Tag Archives: education

Let Them Borrow and Build Schools

In his recent column on The Boston Globe, Lawrence Summers, a economics professor at Harvard and former Treasury Secretary (fun fact: he has two Nobel Laureate uncles on both of his parents side), wrote on public investing in the infrastructure. His main point was that while the economy is running on low interest rate  coupled with still troublesome high unemployment rate for considerable period, the U.S. government should borrow more and invest it on the public infrastructure such as airports, transportation and schools.

I agree with Summers because of three reasons: high unemployment in construction sector, inevitable investment in those infrastructures and more equal externality in the society.

Let me emphasize on each point.

First, with unemployment rate in the construction sector is hovering at 11.3 percent currently, there should be policy directed to those unemployed people, who suffered most during the recession. The beneficiaries of the investment in infrastructure will be the those unemployed people in the construction sector.  Those people who would be employed for these new projects could continue their employment for other private projects once the economy recovers and construction and housing sector picks up. At that moment, these people would be already have been employed for two years, so their opportunity to get back on the employment list increases compared to the case when those people would be long-term unemployed people. Regarding the interest rate,

Second, these infrastructures including transportation and schools are inevitable in the future even though it doesn’t get done today because of increasing population and imminent increase in need for them. It might be  the case that, today, primary and secondary schools are enough in numbers, but these will be insufficient as the population grows and socioeconomic status of low income families get better, and their children attend to school in growing numbers. Aside from new school buildings, there are still already built school infrastructures  which don’t fulfill the need of better learning environment. In other words, it is evident that America will need more of schools and better transportation and education infrastructure, so why shouldn’t the policy makers tackle this projects now?

Last, these new projects will benefit most citizens- if not all- regardless of their today’s socioeconomic standings. At the end, who don’t drive on highways and wouldn’t like their children to attend better schools? As income inequality has been a discussion topic lately, the investment in public infrastructure will help to decrease the gap between people on different socioeconomic ladder.

Not only these projects put today’s unemployed people to work, these new infrastructures will benefit U.S. economy in the long-run as more children attend to school let alone better school. Investment in education is certainly inevitable if the U.S. seeks to improve its education system to be a front-runner in the world.

Animosity Toward Charter Schools

An interesting article comes out of the Wall Street Journal today on an issue that is close to my heart: success in public schools. The author, Nicholas Simmons, echos the distress of one of his students, who asks why people seem to be hostile toward charter schools, like the Success Academy where Simmons teaches math, even while their performance on standardized tests is outstanding. Simmons claims that one reason is prejudice:

The newest theory regarding our test scores is the most outlandish. Jonathan Westin, executive director of New York Communities for Change, a union-funded nonprofit, was quoted in Bloomberg News saying that Success Academy is “trying to find ways to increase test scores; that’s why they go into the wealthier neighborhoods.”

Really? Is it just me—or does anyone else hear the prejudicial undertone in that statement? Is it really impossible for Mr. Westin to believe that Success Academy’s poor black and Latino children can achieve at extraordinarily high levels?

I think that Simmons is right here. Often we do not recognize our own prejudices. But there is much more to the story: many traditionally-trained teachers feel threatened by charter schools because they often hire non-traditional teachers like those who are trained by Teach for America. TFA takes recent college graduates (generally from excellent academic institutions like the University of Michigan and Harvard) and places them in underachieving areas like Detroit and Chicago. TFA teachers are not required to have a formal background in education (some do, but most don’t); rather, they spend the summer before the school year in intensive classroom training and then begin teaching that fall. Critics of TFA, including former Connecticut school principal Ann Evans de Bernard, singles out the lack of undergraduate education training as proof that TFA teachers must be ineffective.

It is easy to understand why traditional teachers would resent teachers from TFA. After all, traditional teachers spent years in undergraduate and/or masters programs to train to be a teacher, and TFA teachers only have a summer of preparation before they begin teaching (though training continues throughout these teachers’ two-year teaching commitment). What is more, because TFA teachers are often drawn from outstanding universities, an image of elitism surrounds them. So, if you’re already hostile toward the fact that TFA teachers have much less training than you do and seem to ooze glamour, it is not wonder that seeing their students succeed at unprecedented levels is infuriating for many traditional teachers.

Of course, testing isn’t everything in education. I might even argue that it’s much less important than we often give it credit for. But the numbers, which you can explore in Simmon’s article, do speak for themselves.

A (Sort of) Rebuttal of Professor Statman

Dr. Statman, a professor at Santa Clara University, has a recent piece in the Wall Street Journal that asks the question “should parents pay for their children’s college education?” Professor Statman says yes:

Parents should pay their children’s college tuition if they can, even if that means borrowing money or dipping into retirement savings.

