Today’s Washington Post has two troubling stories that touch on the future of American competitiveness. One story covers a new Organization of Economic Cooperation and Development (OECD) report showing that the United States is falling in the global ranking of young adults who finish college. The other story is that defaults on federal student loans have jumped.
According to the OECD report, the United States has fallen from twelfth to sixteenth since 1995 in the percentage of adults age 25 to 34 holding college degrees. This happened despite the fact that successive presidents, most recently President Obama, have vowed to put the United States back on top of the world’s higher education rankings.
As the Post story points out, the OECD’s ranking are somewhat misleading. American higher education is built around the four-year bachelor’s degree. Many other countries stress shorter one- or two-year professional degrees. But that raises another important question, is America’s traditional four-year approach the right one? Are most students well served by this model? As much as I would like to give a definitive yes—I have taught at two major research universities—I’m not so sure.
One reason is that the cost of a college education in the United States has skyrocketed. I hadn’t followed college costs closely until my kids became teenagers. Now my oldest child attends the University of Virginia, and all I can say is, wow! UVA estimates that the total cost for an in-state undergraduate to walk the grounds in Charlottesville this year is $24,104. And that’s a pretty good deal. My alma mater, the University of Michigan, puts the total bill this year for out-of-state undergraduates at $50,352. Bates College, ranked in 2010 as the most expensive private four-year institution, charges $55,300.
As someone who will be sending three more kids to college over the next four years, all I can say is, ouch! And yes, I understand that grants and financial aid mean that many students pay less than the full advertised price. And I know you can cut college costs by attending a community college for your first two years, buying used books, and so forth. But still, ouch!
Which brings us to the Post’s second story—defaults on students loans are up. Many students finance college by taking out loans. Borrowing money to pay for college—what economists call investing in human capital—can be a smart idea. College graduates earn substantially higher salaries and have significantly lower unemployment rates than people with just high-school degrees. (Dropouts fare even worse.)
But even a good idea can be a bad one if pushed too far. Student loan debt is growing quickly. In 2010 for the first time, the total amount of student loan debt surpassed the total amount of credit card debt. The average college student now graduates with more than $24,000 in loans, up from an average of $13,172 in the mid-1990s. These figures don’t include what parents borrow, either directly or through vehicles such as home equity loans, for their children to go to college. Students graduating now may become the first generation of parents to still be paying off their college loans when their kids go off to college.
That’s not a good trend. It’s why the United States is likely fall further down the ranking of adults age 25 to 34 with a college degree unless it revises its education model, changes the way its finances higher education, and brings costs under control. (UVA boasted in the press release announcing its 8.9 percent increase in in-state tuition in 2011-2012 that this was the tenth year in a row that it had held tuition increases under 10 percent; that’s a pretty generous standard to be measured against, especially when the past decade witnessed historically low inflation, including an inflation rate of just 1.5 percent in 2010.) A society in which fewer Americans attend and complete college, whether of the one-year, two-year, or four-year variety, cannot be good for the ability of Americans to prosper in a globalizing world, or for the future of American power.