The true student debt crisis
“You’ll notice that I’ve been referring to borrowers and not to college graduates. There’s a good reason for that. A large number of the Americans burdened by student loan debt never actually finished a degree. I can’t give you an exact figure because, until recently, the federal loan database didn’t actually track completion. What we do know, however, is that those who complete degree programs tend to earn substantially more than those who don’t. The college wage premium, or the ratio of the median hourly wage of college graduates and that of those who’ve only graduated from high school, increased at a fast clip in the 1980s and the early 1990s, but it’s been hovering around 1.8 for the past several years. That is, college grads have a median wage 80 percent higher than high school–only grads. The premium for those with “some college” has been stuck between 1.15 and 1.2 for about 30 years.
“Some of these noncompleters will be eligible for help from Pay As You Earn, and I’m sure many will be grateful for it. The fact remains that even in this best-case scenario, noncompleters will still be obligated to fork over one-tenth of their often quite modest incomes to loan servicers. There goes at least half of your wage premium.
“I know what you’re thinking. “Well, Reihan, the real problem is that college isn’t free. If colleges didn’t charge tuition, we wouldn’t have to worry about student debt.” That’s true in the most literal sense. But if the public sector is picking up the tab for higher education, so are all taxpayers, whether they’re college-educated or otherwise. Do we have good reason to believe that the federal government will do a great job of whipping colleges into shape if it controls the purse strings? Some smart, thoughtful people, likeSara Goldrick-Rab and Nancy Kendall of the University of Wisconsin, seem to think so. Take a long, hard look at federal programs like Medicare and you might think differently.”
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