For none of these reasons is it wise to take on a massive amount of debt. Yet many students are doing precisely that in the first quarter of the twenty-first century.
Education is often called an investment. Any investment is judged by the returns it yields, the “return on investment” (ROI).
The clear trend is that, over the last half-century, students have been making larger and larger investments, and much of those investments have been funded by larger and larger debt. Yet the growth rate for salaries is much lower than the growth rate for tuition, and for the loans needed to pay that tuition.
If education is conceptualized as professional training, then it fails to demonstrate a reasonable ROI. If the cost of earning a degree in a profession — engineering, law, medicine, etc. — has increased much more and much faster than the salaries of those professions, then it makes little sense to burden one’s self with debt to pay for such tuition.
It is even more illogical to assume debt if one is studying, not to be trained for a profession, but rather for any of the other reasons mentioned above.
Not only is accruing debt to pay for college unwise, it is also unnecessary: the price of university education is artificially high. A restructuring of America’s colleges and universities can maintain, or even increase, the quality of such education while reducing its price. The modern American university is marvelously inefficient in regard to its use of money, as Carol Roth writes:
However, in certain arenas, debt is being pushed and utilized in a way that is decoupled with achieving ROI. The biggest arena in which this is happening is college debt. In the US, college attendees, whether they had graduated or not, owed $1.6 trillion in college debt principal, aggregately, as of mid-2022.
Why haven’t the universities been reformed to offer better educations at lower prices? Because one powerful entity has a vested interest in keep the universities in their present condition: the government.
By maintaining the status quo in regard to the financing of college education, the government simultaneously achieves several objectives: First, because the government, and not private-sector lenders, does the majority of the lending, it thereby obtains a degree of control over those who are in debt. Second, because the universities rely on students paying large sums of borrowed money as tuition, the government has influence on postsecondary education.
In many cases, the size of an individual’s debt, and the degree on which universities rely on students obtaining large sums of borrowed money, justify the use of the phrase “debt trap” — alumni are held in effective servitude if they are still paying students loans several decades after graduation; colleges and universities understand that if student loan programs were to be reduced in size and scope, then they would be forced to become efficient at delivering quality education.
If these lending practices were used for home mortgages or car loans, the lenders would be prosecuted under the RICO statutes. But in this case, the lender is the federal government, as Carol Roth explains:
To put it bluntly, college and university degrees have become the biggest legal financial scam in the country, and the US government has morphed into the largest predatory lender in support of it.
To continue tricking students into taking out college loans, a barrage of propaganda is necessary to convince the public that a college education is the only path to personal or professional success. A side-effect of such propaganda is the neglect into which the non-collegiate skilled trades in the United States have fallen.
While the colleges indoctrinate America’s youth to believe that they must attend higher education at all costs, and especially at the higher costs which comfort the university’s administrators, the colleges themselves are being indoctrinated by the government to be or to do in such ways as will incline the government to maintain a given college’s status as eligible for student loans.
Each college or university — including the private ones, which are therefore less and less “private” — must comply with government protocols in order for its students to qualify for student loans.
If a college doesn’t comply, then its students will not be permitted to take out student loans, and the college won’t get the money. The students will move on to another college, one which complies with government ideas.
Neither the government nor the university has any motive to encourage students to reflect on whether the cost of the education is reasonable. Who will warn students away from taking on debts which will burden them for decades to come?
Carol Roth explains:
The profiteering college education structure is having a major impact on economic freedom and wealth creation for young individuals, as it does not enable a good financial return, or any return on investment in some cases, for too many of those buying education. Individuals aren’t contextualizing their choices about what they want to do and what they may need to do to fulfill their future objectives.
It is quite possible to restructure America’s colleges and universities so that students get educations which are as good, or better, than they are currently getting, but at a lower price — a price which would make massive college debt unnecessary. What is required is someone with the political will to encourage such restructuring.
