As a current college student, I always find myself interested in the huge investment that many students are making in college. This is especially more interesting to me as many nations are experiencing rising unemployment rates and many college students are returning home to live with mom and dad according to a Pew study. Further, the Federal Reserve of the United States just released new data on the debt levels that college students and graduates have accumulated. While this is a problem that is mostly unique to the United States, the European Union and many Asian countries currently subsidize higher education. Therefore all countries should pay attention to this as the subsidies may run out in the near future.
The data reveals some very interesting features. For one, it’s pretty clear that the level of debt has increased disproportionately to the numbers of borrowers. This makes perfect sense as it is widely documented that college tuition costs have been increasing rather dramatically. However, what’s even more interesting is that only roughly a third of the debt is held by borrowers under 30- which would be considered “college age.” This could mean one of two things: 1) there are many more people returning to college later in life and borrowing to do so or 2) people simply cannot afford to pay their college debt and college is a poor investment for them. This chart from The Fiscal Times seems to support the latter theory.
If college costs keep increasing relative to earnings and employment, what will happen to the next global workforce? Will people still insist on going to college even if it may be a bad investment? Will the incoming workforce be less skilled due to this? Could the cost of college further the inequality gap that many countries are experiencing? What are some of globalEDGE’s thoughts on this problem? How would you solve it?