A College Degree Built on a Mountain of Debt
By Sen. John Thune
There’s no doubt students who decide to pursue higher education at one of the many universities and colleges throughout the United States are making a significant investment in their future, but a vast majority of them end up trading their cap and gown for a mountain of debt and uncertainty. In fact, 70 percent of American college graduates leave school with a “significant amount of loans,” which total nearly $1.5 trillion collectively, according to a 2018 CNBC report.
According to the same CNBC report, Americans are graduating with an average debt that’s comparable to a 10 percent down payment on a $370,000 home or the cost of a new Tesla Model 3. The average debt held by graduates is equivalent to roughly two-thirds of South Dakota’s median household income for an entire year.
I’m not suggesting that getting a college degree isn’t worth it, but I am saying that the debt it potentially creates can present a hurdle for many graduates and new job-seekers while many of them are finding out for the first time what life is like on their own – paying for rent, groceries, and utilities, or maybe making a car payment, all while trying to ensure they have enough left over in their budget for their monthly student loan payments.
Students who graduate from American universities and colleges are a valuable commodity, which is why I recently introduced the bipartisan Employer Participation in Repayment Act with several of my Senate colleagues, including Sen. Mike Rounds, which would create a win-win scenario for graduates and employers, and it could also help incentivize job-seekers to keep their talent here in the United States.
I joined Sen. Mark Warner (D-Va.) in leading this effort that would give employers the option to participate in a program that would allow them to contribute up to $5,250 each year (tax-free) to help pay down an employee’s student loan debt. There’s an obvious benefit for graduates, but it also gives employers a new tool and benefit option to attract or retain top-level talent. If our bill became law, the employer could either make a payment directly to an employee or send it to a student loan lender, cutting out the middle man.
“Expanding employer education assistance helps address the skills gap, which is holding back both workers and employers. When employers are able to help workers pay off student debt, more people will have confidence to pursue higher education and be better prepared to fill high-skilled fields,” said Johnny C. Taylor Jr., president and CEO of the Society for Human Resource Management, which highlights the many layers of support our bill enjoys.
While passing this bipartisan legislation wouldn’t be a silver bullet with respect to the growing concerns over student loan debt and the rising cost of tuition in America, it would certainly help ease some of the pain.
Several of my Senate colleagues, including the chairman of the committee that oversees education, who also happened to lead the U.S. Department of Education in the 1990s, are working on some ideas to address the broader issue of lowering the overall cost of education. I stand ready to work with them to find fiscally responsible policies that can help graduates overcome this debt burden and enter the workforce in a stronger, more certain position.
###
“I recently introduced the bipartisan Employer Participation in Repayment Act with several of my Senate colleagues, including Sen. Mike Rounds, which would create a win-win scenario for graduates and employers, and it could also help incentivize job-seekers to keep their talent here in the United States.”
The EPRA sounds like a decent proposal. Not a panacea, as Senator Thune acknowledges, but a productive step in the right direction. Student loan debt is a significant problem, one we should attack on multiple fronts.
Getting a student loan should be like getting a mortgage: both the borrower and the property need to be evaluated.
Students with poor academic records should not be getting loans to attend good colleges, students with good academic records should not be getting loans to attend poor colleges.
Only good students wanting to attend good colleges should be borrowing money, and the total debt incurred should not exceed the first year’s income in the chosen profession.
“the total debt incurred should not exceed the first year’s income in the chosen profession.”
Not a bad idea. If the average professional makes 45,000 in her first year, one should not borrow (or be allowed to borrow) 150,000 for the “necessary” degree.”
The problem is, you can’t find a degree that would have a corresponding job in SD to meet those requirements unless you had saved up enough to pay for at least a year or two of college. Even the highest paying entry level jobs like engineering start around 60-70 but your degree is going to cost that at a minimum. When talking about jobs that require more education like doctors or lawyers, it isn’t possible unless you are rich to begin with.
I get what you’re saying. If a kid wants to attend SD State and he has zero money (no parent support), he’s won/earned no scholarship, and he prefers not to work part-time during the school year and/or summer, he’d need to borrow more than $90,000! Given that a typical SD State graduate can expect a starting salary in $43-44K range, said student would not be able to borrow enough money to complete his degree.
This proves tuition is overpriced. I agree with the poster who said many college professors and administrators are overpaid. If we reduced the amount prospective students can borrow, colleges would reduce tuition. That would force schools to cut costs somewhere, which is only fair.
Limiting the loan amount available would help high school seniors understand the utility of attending trade schools and technical schools. Everyone should be free to choose, but the current system (cheap college tuition loans for all!) gives students bad information & leads many to make poor choices.
I hope colleges would (simultaneously) attack the problem in another way. Expensive schools should endeavor to increase their graduates’ average starting salaries. We could do this be shrinking classes, departments & programs that don’t lead directly to high-paying jobs. The school can offer these as electives, but students would pay for them with non-loan money. This change would encourage students who want to take those classes to work part time or study extra hard and win scholarships. Happily, there are LOTS of small scholarships available for kids with good grades.
