Sunday, November 6, 2011

No More Student Loans?!

This new generation of college graduates has been hit hard by our struggling on our economy. While I was watching Real Time with Bill Maher a week or two ago I heard one very alarming statistic: 85% of college graduates go home to live with their parents immediately after graduation. He did not say for how long or why most students move home, but this is still very discouraging news to any college student. There are many reasons as to why this unfortunate trend is occurring. One of them is that the price of college tuition has drastically increased over the years. According to Tamar Lewin in her article she wrote in 2009 in the New York Times College Costs Keep Rising, public four-year institutions have raised their tuition by 6.5% over the past few years while private institutions have increased their tuition by 4.4%. Here are two graphs: one of them shows how college tuition has increased over the past few decades and the other compares this increase to the price change in homes:

As you can see in these graphs, college tuition has become incredibly high. Keep in mind that this does not include personal expenses and room and board. Lewin wrote in her article that many people are looking to combat this problem through student loans. This has resulted in college tuition being treated and looked upon as if one was taking out a loan for their home. As a result, most college students are up to their ears in debt by the time they walk up to the podium knowing that they will be a part of that 85%.

Clearly, the solution to this problem that is counterproductive to reviving our economy lies in price containment as opposed to student loans which has proved to just add fuel to the fire. Ron Paul who despite his lack of media coverage pulled off a landslide victory in the Iowa Straw poll with 82% of the vote, has proposed a plan that would eliminate student loans and in return it would lower the costs of a college education. Paul's budget plan would cut $1 trillion in excessive spending in just one year; which includes student loans. He claims that his budget plan would would result in a more robust economy and new jobs. As a result, the price of education and other services would decline due to an increase in free market competition and a reduction in government interface. He believes that the debt induced by student loans is a direct result of our overly centralized government that promotes ineffective solutions that are being passed by our inefficient federal government. Instead, he proposes that our nations solution to this issue lies within our local governments and private-based market solutions.

It would seem that if Paul's plan were to work and be effective, it would benefit our students in the long run because it takes time for the price of tuition to go down. As a result, it is likely to assume that for a few years less students would matriculate to four-year institutions due to lack of funds. This could actually be a blessing in disguise because I remember that during freshmen year when I went to a big state school, so many kids dropped out not just due to financial reasons, but because they were not ready to keep up with the workload. In fact, the freshmen retention rate at m previous institution was only 70%. Therefore, it is reasonable to assume that if Paul's plan were passed we could see a new trend which would entail more students pacing themselves by going to a community college before going to a four-year. In the end, something different must be done to help reduce the magnitude of this issue. Nobody should be up to their ears of debt after four or more years of hard work.

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