Higher education in America is receiving increased attention as student debt soars into trillions of dollars and institutional debt (which future students must pay) is not far behind. Further, business and political leaders now say that college graduates do not have skills for today's economy and most states, including Virginia, talk up the need for reform in post-secondary education.
Student debt is quickly becoming a critical American economic issue. According to USA Today, outstanding student debt is approaching $1 trillion, outpacing credit card debt, and will jump again this year as college gets more expensive and jobs harder to find. Student debt is now the No. 1 consumer debt in the nation.
And according to The Project on Student Debt, some 37 million current and former students owed more than $25,000 each in student debt in 2010, and a recent news report indicates that perhaps one third are at least a month late on payments. Most are only trying to pay interest to keep their debt from ballooning in a lackluster national economy. And to complicate things, interest charged on student debt is due to double from 3.4 percent to 6.8 percent on federally subsidized student loans.
Further, institutions have used easy credit to incur hundreds of billions of dollars in debt, which students of the future must repay. And in a time of easy credit, many states have pushed more and more of the cost of a college education to students. Congress not only facilitated the growth of student debt but made it impossible for students to free themselves from excessive student debt through mechanisms like bankruptcy. This debt is here to stay.
If college degrees were the tremendous economic assets that they were 30 or 40 years ago, this would be less of an issue. However, now the value of associate through doctoral degrees have limited economic value to many students; this complicates the indebtedness crisis. Recently, the U.S. Chamber of Commerce and other national business organizations identified college costs and the limited economic value of a degree as critical national economic issues. (Even Federal Reserve Chairman Ben Bernanke -- whose son expects to graduate from medical school with $400,000 debt -- says student lending requires "careful oversight.")
While there is no question that post-secondary education is critical to individual and national economic growth, the issue of many four-year degrees having little economic value is moving to the national front burner. For example, since 2001, more than 12 million college degrees have been awarded and there are now 6 million fewer jobs in America. No wonder so many college graduates are living with their parents while waiting tables part time for less than minimum wage. A study by the John J. Heldrich Center for Workforce Development at Rutgers University in 2011 showed that of college students who graduated in 2010, only 56 percent had found a job a year later.
The explosion of student cost is significantly a result of states not providing resources and guidance to public institutions, plus borrowing of hundreds of billions (with exotic bonds) to build posh recreational, athletic and living facilities on campus, plus an explosion of administrative costs (presidents' and coaches' salaries have increased more than 30 percent per year over the past decade) and the encouragement of students, through administrative policies, to take five or more years to complete a "four-year degree."
The federal government and states need to calculate and share with students seeking loans the real economic value of individual degrees, and not provide exorbitant loans for every degree. Further, colleges can and should initiate fast-track degrees where a bachelor's degree could be earned in three years, like in all of our foreign economic competitor nations.
The idea that spending five or six years at a college or university is for "intellectual stimulation" is not an acceptable concept in the 21st century economy. And, finally, the explosive growth in non-academic student expenses must also be rolled back.
Something dramatic must be done or the United States will face an economic meltdown far greater than the housing crisis that continues to haunt us.
Gilley, retired president of Marshall University, lives in Reston, Va.