The Higher Education Bubble and its Ramifications
Higher education may be a valuable investment, but it is hardly a priceless one. On the contrary, millions of Americans are finding out every day that the price of getting an education at a four year college or university is getting higher and higher. What once was a merely an expensive cost for students and their parents has now become an insurmountable
barrier to higher education that many students struggle to overcome. As a result, even if they are able to obtain an education from their four year education, many of America's college students will never see the return on their investment that justifies the amount of money they spent on that education.
In colleges and universities today, private college tuition can easily cost students more than $40,000 per year. And the tuition is only the beginning of the costs associated with attending college. Adding living expenses like room and board and fees, books and other costs, and annual tuition can exceed more than $50,000 per year. Although many colleges offer their students financial aid in the form of grants, most students are only able to afford their undergraduate education because they have signed promissory notes for enormous student loans.
These student loans, regardless of whether they are held through a federal lender like Sallie Mae or a private lender, like a bank or another creditor, are the financial equivalent of owning a mortgage. This is a fair comparison, because for many students, they will have to choose between having a college education or owning a house. They won't be able to afford both. Clearly, for many, combining these huge debts with students' lack of financial experience is a recipe for financial disaster.
The financial ramifications are realized when these debt-ridden students graduate from college and enter the workforce. Though they are now equipped with college degrees, they are so weighed down with debt that, after they make their monthly payments, they are unable to save any money to eventually put toward a down payment on their first homes. This leaves the housing market stagnant and unmoving, at a time when it needs the stimulus from new first-time home buyers the most.
As a result, not only do young adults fail to realize the return on their investment in higher education, but the ripple effect stymies the rest of the economy. It's not difficult to foresee that college students in the future will have to rethink whether the cost of attending a a four-year university worth it. And with the rise of the online schools with the ability to communicate the exact same information that a traditional school would offer, and with opportunities for student gatherings organized on sites such as Meetup.com, it's clear that the college education landscape in ten years will be significantly different than what we see today. Our young minds are our country's greatest asset, and to saddle them with a huge debt load does them a disservice that hinders the economic recovery. The future of our nation rests on the ability of our youth to succeed. And they can't succeed if they are expected to support a bloated educational system that hurts their chances more than it helps.