For starters, when parents pay they send a strong message to their children: College matters. This is important to you and to us.

I only partially agree with Professor Statman. In particular, I agree that parents should pay for their children’s education if they can — and when I say can, I mean are able to pay for their child’s college tuition without dooming themselves to a life of poverty or taking on substantial debt by borrowing. In fact, according to nerdwallet.com, the average mortgage debt, as of March 2014, is $152,209; for parents who hold that amount of debt, it seems rough to add and the average student debt, $32,986, to that number. There are much cheaper ways to send the message that college is important, such as encouraging educational pursuits from a young age.

Now, I’m not saying that it is desirable for students to take on $32,986 of debt. As a matter of fact, the costs of college are of course getting out of hand, and for people who cannot afford to spend four full years at a university, the community college option should be strongly considered. There is a stigma against community colleges right now, which is why I would call them to up their academic standards. But ultimately, spending two years at a community college before university is a great deal for many people and would help save money, leaving a student less indebted.

I also think that there is more room for government to play in subsidizing education. Apparently, funding for the Department of Education only accounted for 5.5% of the federal budget last year, and much of that does not go toward higher education subsidies. I’m not saying we need to break the bank with education subsidies; I’m not even saying that education should necessarily be the biggest piece of the federal budget pie. But I think that with a little budget rewiring we can do better than 5.5%.

So, I do think that parents should pay for their children’s education if it doesn’t destroy them financially, but I also think that students should look into low cost options and that our government should create a budget that reflects the value that Americans place on education.

 

 

(Revised) The (Likely) Superiority of Competency-Based Learning

piece in the Wall Street Journal describes a cutting-edge education system known as “competency-based learning.” According to the article, competency-based learning

is based on the idea that students learn at their own pace and should earn credits and advance after they master the material—not just because they have spent a year in a certain class.

As of yet, there seems to be little research out there on competency-based education (probably because, according to competencyworks.org, a working definition for competency-based education was only established in 2011), but I think that there is a lot to say for a system like this. I suspect that competency-based education will be economically superior to the one-year-one-subject system we have now.

The rigidity of our current education system creates an inefficiency (as rigidity often does) because it leaves so much room for wasted potential. If a student does not master the material in, say, pre-algebra, but managed to pass and squeak by to algebra, it stands to reason that she will probably do worse in algebra than if she had mastered the pre-algebra material. The student’s potential to do well in algebra goes unrealized, not necessarily because she is bad at it, but because she was forced to move on with serious gaps in her knowledge. The time spent in the algebra classroom would be much less productive, in terms of knowledge-acquisition, than if the student had mastered the material before she’d moved on because the material in algebra will be more likely to go over her head. Thus, her and her teacher’s time is wasted and the student experiences frustration and loss of confidence. Competency-based learning would wipe these inefficiencies away.

There are, however, some important issues to consider with competency-based learning. According to the Wikipedia article on the topic, “competency” itself does not have a specific definition in the educational context, so each organization would have to define competency in their own way. This could lead to achievement gaps as different expectations arise in different areas. One might even expect to see expectations in historically high-performing areas be significantly higher than expectations in historically low-performing areas. However, even today expectations are different in different states. So, while this is an issue that we may still need to address, it probably should not hold back school systems from adopting competency-based learning.

One other problem that the Journal mentions is that the system could be much more demanding on teachers:

Amalia Lopez, who heads the English Department at Lindsay High School, said she comes to every class with five lesson plans—each for a different level of student aptitude. “I sleep very little and drink a lot of coffee,” she said.

But it seems to me that this wouldn’t be a problem if you allowed for teacher specialization. That is, for, say, a middle school, you could still have 7th grade level English teachers, 6th grade level math teachers, etc, with students moving through the levels at their own pace. In this system, each teacher would not need several different lesson plans for each level of student; they would only need one lesson plan because they only have one level of student.This should be easy to implement in middle schools and high schools, but may be trickier to implement in elementary schools where there are typically fewer teachers per grade. However, the way to correct the problem would simply be to have elementary school teachers specialize, too. Many elementary schools already have a watered-down version of specialization in place already, wherein students change classes for different subjects once or twice a day.

In my original post, one commenter said that a competency-based learning system would be  very costly to implement. I don’t see how a competency-based system would be any more costly than the system we have now. We probably wouldn’t need to hire more teachers: students would simply flow through the set of teachers we have now at their own pace rather than being jerked and pushed along by the calendar. There probably wouldn’t be much in the way of new measurement costs: student achievement is already measured and stored in computers. The major costs to the new system would probably be transitional ones, such as training teachers in the new system, but in the long run these will surely be outweighed by increased student achievement. Remember that the waste our current educational system produces is a hefty cost in itself.

