No Wonder Young People Want Help With Their College Debt

No Wonder Young People Want Help With Their College Debt

Boston Globe Magazine writer Neil Swidey takes a deep dive into the American student debt crisis, focusing on the serious impact the rising cost of higher education is having on low-income students hoping to improve their earnings potential, especially those who don’t manage to complete a degree or take too long to do so:

Even a relatively small amount of debt can become a large burden, since students have to begin paying back the loans six months after they leave school, whether or not they have a degree. At Newbury College in Brookline, only 30 percent of students are graduating. At Bay State, a for-profit college in Boston, it’s less than 15 percent. And if students don’t leave college with a degree, their earning power is barely any better than it would have been with just a high school diploma. The median earnings for a working Boston resident with only a high school education is $29,000, while those with some college but no degree make $32,100. The real gains don’t come until workers earn an associate’s degree ($37,400) or a bachelor’s ($52,000). Yet the worker who tried college has to live on meager wages while paying down student loans, a financial vise that tightens if they go into default. Even students who declare bankruptcy can’t expect to be freed from their college loan debt. Only death or permanent disability does that. …

Swidey points to a study that confirms something we’ve heard before: that the costs of college are starting to outweigh the benefits for many students, especially those from less privileged backgrounds:

A new study by the Washington think tank New America finds that nearly 50 percent of public four-year colleges nationally are leaving the poorest students on the hook for more than $10,000 a year, a figure that has jumped by a third in just four years. But at private colleges, it’s close to 100 percent. Apart from the elites, most privates, despite all those hefty tuition hikes, have even fewer resources than public institutions and can’t come close to meeting students’ entire need. In 1971, the average price for tuition, fees, and room and board at a private four-year college was just shy of $3,000 per year. If that price tag had increased at the rate of inflation, it would be only around $17,000 today. Instead, it is nearly $44,000. …

The subtitle of the New America study, which is the third installment of a long-term examination of college affordability for poor students, may say it all: “The News Keeps Getting Worse for Low-Income Students.” But in an interview, study author Stephen Burd is even blunter, telling me: “After doing this research, I’ve come to the conclusion that it doesn’t really make sense for low-income students to go to private colleges unless those colleges have the resources to meet the students’ full financial need and have high success rates with graduation.”

But doesn’t having a college degree dramatically boost your earnings? Won’t these students’ fortunes turn around eventually as long as they graduate? Well, that depends:

Even the widely cited finding that a bachelor’s degree boosts a worker’s career earnings by an average of $1 million masks the stark unevenness of those gains. New research from the Brookings Institution finds that low-income students with bachelor’s degrees start their careers earning about two-thirds as much as affluent graduates; that ratio declines to about half by the midpoint of their careers. Poor grads with a bachelor’s earn 91 percent more over their careers than their counterparts with only a high school degree. But this “bachelor’s bump” in career earnings is nearly twice as powerful for grads from wealthier families, at 162 percent.

A newly released survey of new graduates from the job search site Indeed found that over 60 percent were looking to find a job with an employer who would help they pay off their student loans, while about 25 percent said this was a “top priority” in their job hunt. With so many young people struggling under mountains of debt, it’s not hard to see why. Other recent research has indicated that student loan benefits can be remarkably effective, saving employees thousands of dollars in interest payments. While most indebted millennials would still prefer health insurance, this type of benefit is increasingly popular—and may very well remain so as long as the student debt crisis continues.