Tackling the Debt Burden

Would you like to go to Harvard for free?

Who wouldn’t, right? Forget for a moment that it’s one of the most prestigious schools in the world — who wouldn’t want a free college education?

This is one of many drastic changes being proposed to halt the growth of the U.S.’s staggering student debt problem.

Right now, the country is facing more than $1.3 trillion in student loan debt… and counting.

Think about that: $1.3 trillion trumps the amount of car loan debt and even exceeds the amount of credit card debt… the only thing that overshadows it is mortgage debt.

The average student owes just under $30,000 now, and default rates stand at 13.7%.

How did it get this bad?

Why do our students struggle to pay for an increasingly necessary investment?

Dollar Dissonance

Once upon a time, a part-time job or even just a summer gig could’ve paid for a college education.

Now, the idea is laughable at best.

You see, tuition has risen much faster than inflation. Since national tuition rates began being recorded in 1978, the cost of a college education has skyrocketed more than 1,120%.

The minimum wage, on the other hand, has only risen 174% in that time. Not the least bit equal, obviously.

So why are people still even going to college if the cost has increased so disproportionately?

Simply put, they kind of need to.

More and more jobs these days require new hires to have a degree. Some even require as much as a Bachelor’s for an entry-level position.

In theory, this ought to be a good thing. More educational requirements mean a highly skilled, highly paid workforce, right?

This chart from the National Center for Education Statistics shows that the benefits of completing a college education are pretty good. For every degree level a student achieves, their average salary goes up.

But the problem with this idea is two-fold: getting a job with these high salaries is harder than it looks, and those who end up not completing their degree for one reason or another are left with no benefits at all.

So what can we do?

A Surplus of Solutions

Making college free is just one of many possible ways to cut down on student loan debt.

The biggest question this decision would have to face is how such action would affect the quality of education.

The reduction or removal of interest rates has also been proposed, as has making colleges pay interest on their students’ loans.

Capping tuition rates, as they’ve done in Britain, is also a possibility.

These are just the tamer ideas…

Several of our current presidential candidates think it may be a good idea to do away with the Department of Education. This would reduce federal power over the loan system and leave individual states to find their own solutions.

One college in Maryland allegedly discussed plans to start culling the herd: The freshmen were apparently given questionnaires that would determine exactly how likely they were to finish their degree program, and anyone under a certain threshold would be dismissed.

Of course, the most commonly heard cry is, “Just forgive my debt!”

There are already a handful of programs that do that, either once you’ve worked in a certain field or once you’ve made regular payments for a number of years.

That, however, does not address the future debt of incoming students. And there are more enrollments every year.

A Losing Game

My colleague Christian DeHaemer has predicted the rise of student loan debt to more than $1.5 trillion by the end of this year.

That’s pretty likely, considering people aren’t going to suddenly stop going to college overnight. We’ve turned that sheepskin into a necessity today.

Thing is, you don’t have to let that debt drown you.

Chris has actually found a way to get back a good portion of what you paid into tuition. In fact, he‘s putting the finishing touches on the report as you read this, and you’ll have full access to it — at absolutely no cost to you — very soon.

Stay tuned.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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