“You know, in today’s economy, higher education can’t be a luxury. It’s an economic necessity. Everybody should be able to afford it.” – President Obama in a speech to UNLC in June.
Well, the president got his wish.
Congress passed legislation to keep interest rates low on student loans back in June of this year. By doing so, college degrees are essentially regressing into earning a second high school degree—you need one just to keep up with the rest of the country and for just a hope of finding a job. Artificially holding interest rates at low levels on student loans dramatically increases the demand to attend college. Basic economics shows when demand increases, so do prices.
During the Obama Administration alone, College Board has reported a 25 percent overall increase in college tuition. Students are encouraged to live fiscally irresponsibly by taking out massive loans to attend schools who keep raising prices. The Department of Education released for the first time an official three-year student loan default rate report. With this larger time span, it’s obvious that students have had a much harder time paying off their student loans. Two years after graduation the student loan default rate is 9.1 percent—up from 8.8 percent in the previous report. The more shocking figure is at the three-year mark, when the default rate increases to 13.4 percent.
The ratio of students that attended for-profit institutions that are defaulting on their student loans after three years is 1:5. Private schools are only slightly better off with rates at 7.5 percent after two years and 11 percent after three years. Nearly 250 schools had loan default rates of over 30 percent, and handful of which were over 40 percent.
Is this surprising? Absolutely not.
The student loan industry mirrors the mortgage industry on a smaller scale. In 2008, America experienced a financial meltdown fueled by the mortgage bubble. The government encouraged banks and government-sponsored enterprises, Fannie Mae and Freddie Mac, to issue mortgages at extremely low rates to almost anyone—whether or not they could afford it.
The result? The bubble created by the artificially low interest rates finally burst and people could no longer afford their once-amazing real estate packages. Defaults on loans skyrocketed and foreclosures on houses were extremely common.
Students are now seeing a similar trend in the student loan industry.
With artificial demand increases in the student loan industry causing the cost of college to significantly increase, students are pressured to attend college to keep up with the rest of the country. Many students enter college without knowing what path they wish to take. Only 31 percent of students graduate in four years. For the remaining 69 percent, this only means racking up more debt.
And for what?
Youth unemployment under the Obama Administration has stubbornly held around 17 percent. Young Americans are forced to compete in an economy with a national unemployment rate that has held above 8 percent for 43 straight months. They are competing for jobs with people of more experience and higher education degrees.
The outlook is anything but promising in the near future. 53 percent of college graduates are unemployed or underemployed. More than one in three of these students have moved back home with mom and dad.
President Obama should be ashamed of his policies’ effects on young Americans. I have one piece of advice for my generation: register to vote and use that power to fire President Obama.