We don’t need no education

~ Anna Barshchevskaia

Private-student-loans

What comes to your mind when you think about a University? Studies, books, professors, friends, various networks, parties? What about money? Not many people are aware of the fact that every medal has its reverse. In Europe, higher education obtains much more government subsidies, so student loans are much less common comparing to US. However, even if one receive a free of charge education, he or she still needs to pay a rent, cover fees and taxes, buy books and so on.

Student debt is a rapidly growing issue all over the world. Roughly, 70% of academy graduates leave school with student loan debt, compared to not more than 50% twenty years ago. These days, student debt is the second-largest source of consumer debt in the US, beating credit card and car loan debt and it is headed only by mortgages. Constantly rising costs of university education and continuous unemployment and underemployment of college graduates, a student loan debt starts to become one of the major issues in the nearest future — and it has the possible strength to harm economy and enforce crisis.

In the beginning of the month The Wall Street Journal published the article, which claims that approximately seven in 10 seniors are about to graduate from American’s colleges this spring borrowed for their education with a record-setting average of $37,000 in debt. It should be taken into consideration that for instance software engineers are paid more compared to teachers. It makes a potential year of paying off a debt significantly vary. While yesterday’s students are still paying for their education, tomorrow`s students are taking more loans.

Researchers at StartClass (an education research website in the USA) used Federal Reserve data from 2006 to 2015 to evaluate the per-second growth rate in student loan balances. They subtracted the amount of remaining student debt in the first quarter of 2006 from the amount of remaining student loan debt in the first quarter of 2015 and divided that number by the number of seconds in a quarter and then divided that by the number of quarters between the first quarter of 2006 and first quarter of 2015. That let them to create a special clock, which presents a cumulative student debt in the USA.

The outstanding balance of the nation’s student loans is growing by an estimated $2,726.27 every second. As legislators and experts debate ways to challenge Americans’ $1.3 trillion in student loan debt, this student-loan debt clock provides a window into the growing hazards to the economy as well as to student loan debtors and their families.

Many would say that there is an opportunity to get a scholarship. Yes, it is possible. However, frankly speaking, the amount of applicants overbid the amount of scholarships. What is more, not everyone can show an outstanding result in studies, so these students have even less chances to have a scholarship and as a result get their degree due to financial problems. In the USA a Student financial aid exists, which should help students to cover costs associated with attending a college. The aid based on calculations of the Expected Family Contribution. This is fundamentally how much the government considers that families can afford to pay for their kid’s education. It is found on a compound formula, which takes into consideration earnings, assets and other indicators. Using this formula, colleges calculate how much need-based financial support a student need to receive.

The drawback is that this formula does not take into account any family expenditures, any necessities for saving for retirement and possible costs of saving for another kid’s in a family college education. Therefore, while the government may be concerned that one is able to donate thousands of dollars, he or she may not have this opportunity. For instance, if the cost of attending is $55,000 and the parent’s cumulative Expected Family Contribution is $47,000, the student will not receive more than $8,000 in the financial aid. That is called ‘too rich for financial aid’.

According to Anne Campbell, an English Labour Party politician, a former Member of Parliament (MP) for Cambridge from 1992 to 2005: “Poorer students take out larger loans and will have to contribute more to the cost of higher education”. About 40 million American students are carrying some loans and about 70% of students graduate college with a burden. In addition, less than 40 % are paying down the debt. As a result not being able to pay down a debt may automatically make one’s kids to get a student loan as well, which creates a vicious circle. It may influence generations; this also excludes these students from evolving an economy (a burden prevent buying cars, houses, starting a new business).

So do we need such an education or not and what is its real price?

References

5 thoughts on “We don’t need no education”

  1. Really interesting article that makes me glad to study in a country where student debt is still rather low. And luckily so, since education is literally the only ressource Germany (and a lot of other developed countries by the way) is able to toss in the ring. So if you ask “do we need such an education?” I’d still say that we do. Else we might just as well stop whatever we’re doing and go back to farming 😉
    However, I completely agree when it comes to questioning the high financial pressure on students. while one could argue that we don’t need nearly as many students and only the best should be allowed / enabled to study, this system is neither fair nor effective. in my eyes a proper education enables almost everyone to improve themselves and the chances they’ll have in life. Therefore this path shouldn’t be exclusively for the best (or rather the most wealthy) but for everyone. Student debt might also hinder enterpreneurship, since indebtedness might make you more risk averse and reduces the availability of financial sources.
    What I might want to add, however, is that not every field of education is created equally. I would assume that engineers, lawyers etc. have a much easier time paying of their student debt than maybe philosophers, linguists or art students. Here the question arisies for me: Might student debt even be necessary to motivate students to pursue careers more needed by society?

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    1. Well it may sound convincing as regard low tuition educational system like Germany enabling every student to enhance his or her educational background but sometimes high financial tuition provides competition for a competitive job market. Even philosophers, linguistics and arts students as you rightly mention do compete among themselves. So high financial tuition cannot be left out as it provides quality education for quality human resource. That is why in the US students are oblige to obtain loans to finance their studies not only the rich.

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      1. I don’t quite understand in how far high tuition costs might increase competition on the job market. Since it would exclude a significant share of students from obtaining the necessary qualification for some jobs, would the american system not much rather decrease competition and therefore the quality of human resource available? I think it is a fallacy to assume that high tuition costs seperate the good from the bad students but much rather lead to unfair advantages for privilleged students. In my personal (maybe slightly biased opinion) the US does not require students to indebt themselves to provide quality education but much rather because their education system is fundamentally broken.
        While I do agree with you in that tuition fees might have some merit (motivating students to take studying more serious), I still think that they should not be used to weed out students. If one must (and I would support that) performance would be a better indicator to limit ecessibility of education than the wallet of ones parents.

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  2. This is such an interesting topic. Student debt and college affordability has become one of the central debates in the Democrat Presidential primary in the United State. Where Hillary Clinton has made addressing the increase in student debt one of her main policy proposals. Socialist Sen. Bernie Sanders has won the hearts, if not the wallets of young voters by promising free college tuition.
    The question of should education be free? In my opinion education can never be free because in one way or the other we must pay back to the government in order to keep the cycle going. In Germany for example, free education which means more people can go the university and as a result, when they are done are added to the government human capital which brings about development in the economy and increase in the government reserve through taxation. Also looking at the U.S. The U.S. Treasury Department released its annual financial report for the US Government which calculates the government’s total number of assets and liabilities early in February 2016. In the report was a surprising fact. Student loans now make up 37 percent of the total assets of the U.S. government. In some ways, a major business of the U.S. government now is getting students to take out loans to pay for college. Last year, the Federal Government held as assets almost $1.1 trillion in student loans. This is up almost 10 percent from 2014. The federal government earned almost $1 billion on these loans last year. Any drop in the number of student loans, after all, will also greatly reduce the number of assets the government owns. That will make its fiscal situation even worse than it already is. Therefore education is seen by government as very important to the development of the country.

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  3. In most developing and least developed countries, students do not have access to loans to pay for education- education plays a key role in development- and their parents can barely afford tuition, not to talk about the government, students in developed countries like the United States and Germany (for example) should be grateful they have access to this and their government can be involved and even quality education and a job after university.

    Students can also work during school hours to cover up for some little expenses, this is rarely the case in LDCs.

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