Dethrone the Loans: The Answer to Expensive Higher Education

By Markus Weinzinger

Opinion articles do not necessarily reflect the views of the editors, the Denobis staff, or Tri-City Prep.

It’s an inevitable problem faced by students entering the doors of higher education. The massive debt of student loans —over $1 trillion— continues to intimidate prospective students. Graduating with a pile of debt has become all too commonplace. Federal subsidy of student loans brews a toxic mix of good-intentioned theory and college greed that evaporates the hopes of college students along with their bank accounts. How did this happen?

The origins can be traced to the late twentieth century. According to Information Station, in 1980 the cost of attending a four-year college hovered around a comfortable $3,400 annually. Today, that figure has skyrocketed to $23,000 or more annually. More shocking, Bloomberg News reported that the cost of a college education since 1978 accelerated over 1000%, compared to the 265% increase in inflation. It’s now the norm to find a college student (graduate or drop-out) that owes five figures in student loan debt. Who’s responsible for these unprecedented prices?

To the average college student, a spike in college tuition signals a need to acquire more cash. Traditionally recommended to be last-resort, student loans are becoming a popular —and default— means of payment. Information Station charges accusation to the U.S. federal government’s generous handouts. Initially, this seemed like a good idea, until colleges discovered they’ve hit the jackpot. With a guaranteed stream of money, regardless if it’s the government’s money, colleges have every incentive to raise tuition costs to net these subsidies. On the other hand, the government wins by collecting on the interest of the loans when they’re repaid.

“The biggest loser becomes the college student, trapped on two fronts with debt rising,” says Charles Kirk, founder of Turning Point USA. “However, these dead ends are only a fraction of the total losses suffered by the student.”

Student loan debt wreaks havoc on the capabilities of college students unplugged from college life. The average student loan debt in America stands at $28,400 per borrower; notice this statistic wasn’t per graduate, but per borrower. In addition, only fifty-nine percent of college students exit with a degree. Kirk Mike Rowe, host of the TV show Dirty Jobs, concisely summed up the situation: “We are lending money we don’t have to kids who can’t pay it back to train them for jobs that no longer exist.” In effect, a big piece of the student debt is held by college drop-outs who can’t pay back the loans. Unfortunately for the college student, the dilemma only gets worse as scammers come knocking.

College students would love nothing more than to see their debts dissolve. Catering to this fresh market are student loan companies and scammers. According to Forbes Magazine, scammers try to tap into a six-month grace period borrowers have before their first payment to a lender. The scams have included everything from loan consolidation to loan elimination. Borrowers will have to be more cautious when taking out loans, risking losing more money than what they already owe. Compounding the problem is the decision of what a college student chose to major in.

There’s no question a college degree offers greater opportunity for higher-paying jobs than a high school diploma. Careers in science, engineering, law and the medical field are the biggest guarantees. Granted, Kirk reveals that most majors are in the social sciences, fields with very low employment rates. The return-on-investment runs poorly for professions like anthropology, sociology, or history. If a student graduated with a degree in the social sciences, the annual salary would not be enough to pay for the loans up to twenty or thirty years later. Sufficient job preparation in college has also diminished, as the focus of universities no longer aims toward job (or life) preparedness.

In order to lower college tuition, the goal is twofold: cut back on government-subsidized loans, and educate the public that a college degree is not necessarily required to unlock a good living. SimplyHired reports that trade jobs like plumbers, carpenters, and welders bring in $55,000-$62,000 a year: approximately five to six times greater than working a minimum wage job. At most, trade school or certified training are required at significantly lower cost than attending a four-year university. In the first case that directly deals with loans, this combines with the business model of universities. In effect, colleges are businesses making money. By cutting off the pipeline, universities will sharply lower their tuition to attract more students. In this market view, the universities will be the ones on their knees as the students choose the more economical institution. Granted, opponents of this approach overlook the economic model in favor of their own response.

Different responses have attempted to take on the student loan debt issue. In the 2016 U.S. presidential race, politicians juggled the issue of solving student loans. The most outspoken advocate was Vermont Senator Bernie Sanders. His platform involved making public colleges and universities tuition-free by cutting back loan interest rates, refinancing loans to current low interest rates, and imposing a tax on Wall Street speculators. Sanders looked to European countries like Germany, Norway, Finland, and Sweden as the chosen, real-world models. Government-subsidized student loan forgiveness seeks to cut the costs of paying tuition and repaying loans. Lastly, the Greehey Scholars Program seeks to provide students completion of coursework sooner by teaching the classes online. All these ways have tried, but failed.

In theory, these are good ideas, but in practice, they’re anything but helpful. Student loan forgiveness burdens taxpayers through levied taxes. The Achilles heel of the Greehey Scholar Program is a decrease in face-to-face interactions with instructors and other students, a skill which is a virtue in the job market. Sanders’s plan was implemented by his wife Jane Sanders at Burlington College. Later in May 2016, Burlington released the following statement: “Due to the crushing weight of debt…our accreditation will be lifted as of January 2017.” Political commentator Bill Whittle described Sanders’s policy as a “non sequitur,” literally meaning “it does not follow.” Whittle added that “colleges know there is no price the government cannot pay,” and argues Sanders’s plan could add seventeen trillion dollars to the national debt. Government subsidy is fed by taxpayer dollars, and like pyramid scheme, the heaviest taxes will fall from the upper-class to the middle-class. Therefore, government involvement in student loans should be significantly restrained to truly help students.

A market approach is the only impactful solution to student loan debt. With colleges left to their own devices, and without the perverse incentive of big government, it will be the student who commands the prices. Colleges have been successful in marketing their way as the path to a great career, but blue-collar jobs can reach far at lower cost. The reality shows that universities are involved in the same risk-and-investment market as Coca-Cola and Hobby Lobby. It is all the more important for students to have an affordable avenue to carry on the American dream.