[Guest Post by By Sofia Rasmussen]
It has become common knowledge as certain as death and taxes that a college education leads to a better life. A recent Pew research poll found that Americans holding a Bachelor’s Degree can expect to make an additional $650,000 on average than those who have only graduated high school. That said, the loans many college students and parents need to take out to pay for higher education have college graduates asking themselves if it’s all worth it. Students are asking if that trip to MIT really a good investment at a 7% compounding interest rate and if going to Harvard is really worth that much more than a top online PhD degree. As debt increases, recent graduates are entering the workforce already overwhelmed, and economists are speculating as to whether the current trends in student loans may be leading to the nation’s next major debt crisis.
It’s easy to see why student loan debtors and economists are concerned. According to a report by the National Association of Consumer Bankruptcy Attorneys, individual college seniors owed an average of $25, 250 in 2010, up 5 percent from 2009. These trends are no less staggering on a macro level, with 2011 representing the first time that US student loan debt exceeds $1 trillion, higher than the amount of credit card debt Americans have accrued. A report from Standard and Poor’s states that ‘student loan debt has ballooned and may turn into a pricing bubble’.
The US is not the only nation facing student debt issues. India has been struggling to handle student loan applications that have more than doubled in five years, thanks to growing aspirations among the their previously lower economic class. As more Indians attend university, the cost of educational degrees has been on the rise and Educational loans from self-financing institutions in engineering, medical fields and management have become widely used. Also rising is default on debt, and India’s banks have taken notice. Banks have aimed to address bad loans by linking loan approval to employability. It is telling, then, that India’s banks do not provide any loan at all for a degree in Arts.
Whether or not student loan debt will lead to disaster for the economy at large remains to be seen, but for recent graduates, the crisis is readily apparent. Owing $25 thousand without ever having a full-time job or experience in one’s desired field can have a profound psychological effect. The student loan anxiety can impact job decisions throughout an entire career. Even if there are openings in the fields they specialize in during college, the burden of debt leads recent graduates to opt for work with the fewest potential risks. Often this work is outside of a student’s preferred field or less intellectually stimulating than they’re capable of handling. According to a recent article in The New York Times, only half the jobs landed by new graduates even require a college degree. A graduate with a degree in Arts may be dismayed to find there is little market for a vast and intricate knowledge of WWII era British Literature, even if they had found their knowledge of the subject lead to great success in college.
While the outlook is better for a sciences graduate, they too are often saddled with work in fields that are very different from what they passionately studied at university. There is certainly no lack of need in the sciences, but often graduates with little experience outside of the classroom are saddled with grueling hours and demanding work, work they would never take if it weren’t for the threat of crushing debts to pay off.
Even as the cost of education continues to rise, parents around the world happily risk tens of thousands of dollars to send their children to best schools they can afford. For most young people, college remains a good investment. What may be changing is the sense of freedom that has traditionally been associated with college. Students may be expected to know exactly what they want to study much earlier in their educational career, perhaps even choosing specialized skill schools as opposed to the more rounded university experience. While it’s true, this may result in less culturally savvy graduates, for many students it may be the practical solution for an economically feasible life.