Noreen M. Carrocci: Student debt not ‘crippling’

08/25/2013 12:00 AM

08/23/2013 5:42 PM

An Aug. 11 Eagle article on loans and the costs of public higher education in Kansas contained facts that can’t be disputed – such as the rates of tuition increases for each university for 2013. The headline, though, was somewhat misleading.

Is it really “crippling” to have an average student debt of $23,857 (Wichita State University in 2011) or $24,068 (Newman University in 2012)?

The average price of a new car in 2012 was $30,748, and sales were up 13 percent over the previous year. Would the great majority who financed these purchases with private loans be characterized as “crippled” by this debt? I think not.

The moment we drive our new car off the lot, it begins to depreciate, a process that continues until we need to replace it with another new or used car. Our education, on the other hand, continues to appreciate over time.

According to the federal Bureau of Labor Statistics, the unemployment rate in January 2013 was 3.7 percent for those with at least a bachelor’s degree, compared with 8.1 percent for those with just a high school diploma. And a recent Georgetown University report estimated median lifetime earnings for workers with bachelor’s degrees to be $2.3 million compared with $1.3 million for those with only a high school diploma. And that doesn’t begin to address the documented higher levels of good health and happiness that come with completing a bachelor’s degree or better.

I’ve said on countless occasions that the loans I took to get through college were well worth the 10 years it took to repay them after finishing graduate school. Taking out loans to complete a college degree is clearly an investment worth making, and yet the public conversations in recent years point the public in the opposite direction.

“Trillion-dollar college debt is the next bubble!” “College grads not finding jobs!” These and other such headlines lead people to wonder whether college is really worth it. Add that to the near constant charge at the state and national levels that college costs are soaring, and it is easy to understand how higher education is no longer seen as a “common good,” but as a private entitlement to be gotten with the minimum investment possible from those who can afford to pay.

A fascinating study was released recently on “How America Pays for College 2013” (SallieMae.com/Pays2013). Eighty-five percent of parents surveyed strongly believe that college is a smart investment in their children’s future. That doesn’t necessarily translate into the parents investing more, however. In fact, parents’ average out-of-pocket spending declined from $8,752 in 2010 to $5,727 in 2013, more than a $3,000 decrease.

Whereas in 2010, parent income and savings comprised 37 percent of the total cost paid, they made up 27 percent of the total in 2013. Parent borrowing as a share of the total cost went from 9 to 10 percent in the same period. Student borrowing increased more as a share (14 to 18 percent). The percent of cost covered by grants and scholarships went from 23 to 30 percent in the same time period, and is now the largest contributor of all. It seems that most of the decline in the parents’ contribution average can be attributed to high-income families ($100,000 or more annually) paying about $7,100 less than they did three years ago.

If higher education were still perceived as a common good, legislators would be horrified with the recent disinvestment in higher education. And if families with means were willing to invest more, perhaps the numbers and amounts of student loans would be reduced. Are claims such as these more or less exaggerated than that of “crippling student debt”?

Every family’s situation is different, and there are many differences among two-year and four-year public and private colleges and universities. As I tell families often, do save what you can for college. When the time comes, find the program and institution that is the best fit for your student, and then work with college officials on the finances. And, remember, education is an investment that appreciates.

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