The Student Debt Crisis and Self-Directed Learning for Free

Mindy Fetterman and Barbara Hansen analyze debt burdens on younger generations.

Although the percentage of people ages 22 to 29 with debt has declined, their total debt is up 10%, to an average $16,120 as of Aug. 1, compared with five years earlier, Experian’s analysis found. Every type of debt — from credit cards to college to personal loans — has risen.

Student-loan balances rose 16% to an average of $14,379; revolving debt, including credit cards, surged 24% to $5,781; and total installment debt, including student and personal loans, rose 4% to $17,208. (Comparisons are adjusted for inflation.)

The culprit is not profligate spending but rising educational costs:

There’s a blame-the-victim attitude at work, too, says William Strauss, co-author of Millennials Rising, a 2000 book that identified the generation born from the early 1980s to the early 2000s.

“There’s the common misconception that they have these debts because they’re buying iPods or cable TV,” Strauss says. “It’s not that. It’s student loans and housing.”

What exactly is tougher about the financial challenges facing today’s young adults? Shireman of the Project on Student Debt points to:

•Skyrocketing tuition. The average price of college has grown much faster than the rate of inflation. Average annual tuition at public four-year colleges and universities is $5,836 in 2006-07, up 268% from 1976-77, according to the U.S. Education Department and the National Center for Education Statistics. Private college tuition is up 248% to $22,218 a year.

•Declining student grants. Though total federal student aid has grown sharply, so has the proportion of people in college. In 2004, 67% of high school graduates enrolled in college; in 1972, only 49% did. As a result, student grants cover only 39% of the costs of a four-year college today, compared with nearly 80% in the mid-1970s, the College Board says.

•Soaring student-loan debt. Students have generally made up the gap between what colleges charge and what they can afford by borrowing. The percentage of students who borrowed for college jumped to 65% in 2000-01 from 34% in 1977, the National Center for Education Statistics says.

And they use credit cards to help pay for books and other items. Half of all graduates in 2004 used credit cards for school expenses, the American Council on Education found.

I had problems paying off my student load immediately after college, and it definitely forced me to change my career choices in my twenties. I couldn’t stay in graduate school (my student loans were private loans and nondeferable) and I couldn’t join Peace Corps until I paid them off.

There are two problems here. First, private student loans are simple debts; there are no escape clauses for those doing charity work or staying in graduate school.  Students rarely realize this. When they are in college (or even in high school), they don’t appreciate the magnitude of the financial burden they are accepting.  Related to this is the fact that others are making your financial decisions for you; parents will happily push you to assume student debts so they won’t have to pay it themselves.  Actually, with government low interest debts,  it probably makes sense to defer these debts, but parents should assume some responsibility for  private loans; they can’t realistically expect their children to have the ability to pay $500 a month within the first 5 years out of college.

Secondly, educational expenses have been rising–even ancillary costs like textbooks. Getting a college degree or graduate degree seemed like a good idea for your long term financial health. But students really should address the practical question: will the amount I am spending (or will be spending) on this degree truly pay off in the long run? Luckily, I had a graduate fellowship at Johns Hopkins, but several people assumed lots of student loans to pay for a premium graduate education. Trust me, Columbia or Harvard isn’t worth that much more than your average state-run graduate program.

Students are used to seeking out brand name products, and choosing a college seems to be a byproduct of this decision-making process.  With brand names, you are willing to pay a premium for the imprimatur and the social acceptance. (This often happens in fields where it’s difficult to gauge quality).  But resisting the allure of the brand name (or at least trying to objectively assess the costs and benefits together) can often save you a lot of money and allow you to find an educational bargain in the process.

I’ve long insisted that the 4 year degree needs to die. Many institutions are just not taking advantage of new technologies to reduce educational costs. Instead, every new technology becomes an excuse to keep tuition high.  Now that I am out of college and in the work world, I am constantly teaching myself new things–and constantly learning these things without having to pay a dime of tuition. Not that I have a problem with doing so; I would gladly pay the money (or even borrow the money) to pay for a skill I thought I needed. But so many low cost learning opportunities exist–hey, there’s this thing called the Internet;  they say it’s supposed to be great).

What students need is not more college credits but help from a independent consultant to plan a self-learning curriculum that is affordable , yet effective. Right now, educators (and students) seem to feel that the only way to learn a trade is to enroll in a 2 or 4 year degree. But that is not true anymore. A few years ago, I enrolled in a graduate program at University of Texas for Instructional Technology. Fun, exciting program; I definitely benefited from it. I took two graduate courses and dropped out with an A and B. While taking these classes, I realized how little I needed to be in this graduate program to learn the things I was learning. In fact, it was almost more efficient to be learning these things on their own.

This phenomenon is not always true. With technology fields, you want to see the tools or algorithms which experts use. Sometimes it just is too time-consuming to teach yourself these things. In programming for instance, it often takes a long time to set up a development or testing environment. It would help to have a school set these things up for you. On the hand, setting this environment up is not time-wasted; many developers struggle to learn everything at a very detailed level, and instructor-led courses can begin at a high level simplified view.

Learners don’t need teachers or even classroom environment, but they do need learning sequences and plans for self-directed learning. Moreover, they usually also need a social setting where they can exchange ideas with other people trying to learn the same thing.

(Incidentally, I’ve linked here before, but the Stingy Scholar is a good place to start for online learning resources).  








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