Higher Education: Costs, Value, and a Birthday

Last week I was sure that our next post would be on the U.S. Census Bureau's recently released paper on Pacific Islanders, but it's not.  Instead, this post sort of wrote itself over the course of the week, in three parts: the newspaper on my neighbor's door, a blog post in the Harvard Business Review, and a good friend's birthday.

First, the Newspaper: Last Sunday, when returning from an errand with my son over my shoulder, I saw the Sunday edition of the New York Times on my neighbor's doormat. The front page story was "Student Loans Weighing Down a Generation With Heavy Debt." We've blogged about student loans before (even regarding NY Times articles on the subject), and while much of the article was old news, I thought it was a well written overview of how student loan debt is impacting students, graduates, dropouts, parents, and our nation's economy.

I encourage you to read the whole article yourself, but here are the main things that struck me:

• National student loan debt is greater than $1 trillion dollars, and it's growing
• For all borrowers, the average debt in 2011 was $23,300
• Two factors in rising student debt: state and local government spending per student is at a 25-year-low, while tuition is rising so fast it's on track to double over a fifteen year period
• The student loan default rate doubled in four years (2005 to 2009) -- nearly one in ten borrowers in 2009 defaulted within two years

Certainly these kinds of numbers can make reasonable people question whether college is a sound investment, given the rising cost and uncertain benefit. 

That brings me to the Blog, which arrived in my inbox on Wednesday. I subscribe to the Harvard Business Review's "Daily Stat" blog.  Wednesday's stat was "Though Tuition is Rising, the Value of Education is Rising Too."  It summarized a recent study that looked at the tuition, student loans, and income outcomes for people at different levels of education.  Their summary:

Despite wage declines in entry-level jobs and steep increases in tuition, college is still a good investment in the U.S.: The earnings premium for a college degree relative to a high school degree has nearly doubled in the past three decades, say Christopher Avery of Harvard University and Sarah Turner of the University of Virginia. Government statistics show that the jobless rate is 4.4% for college grads and 7.6% for people who attended college but didn't achieve bachelors degrees.

Source: Student Loans: Do College Students Borrow Too Much—Or Not Enough?

In other words, the cost is rising, but so is the payoff.

Today's students need to think carefully not just about how they'll get into college, and which college they'll attend, but also how they will afford it.  Tuition and related expenses are a factor, but so is access to financial aid.  Students from underrepresented communities -- who are less likely to have parents who went to college, and more likely to live below the poverty line -- can face additional challenges, but they should be certain to take advantage of the scholarships, fellowships, and academic support programs for underrepresented minorities.  (By the way, Pacific Islanders are underrepresented, but they are excluded from applying to many of these programs.)

And for those students who have to choose between no college and no loans, or college and student debt, they still can choose how to approach their payments.  This leads me to the Birthday: a very good friend of mine turns 30 this weekend.

Nathan and I went to college and grad school together. To finance his masters degree, he took out a lot of student loans. 80 weeks shy of turning 30, he was unemployed and stuck with hefty student loan payments.  I was worried for him, and shocked that he was in that situation: After graduating with a double major in theatre and political science, Nathan earned a graduate degree from a top 50 national university, was Class President of its School of Public Policy, and had worked his way up from intern to social media director for a high-ranking Congresswoman.

But now he was having trouble finding work and making his minimum payments. His solution -- to solve this problem -- was to set a more ambitious goal: rather than scraping by, he'd resolve to be debt free by 30, somehow paying down nearly $900 a week in addition to the rest of life's expenses.  He had 80 weeks to do it, and he wanted to chronicle his experiences through a blog called 80till30.

Nathan's approaching week 80 -- which is when he turns 30.  He was still short of being debt free last time I checked, but in the meantime, he moved to Alaska, got engaged, and started a businesses.  If you read his website, you'll see that as an entrepreneur he incorporates all the things he learned in college -- his ability to quantitatively demonstrate success or failure; his ability to incorporate theatrical elements in web videos and understand the policy-based and political elements of communicating for his clients -- into a growing, successful small businesses. In his case, Nathan is using his education to pay off his student loans, and as you can see from the web videos on his blog, he's enjoying life along the way.

That's it for this week.

Kawika