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Rapidly Inflating Student Loan Debt Poses Ominous Questions

Posted on July 8, 2017 in Education Public Education Student Loan Debt

Since the 1960s, the cost of a college degree in the United States has increased by more than five times, adjusted for inflation. This has been one of the main drivers of household debt and expenditures in general, representing a higher fraction, in 2017, than any other form of household debt, save mortgages. But there is a gigantic problem with these huge increases in cost. The quality of education has demonstrably not gotten better and has arguably gotten considerably worse.


According to this article, a majority of the nation’s four-year college graduates actually perform worse on tests of critical thinking and logical analysis upon graduation than they did upon entering college. This is hardly indicative of great value being delivered. Over 20 percent of these students will leave college with more than $50,000 in student debt, an amount that often takes years or even decades to pay down, creating vast opportunity costs and deferred consumption at the same time.


But there are even more worrying signs of the rapidly expanding student loan debt in the United States. The total outstanding student debt today stands at more than $1.3 trillion, more than auto loans, credit card debt or any other consumer debt, except mortgages. Student loan debt also has the highest rates of default of any consumer debt type, with more than 10 percent of borrowers currently behind or having stopped payments altogether.


Another aspect, independent from Universities’ ability to meaningfully educate their students, in any liberal arts sense, is the question of exactly how much value those expensive college degrees are creating for the students in the job market. While it is still true that those with college degrees tend to make more than those without, there is an increasingly urgent question of whether or not the price itself justifies the gains. It turns out that some degrees from some schools have great value in the marketplace, while others are little more than expensive participation trophies.