saw the real ramifications of payment in an economy that simply could not support it.

Payment reform, spear-headed by the Obama Administration, goes a long way to addressing this problem.  Initiatives include mandates that new borrowers will pay no more than 10 percent of their disposable income towards outstanding student loans and any student debt remaining will be wiped clean after 20 years.   Furthermore, public service employees, like military members, nurses or teachers, will have their debt forgiven in 10 years if they make their payments on time.

Why is college so expensive anyway?

These actions address the high cost of college attendance as it exists today – but what about that high cost itself? The lifetime earnings numbers show the clear reasons why a particular student benefits from a college degree, but that thought pattern is too narrow. The economy and shared learning of the entire country sees a lift when more if its youth are educated at a college level.  Therefore, efforts at financing college in a more communal way would go a long way toward easing the financial burden of today’s youth.  To this end, there are several plausible solutions.

One idea is to allow private investors to pay for the tuition of college students in exchange for a portion of their earnings later on as outlined by U.S. Senator Marco Rubio. This would mean the students acquired no traditional debt and would not start out their careers in the hole – at least not in a typical way.  However, this approach leaves the student without protection if he/she becomes unemployed or otherwise unable to work.  Similarly, the idea of a state-run repayment program that is similar to Rubio’s private investor one has already been implemented in Oregon.  The Pay It Forward program has been approved (though not yet enacted) and will give students their public college education upfront, free of cost, in exchange for paying the state a portion of their earnings post-college. Supporters bill it as a “debt free” alternative to a college education, but like Rubio’s plan there is still money owed at the end of the college term that does impact actual earnings. It will be interesting to keep an eye on Oregon in the coming years to see how the program impacts the first groups of students who take advantage of it.

What if a public college education was completely free, though? At his State of the State address, Tennessee Governor Bill Haslam called for free tuition at Tennessee’s community colleges in order to improve the state’s reputation as one of the least educated. Haslam proposed that the money to pay for it come from the state’s lottery earnings that would be placed in a $300 million endowment fund. While a short-term solution, it is an interesting idea.

I believe that paying something for a college education is reasonable, but the current setup puts an undue burden on the nation’s young people and as a result, the entire economy suffers.

What creative cost and repayment options for a college education would you like to see implemented?

photo credit: Tax Credits via photopin cc

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