Friday, September 09, 2005

The Big "D" Word

No, it's not anything obscene, or at least, not in a literal sense.

D-E-B-T, debt is a huge problem for many Americans, and members of my generation are being catapulted into it in a way that may entrap us for many years to come. I caught the tail-end of an episode of "Money Talks" on my PBS affiliate that focused on a young woman who had recently graduated from college (apparently from Northwestern) saddled with credit card and student loan debt. She reported that her friends were in similarly dire situations with some having already filed for bankruptcy. As the description of this installment, called "Graduating into Debt" says, "Credit card debt and increasing college tuition rates are leaving many graduates in financial ruin before they even get their first jobs." Young people are told, and rightly so, that a college education is the first step to attaining a more optimal job and is a stepping-stone to graduate education, which has become increasingly common and necessary for career advancement.

However, the costs of college are hard for most people to meet on their own. According to the College Board, the
average yearly cost of attending a four-year public school (tuition, room & board) is $12,841, and the average yearly cost at a four-year private school is $27,677. College tuition increases have far out-paced inflation. According to Professor Ronald Ehrenberg of the Cornell Higher Education Research Institute, "during the last quarter of a century undergraduate tuition and fees have risen at annual rates exceeding the rate of inflation by an average of 2.5 to 3.5 percentage points." (Ehrenberg details the reasons for these increases, which I won't outline here but which are worth a read).

Financial aid only partially addresses the problems of affording college. Since it mostly comes in the form of loans, rather than grants, which must later be paid back, college graduates are still faced with a huge debt burden. According to Ehrenberg's article, from 2002-2003, 40% of aid was made up of grants. Grant levels have not kept pace with increasing tuition:
During the mid 1970s the average Pell grant received by students was about 46% of the average costs (including room and board) of attending a public higher education institution. Last year, the ratio was under 30% (the ratio is much lower at private institutions but they have more institutional resources for financial aid).
The National Center for Education Studies reports that the average loan amount for a student at a four-year institution of higher learning in the 2002-2003 year was $5,900.

All of this adds up to big post-undergraduate debt for students from education alone. Factor in other big-ticket purchases that people in their late teens and early twenties make via credit card--which, if not paid back on time, are subject to incredibly high interest rates--and one gets a headache thinking about these financial woes.

In light of this, countries that make more of an effort to aid in their citizens' financial burdens look pretty appealing. The Village Voice has an article addressing exactly this. As the article, called "Generation Debt: The New Economics of Being Young" says, "
Fed up with uninspiring jobs and crappy, expensive apartments, young expats like [recent college graduate Joe] Moline are again discovering that life is better in Europe. The State Department estimates 3 million Americans are living abroad, a number that has doubled in the past 30 years. " Here's more from this interesting article:
Sunnee Billingsley, 29, moved to Barcelona to earn a doctorate in political science. She says she looked abroad for graduate programs to learn a second language and "experience another culture, and so I could get an education that wouldn't put me more in debt." Billingsley says Spain's strong social-welfare protections support a relaxed pace of life. "The state takes care of so much that people don't worry as much as Americans and don't spend as much on things like insurance programs and retirement accounts," she says.

Billingsley and other expats also note a friendlier attitude in Europe toward the struggles of emerging adults. Here in the U.S., college grads who move back in with their parents are maligned as "boomerang kids" and developmentally delayed "adultescents," but in Europe it is the social norm for young people to live with their folks and save money while getting their lives together.
I am all for living abroad after college, but a standard of living free of huge financial burdens should be equally attainable to young adults in the U.S. While right-wingers gripe about the European welfare state being too paternal, the average European citizen seems to live a less debt-ridden life than the average American citizen, what with state-funded education and health care being a much higher priority. The point is, it can be done, and it can be done well. It is outrageous that costs of education (and health care, etc.) and the debt they create have not been addressed in our country, yet unsurprising because of the current political climate.

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