It used to be that college was reserved for those who were truly interested in academics and pursuing higher education. Some careers required it, but more often than not, young people inherited trades and careers from family members or took on apprenticeships to learn the work.
Today, though, it seems like you’ve got to have a college degree even to be a barista. While expanding our horizons and pursuing academia is an honorable route, though, the increase in the percentage of people attending universities has be accompanied by a not-so-pleasant thing: a skyrocketing of student loan debt and federal Pell grants.
In the past five years alone, Pell expenditures have more than doubled. And while it’s a fantastic thing that our government supports students who want to attend college but can’t afford it—we’re getting to the point that the government can’t afford it, either.
Research from Brookings Institution and The Hamilton Project found that of all beginning undergraduates, about 51% do not receive credentials within six years. For all beginning Pell recipients, that number is a shocking 55%–which essentially means that the government pays for students to attend academic programs that most will never complete. Only 30% of Pell recipients graduate with a bachelor’s degree in six years or fewer, less than 10% earn an associate’s degree, and about 16% are awarded some type of certification.
On the student loan side of things, it gets interesting. While student loan debt is at about $1 trillion, in 2009, nearly 70% of students who had started college six years earlier (2003) borrowed $10,000 or less. Ninety-eight percent of students borrowed $50,000 or less. The crisis is not one of debt; in truth, it’s of repaying that debt.
“The current system turns reasonable levels of debt into crippling payment burdens that can prevent young workers from attaining financial independence and stability,” reads a paper from Susan Dynarski and Daniel Kreisman.
Dynarski and Kreisman propose a better loan repayment process, which is based on income. As former students earn more or less, their payments will rise and fall accordingly, with deductions being taken automatically from each paycheck. Not only does a system like this make more sense, but it also makes it far less likely for loans to go into default—unless former students aren’t working at all.
The Brookings Institution is a nonprofit public policy organization that conducts research and makes recommendations to advance American democracy, economic and social welfare, and security and opportunity for all citizens. It is headed by President Strobe Talbott, Chairman John L. Thornton. Its board of trustees includes businesspeople like Nike Chairman Philip H. Knight, Lazard CEO Kenneth Jacobs, MGM Chairman and CEO James Murren, and WellPoint Founding Chairman and CEO Leonard D. Schaeffer.
The Hamilton Project is an economic policy initiative launched by the Brookings Institution in 2006. It produces policy proposals, conducts research, and promotes long-term prosperity through economic growth. The Hamilton Project is led by an advisory council that includes George A. Akerlof of UC-Berkely, Robert Cumby of Georgetown University, Ted Gayer of The Brookings Institute, and Suzanne Nora Johnson of Goldman Sachs.