The dilemma of student debt

06/09/2014 6:50 PM

02/15/2015 11:26 AM

President Obama took action Monday that he said would help some 5 million more borrowers lower the monthly payments on their student loans. This is probably a smart issue to focus on, because there are a lot of folks out there who owe a lot of money. According to the president’s remarks, the average borrower at a four-year school owes nearly $30,000 by graduation. I have seen higher numbers.

This has implications for the economy. Think about how many college graduates visiting a car dealership or an open house are dragging in tens of thousands of dollars in debt, making it difficult to get credit.

I was curious about what has happened in recent years to create this $1.1 trillion in student debt, up from $300 billion a decade ago, according to the Federal Reserve Bank of New York.

I looked at a table compiled by the National Center for Education Statistics, covering total enrollment in degree-granting postsecondary institutions. In 2000, there were 15.3 million students enrolled. By 2012, this number had grown to more than 20.6 million. So there is strong demand for higher education. That tends to make it relatively easy to raise prices on everything from tuition to textbooks.

Obviously, it helps our global competitiveness to educate more Americans. And more Americans have figured out that postsecondary education is a good investment in time and dollars. President Obama mentioned the payoff in his speech Monday:

“The typical American with a bachelor’s degree or higher earns over $28,000 more per year than somebody with just a high school education - 28 grand a year.”

Which is why around two-thirds of high school graduates are going on to a two- or four-year college.

But American families and their college students don’t have an unlimited capacity to finance this surge in enrollment - as desirable as it might be - and that’s the big public policy dilemma.

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