Saturday, October 20, 2012

Of Human Bondage

My step-daughter is starting the process of searching for a college to attend next year.  More importantly, she has begun to look into her financial aid options.  The average cost of a four year undergraduate degree has gone up over 1000%  since 1978 .  Think about that.  Everyone is aware of skyrocketing health care costs and the difficulty of controlling their inexorable rise.  But the college and graduate school tuition explosion is far worse.  The average cost to attend a four year public university runs around $20 grand.  For a private school, the costs average close to $40 grand.  Certainly, these totals are attenuated somewhat by grant/scholarship outlays but, in general, the bulk of the costs are covered by obtaining federal subsidized and unsubsidized loans.  So even with a $5,500 grant/scholarship (the max allowable by current Pell grant rules), one is looking at graduating from say Ohio State or Kent St with a balance of somewhere between 50-75 grand.  Of course, one could always be born to rich parents and simply, as per Mittens, "borrow some money from them".  As for my step daughter, she unfortunately won't even qualify for a Pell grant because her mom married a physician and step parent income is inexplicably included in the application process.     

Further, imagine one decides to pursue a post grad degree in like law or medicine.  Tuition to medical/law schools runs from $25-45 grand.  Moreover, many if not all professional school students have to borrow additional unsubsidized or private loans in order to cover living expenses.  Many medical students are married, have young kids.  How does one pay the rent and put food on the table when one has no income.  Medical school is a fulltime job.  One can't  work part time at Wallmart three nights week while spending nights in the gross anatomy lab.

We are gutting our younger generations with onerous education debt loads.  If you don't get the degree, you're cooked.  If you graduate, then statistically you'll be better off but you'll spend the next 15-20 years forking over substantial chunks of take home pay to loan servicers.  And there is no recourse for those who find they cannot meet payments.  Revision of bankruptcy laws has made it nearly impossible to  evade responsibilities.  Enormous powers have been vested in the federal government to collect outstanding balances over the course of your life.   


Let's run the numbers a bit to see how burdensome these debt loads can be.  Starting with a typical medical student.  Let's say she graduates from Bucknell owing about $85000.  Then she attends OSU medical school and borrows close to fifty grand a year for tuition and living expense (she marries 2nd year and they have a baby while she is a fourth year student.).  She graduates owing $275,000 and change.  She consolidates all her loans into a bundle.  The term is fifteen years at a rate of let's say 6.2%.  Over fifteen years she will have paid a total of $423,000 in interest and principal.  That works out to be $2300 a month.  Well, she's a doctor, you say.  She'll pay it back easy.  Imagine she isn't a neurosurgeon but instead takes a job with a giant healthcare behemoth as a family practitioner for a starting salary of $145,000.  She will not be paying country club dues or flying to Italy for three week excursions anytime soon.

Exchange middle tier law school for medical school in the above paragraph and the scenario is even more grim.  It's a fact that we matriculate 100,000 more law grads than are available positions every year.  So maybe she ends up clerking for a year or moonlighting as a paralegal at 15 bucks an hour, all while staring down a $235,000 debt load.

Or what if a young man just goes to Wittenberg or Hiram (small liberal arts schools in Ohio)?  He graduated from high school in the top 5% of his class.  Small Lib Arts Scool X gives him about 15 grand a year in grants/scholarships/work study.  He borrows another $18 grand a year to make up the difference.  He pursues a degree in philosophy.  He graduates owing $75,000.  He has a philosophy degree.  He has to get a masters or even a PhD when he realizes the job market for itinerant philosopher dried up with the passing of Socrates.  Final tally over a $100 grand.  Over fifteen years he will owe over $900 a month and pay in excess of $50,000 in interest. 

Previous generations have never had to deal with such debt responsibilities.  This is unprecedented.  And it's a ticking time bomb that no one wants to deal with.  There is no more bipartisan consensus in Washington right now than on education.  No one wants to address higher education costs.  It's all kicked down the road.  Let Generation X and Y deal with it when they enter middle age.  Don't let President Obama fool you.  His rhetoric focuses on Pell grants and how he wants to increase the maximum payouts.  Let's say he is successful in increasing the Pell grant outlay by 20%.  So instead of $5500 one can qualify for up to $6700.  Big deal.  It still doesn't come close to matching the exponential rise in tuitions. 

Similar to entitlement reform, meaningful change is being deferred to future generations.  Current seniors will see no decline in benefits (even that weasel Paul Ryan promises he won't touch social security or medicare for 15-20 years).  So when Americans 40 and younger reach retirement age, we won't be able to count on social security and Medicare assistance for health care expenses could be curtailed.  This is as clear an example of moral failure as it gets.  Make younger people pay more to get  ahead (and even a degree is no guarantee of success) and then implement austere cuts on federal assistance when they age and look to slow down. 

This is a recipe for social unrest, even rebellion.  And no one wants to talk about it.  The Occupy Wall Streeters who did were sanctimoniously denigrated as "low life hippies" and "whiny brats who needed showers".  We are the wealthiest nation the world has ever known.  We spend more on national defense and the military every year than all the world combined.  And yet we are the only western country whose federal government doesn't subsidize the bulk of the cost of educating its youth.  We are the only advanced western nation that does not provide a national health care safety net.  It's truly scandalous.  And the fruits of such policies will eventually rot the soul of our nation from within.....        

    

3 comments:

Dr. Midlife said...

Yup.

The upper range of med school tuition+fees is now over $60k though. Caribbean med schools are cheaper than a fair number of mainland med schools. (Yikes.)

My med school is public, but half of its students are out of state, paying $56382 tuition with $1446 mandatory fees (not including books or health insurance). So that's nearly $60k/yr for half the M1's.

Full cost of attendance for 4 years is over $320k. Add in some undergrad/grad debt and new medical grads in 2016 will be over $500k. Not the majority, but $500k+ debt will be common. COMMON. That's before we start talking about interest accrual or capitalization.

There are several federal programs (IBR, ICR, PSLF, NHSC, HPSP) that allow for the possibility of a free ride or forgiveness. The stability of these programs with the upcoming "fiscal cliff" isn't confidence-inspiring.

Attorney Andy said...

These are the results when our gov't leaders care more about JP Morgan Chase than the electorate. The only way to get the meaningful change you refer to is to change the political system. Until someone with good ideas can get elected without a treasure chest of tens of millions of dollars, there is no incentive for the gov't to fix the problem.

Another good post, glad you're back to blogging with some regularity.

Anonymous said...

Look at the relative change in support from states for state universities in that same time period. At what level did your state support its universities in the 70s? And now?

That's a lot of the rise in state school tuition. The taxpayers don't want to pay for the public schools, so the students get most of the bill.