I could not help but notice a stretch of white plasterboards lined across McKeldin Mall last weekend. It was a sight that screamed for attention. Together, these boards told a story of our nation’s indebtedness, all 16 digits’ worth. To UMD Young Americans for Liberty, the group that came up with this idea, I commend you for having taken the initiative. The national debt is one of those numbers that is so astronomically large that it is almost difficult to fathom. How do we equate anything with a number like $14 trillion?
Perhaps a smaller number might suffice. How does $900 billion sound? Surely we’ve heard of $900 billion stimulus plans being thrown around before. Well, this number is the total amount of outstanding student loan debt, and it is also growing. As the national conversation shifts toward raising the debt ceiling, I challenge this student body to consider our own precarious situation. For us, the debt that must be repaid has no ceiling and may lead us off the cliff once more.
Today, student loans are so commonplace that we hardly consider their popularity. According to www.finaid.org, student loan debt is increasing at a rate of about $2,853.88 per second. By next year, total outstanding student loan debt will likely have passed $1 trillion. According to the U.S. Department of Education’s most recent data, average student loan debt at four-year public institutions was $20,200. This university’s average fits the bill at $20,256.
Not only are students accumulating record amounts of debt, but more students as a proportion of the population are borrowing to finance their education. In 2008, 67 percent of graduates with a bachelor’s degree had accumulated some debt. According to the Pew Research Center, students earning a bachelor’s degree in 2008 borrowed 50 percent more than their counterparts in 1996.
Peter Thiel, a co-founder of PayPal and hedge-fund manager, recently suggested that student loan debt might be America’s next bubble. Thiel, who foresaw both the 2001 dot-com bubble and the recent housing market crisis, argues that the evidence is clear. For a long time running, attending a four-year institution has been a glorified component of the American dream: Do good in school, go to college, and you’ll end up with a high-paying job. Today, however, graduates often pay enormous tuition bills only to find themselves on the sidelines with onerous debt burdens.
One need not look very far to see the parallels between the subprime mortgage fiasco and a looming student debt crisis. Over the past decade, higher education was almost as popular as housing. From 1996 to 2008, average student loan debt per capita (including non- and for-profit universities) increased by more than 80 percent. For the first time, total outstanding student loan debt exceeds total outstanding credit card debt. How can that be, you ask? The answer may lie in the fact that following the recession, households began paying down the debt they accumulated in the boom years. All the while, a college education maintained its appeal. Receiving a college degree became even more attractive when jobs grew scarce and people flocked to universities to avoid having the dreaded “gap on their resumé.”
Student loans are different from mortgages in one very important respect: They cannot be refinanced or written off. Federal bankruptcy law prevents people from discharging their student loan debts. Until your debt is paid in full, the government can go as far as garnishing your wages or even reversing Social Security payouts. This is what makes the situation unsustainable. As college enrollment continues to increase, so does the cost of tuition. And students’ finances are already strapped.
If significant steps are not taken to address this issue, including increasing the availability of grants at both the federal and state level, this nation will have a second crisis on its hands. Debt should not become a necessary evil for receiving a college education.
Steven Spinello is a junior economics major. He can be reached at spinello at umdbk dot com.
