The Best Investment the U.S. Could Make — Affordable Higher Education

The Best Investment the U.S. Could Make — Affordable Higher Education

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The most frequently cited remedy for rising inequality is more and better education. According to this view, many workers do not have the skills they need to be successful in a globalized economy, and this “skills gap” can only be overcome through improved educational outcomes.

But this can’t be the entire story. First, wages have stagnated for both the college educated and those without a college degree. So a college education is no guarantee of immunity from rising inequality.

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Second, we have been trying to improve education for as long as I can remember. If not all those decades of effort haven’t paid off in the sense of preventing inequality from increasing, what is different now? Have we suddenly found the answer?

Third, the skills gap story ignores the fact that education will never be the answer for everyone. We can offer other types of education, e.g. technical training at community colleges, but we will still miss a substantial fraction of the working population. College won’t work for everyone.

Fourth, many of the trends that were present in the 1990s when the push for education as the solution to inequality became mainstream have diminished, and this undercuts the skills gap story.

Fifth, the skills gap story ignores other potential explanations for rising inequality such as the decline in worker bargaining power as unions have faded, a minimum wage that has not kept pace with inflation, let alone productivity, and economic power that distorts the distribution of income toward capital rather than labor.

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However, while education does not fully explain the trends in inequality and is therefore not the answer for everyone, it is the answer for most people. A college degree is a worthwhile investment – wages for the college educated have stagnated, but they are still much higher than for those with just a high school education.

Unfortunately, it is becoming harder and harder for middle class households to finance a college education. According to figures provided by the New York Fed’s Liberty Street Economics blog:

Since 2004, student loan balances have more than tripled, at an average annualized growth rate of about 13 percent per year, to nearly $1.2 trillion, in 2014.

Our data indicate that both increased numbers of borrowers and larger balances per borrower are contributing to the rapid expansion in student loans. Between 2004 and 2014, we saw a 74 percent increase in average balances and a 92 percent increase in the number of borrowers. Now there are 43 million borrowers, up from 42 million borrowers at the end of 2013, with an average balance per borrower of about $27,000.

As the authors document, rising debt means rising default and delinquency rates. Thus, “only a little more than a third (37 percent) of all borrowers is making regular payments on schedule.”

Struggling to pay off student loan debt, which has affected home ownership among the young, is no way to begin life after college. I was lucky. I grew up in a working class household. My parents attended a community college for a bit, but never graduated, and they made it clear that if I wanted to avoid working in a tractor store for the rest of my life like my dad did in the tiny farming town where I grew up, I needed to go to college.

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Fortunately for me, CSU Chico, which was nearby, only charged approximately $100 per semester. That meant I could work all summer and save enough to finance a dorm room, tuition, books, etc. for my first year of college (later I moved out of the dorm and worked at a gas station, among other places, to pay expenses). If it hadn’t been for the cheap tuition, I would have been stuck in that town with little hope of finding my potential. I am grateful to this day that the State of California gave me that opportunity for an education, and that I was able to eventually make it through graduate school with very little debt (a single textbook today costs about the same, in inflation adjusted terms, as my entire tuition for a semester in the mid to late-1970s).

When I think of all of the kids who have no choice but to take on a load of debt in order to go to college, and those who don’t go at all or choose an option that doesn’t fully develop their talents due to the cost, it saddens me.

How many people who are in a situation like I faced will be stuck there, unable to afford to go to the college that best suits them, or can’t go at all? When that happens, when so much potential is unrealized, it makes us all worse off. We must do a better job at providing support for students who want to go to college. We must stop saddling them with tremendous amounts of debt when they try to improve their lives.

We can do better than this.

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