People go to college for a number of reasons.
Some are pursuing their dream and their life’s work. Others, perhaps less focused, or simply less gifted with a consistent dream, go for just the opposite reason — to delay decisions about their life’s work. Some attend college because their parents expect it, some for the social life. And some see it as a gateway to higher-paying jobs, even if the nature of those jobs may be somewhat vague in their minds.
These reasons haven’t changed much in a hundred years, despite the significant cultural, economic and demographic shifts our country has experienced. In that sense, driven by its costs, higher education has changed far more than its students.
A greater proportion of today’s students is seeking higher education for practical, economic reasons, for example, but this is probably more a response to the rise in educational costs than it is a reflection of changed values in our society.
The marketing campaigns of colleges and universities around the country reflect each of the students’ reasons to some extent. Their Web sites and television ads promote the idea that higher education is a key to achieving a fuller, more rewarding life. In the film clips students are shown in science labs and classrooms; studying, walking, socializing and talking together; and experiencing the joys of team sports.
It is not a matter of false advertising. All of this is true. The experience of higher education on a college or university campus is like no other. It changes people — some more than others, of course — and for the most part people emerge the better for it.
The issue is not the value of higher education but its price. A good bit of higher education marketing is aimed at justifying this price by comparing it with predicted future income. Still, access to higher education is made difficult by its high costs, and this constraint, like all economic constraints, is changing behavior in ways that will reshape life in our country.
Faced with ever-higher costs of tuition and fees, students react the same way that consumers in other markets do: they try to maintain their consumption level by adding debt.
One of the fastest-growing sectors in our economy today is the so-called “private student loan” business. That’s where students and their families turn when they reach their borrowing limits for government guaranteed loans. Nationwide, these loans to “maxed out” students now total over $17 billion and the amount is growing exponentially.
The average college student graduating today comes away from the educational experience with a diploma and over $20,000 in student loans along with credit-card debt and other obligations.
The situation for doctors and dentists is considerably more intimidating. Graduating medical students, on average, have accumulated debts of over $140,000. And the American Dental Association reports that graduating dental school students on average now carry a debt burden of nearly $159,000 along with their diplomas.
Debt affects behavior and changes relationships. We have the well-known example of what happens when money is lent by one friend to another. While a few friendships are made stronger by the transaction, many, perhaps even most, do not survive.
Debt affects the behavior of institutions and businesses as well as individuals. A corporation with a lot of debt has a much more limited range of actions than one funded by equity. Even federal, state and local government is now finding that debt levels can get large enough to affect their options.
The price of higher education, and the debt accumulation that accompanies it, affects behavior in several ways. Certainly, the debts of doctors and dentists affect their choices of where and how they work. And because of their key role in our society, their choices affect us, very obviously and directly.
College and university graduates in other fields, too, leave the campus to face the world accompanied by their debt, which trails them like a large pet. And just as apartment rental options are limited if you bring your St. Bernard, career selection for graduates is often limited to getting a job immediately that pays enough to cover the debt servicing.
By reshaping the behavior of graduates, debt accumulation lowers the benefits and the economic efficiency of higher education, and we pay the price. It is what economists call an “externality” of the higher education process, an unintended social cost, and it has reached dimensions that we can no longer afford to ignore.
Whether the cost of higher education is affordable by individuals is a decision that consumers can make on their own. Whether the external costs of higher education are affordable by the economy is a question for all of us to answer.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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