I believe colleges should offer a 3-year track for kids who wish to bypass non-core element of their degree; this would cut costs by 25 percent & let them begin salaried work 1 year sooner. But that’s just my opinion. Others make a strong case that we must ensure all our public college graduates have studied some history, some science, English comp, foreign language, etc. Maybe that’s true. You tell me.
But if you’re passionate to major in dance performance & the average starting salary is just 23K, you should probably work for a while & save up money to finance that dream. Society has enough ballet dancers; the ballet market does not demand many more. Same with opera. Same for sociology. Drama majors are not in high demand. Sixty percent of movie and TV stars find success without any university training in drama. Salaries in these majors are quite low (& jobs hard to find) b/c we have more than enough people active in the labor force with said skill. Working families should not be asked to subsidize the education of someone pursuing a five-year “recreation and leisure studies” degree. Hey — if that’s your passion: great! More power to you. I’m not being critical: I LOVE recreation and leisure. I agree we need good people working at our city parks. But there’s little demand for that degree in the market (many applicants, few jobs) so you’d need to (partially) self-finance your ambition.
Public colleges have a duty to guide students into careers that justify the tuition investment. I’m not saying we should, by edict, FORBID study in less remunerative fields. But we harm everyone when we subsidize & promote kids who develop (what amount to) very expensive hobbies. These kids take on huge debt loads that they can never escape. Graduates end up frustrated and disappointed when they can’t find work in the field for which they’ve trained. Many of these borrowers default on their loans, risking systemic collapse. It’s all bad.
That’s a whole lot of regulation for something that’s supposed to be a free market. Yes student loans are a problem and more education in high school would be beneficial but telling kids they can’t do something because it’s not lucrative is kind of a nanny state.
“telling kids they can’t do something because it’s not lucrative is kind of a nanny state.”
Quite right. Did you miss this line? “I’m not saying we should, by edict, FORBID study in less remunerative fields.”
This is the USA. Kids can study, and colleges can teach, whatever they like. Want to major in postmodern Icelandic literary criticism? Be my guest. [William Wallace voice] Freedom!!!!! But you fund it. Let’s shrink the public subsidy for degrees w/ few-to-zero job offers.
If it’s funded by taxpayers, it’s not “free market.”
If you didn’t learn that in school, you deserve a refund.
You better go back to school if you think college is funded by the taxpayers. It may be financed and backed by the taxpayers while in school, but that student is on the hook for the full amount including interest.
Thanks, I wasn’t sure what taxpayer money was being referred to…this would be an agreement between employer and employee, no taxpayers involved.
Here’s the FY19 Board of Regents General Fund Budget Request
https://sdlegislature.gov/docs/interim/2017/documents/DEXE08282017-K.pdf
According to the Center on Budget and Policy Priorities, state and local appropriations accounted for 53 percent of higher education revenues nationwide in 2013. By contrast, private institutions do not receive direct government funding. Instead, these institutions rely primarily on tuition, gifts, and endowments.
https://www.ballotpedia.org/Higher_education_in_South_Dakota#Funding
College is funded in part by the taxpayers. Billions of free money go to students via PELL grants. There are others too.
How about asking perfessors to take a reasonable salary instead of getting paid like they are worth their weight in gold? How about getting rid of nonsensical degrees that don’t lead to employment after school?
Health care costs skyrocket and look what government intervention via ObamaCare did to them. Any intervention by the government needs to be looked at carefully.
I think the administrative salaries are too high in colleges. I would rather pay a good salary to a professor than to a president, athletic director, etc.
And I agree if a student knows what he wants as a career he should be able to take the core classes for that and skip the electives such as art appreciation etc. My son did that…he wanted to be a veterinarian so completed his core classes in two years and then got into vet school. He was out working with a doctorate in just six years. It saved two years of expense and gave him two more years earning salary. This works.
Friend of education is exactly right: the cost:benefit ratio is out of whack and the resulting debt creates either modern day servitude or bankruptcy. Unless there is a rapid fundamental change sooner than later, enrollment in traditional college programs will plummet as students migrate to programs which are online, cheaper and custom designed for employment skills rounded out by liberal arts via self directed courses.
But, in SD, our legislators are spending time with legislation that sounds good but avoids the problem except to the degree it will make it worse.
I still don’t know if if they are lying scumbags, stupid morons, or too lazy to do something substantive. But, these are the only choices.
Two things which happened in the early 80s have come to mind:
1. Governor Janklow shut down the Springfield campus and at the same time I remember he hit the early childhood education program hard. He declared it had to end because its graduates were earning minimum wage and nobody should go to college for a minimum wage job.
2. Dakota Wesleyan fired the two people running the financial aid office because all they packaged were loans and some students were incurring excessive debt.
Both of these actions are the kind of thing the Board of Regents could be doing: shutting down worthless degree programs and firing irresponsible financial aid directors.
But Anne, that would be substantive. The faux conservatives prefer the pretend and easy actions.