College Grades: Three “D’s” Debt, Default and Disillusionment

Loans: Anchors or Preservers?

Here’s a title to give parents “the willies:” “Drowning in Debt: The Emerging Student Loan Crisis.”

An excellent summary of the findings by Inside Higher Ed makes three basic points:

Greater numbers of students are borrowing to attend college
Student loan amounts are higher than ever before
More students than ever are taking out private loans to finance their education

Where will it all end? No one likes to get “D’s,” in school, but at this point it looks like debt, default and disillusionment, probably in that order, is the “real life” grading system for the near future.

DEBT: The study points out that 53% of students at four year universities, and a whopping 92% at for-profit colleges now borrow for their education. Something in the system is broken when so many have to borrow so much. College costs rise at about double the rate of inflation, which means that more families and students are forced into borrowing, particularly in this economy, where savings and home equity are exhausted, and even low-paying jobs are hard to find.

DEFAULT: Look for default rates to rise, despite the consequences. Students are now borrowing at a $20 billion annual pace, and the numbers of students just giving up on paying has ballooned to nearly 7%–for the 2007 (!) fiscal year. I can only vaguely imagine what the default rate will be in 2009.

DISILLUSIONMENT: Though not readily measurable, the strain is starting to show in some ways. Borrowing $100 or $200,ooo to prepare for a job that pays $30,000 seems nonsensical just in the telling. Yet it’s a fact that the new generation of graduates may be lucky to find a job at all, and that the job they finally find may have nothing to do with a college degree. The more resentful kids seem to feel that they were somehow “tricked” into college, believing that a degree would be the pass to a lucrative job or career. But even those who are more philosophical about their post- college seem surprised at the lack of open doors.

What can be done to re-grade the system? It’s doubtful that “A’s” can readily supplant “D’s”, but there is no reason that thinking parents and families can’t achieve at least a series of “B’s:” Borrow less, far less. Be realistic in your goals for a degree. Believe. Good things happen to people who believe in themselves.

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