So, while the novelty of competency-based education means that the jury is still out on its efficacy, it seems to me that the push for competency-based education is a sign that our society is addressing the fact that every student has different needs. This is an excellent thing that should be fully embraced.

In Support of Competency-Based Learning

This piece in the Wallstreet Journal describes a cutting-edge education structure known as “competency-based learning.” Here, according to the article, is the idea behind the system:

Called competency-based learning, it is based on the idea that students learn at their own pace and should earn credits and advance after they master the material—not just because they have spent a year in a certain class.

I think that there is a lot to say for a system like this, not the least of which is an improvement in economic efficiency. Under the old system, there was much more room for wasted potential. If a student was introduced material, say in pre-algebra, that she did not master, and then was expected to go on to algebra because she technically passed pre-algebra, we would probably expect her to not do too great in algebra, either. Thus, the student’s potential to do well in algebra goes unrealized. What is more, the time spent in the algebra classroom is would be much less productive, in terms of knowledge-acquisition, than if the student had mastered the material before she’d moved on — in other words, because she did not have the pre-algebra foundation before she moved on to algebra, what she works on in her algebra class will be more likely to go over her head, and thus her and her teacher’s time is wasted.

There are, however, some important issues to consider with competency-based learning. According to the Wikipedia article on the topic, competency does not have a specific definition, so each organization would have to define competency in their own way (unless a federal regulatory agency made the decision for the whole country).

This could lead to achievement gaps as different expectations arise in different areas. One might even expect to see expectations in historically high-performing areas be significantly higher than expectations in historically low-performing areas. However, it’s not like this would be a new cost: the system now has a similar tendency. Expectations are different in different states. So, while this is an issue that we may still need to address, it probably should not hold back school systems from adopting competency-based learning.

One other problem that the Journal mentions is that the system could be much more demanding on teachers:

Amalia Lopez, who heads the English Department at Lindsay High School, said she comes to every class with five lesson plans—each for a different level of student aptitude. “I sleep very little and drink a lot of coffee,” she said.

But it seems to me that this wouldn’t be a problem if you allowed for teacher specialization. That is, for, say, a middle school, you still have 7th grade level English teachers, 6th grade level math teachers, etc. In this system, each teacher would not need several different lesson plans for each level of student; they would only have one level of student and thus only need one lesson plan. The students would simply move through levels as they are ready.This should be easy to implement in middle schools and high schools, but may be trickier to implement in elementary schools where there are typically fewer teachers per grade. However, the way to correct the problem would simply be to hire more elementary school teachers: hire those who specialize in 3rd grade literacy, in 2nd grade science, etc. The students would probably benefit from the teacher’s specializing, too.

Magna Charter?

Both the Economist and the Wall Street Journal are hyped about charter schools, and worried about Bill de Blasio’s effort to make life harder for them. Those two magazines don’t agree very often (which is why I like reading the Economist, and feel less enthusiastic about reading the Journal). That suggested to me that either something must be very wrong with this picture – or charter schools must really be as good as they say.

In case you’re also late to the party (or, like me, not from the US), charter schools are publicly funded schools that are run independently. They have much more freedom to hire and fire teachers and set their curriculum than ‘regular’ public schools, although the exact regulations vary from state to state. They are also not unionized. And the Economist and the Journal love them.

The articles both cite a couple of examples of charters outperforming neighboring public schools. Says the Economist:

Bronx 2 [a charter school], part of the Success Academies network, serves black and Latino children from mostly low-income families. Its pupils did extraordinarily well in the 2013 state examinations—97% passed mathematics and 77% passed English. The school ranked third in the state, even beating children in well-heeled Scarsdale, a well-to-do New York City suburb. Bronx 2 shares space with PS 55, a traditional district public school where only 3% of pupils passed English and only 14% passed maths.

That sounds pretty impressive. And there’s plenty of stories like this one out there. Probably enough to persuade the average sociologist or PoliSci major. But let’s be honest, as an economist it takes something special to convince you. Doesn’t this whole thing just beg to have a paper written about it?

Turns out you weren’t the first to think that. The good news is that there’s a vast literature on the subject. The bad news is that it’s highly inconclusive. Findings on the gains that charter schools bring range all the way from none to basically none to (modest) benefits (some actually find negative effects). They also seem to be much more segregated than ordinary public schools.

At any rate, the picture is much less rosy than the Economist and the Journal try to make it seem. I kind of expected this, because neither article really has a convincing argument as to why charter schools should be better, they simply state that they are.

I think charters get a lot of good PR partly because some of them do phenomenal things with kids from less phenomenal parts of town. Which is good, because those kids might fall through the cracks otherwise. But it’s also the reason why charter schools are often highly segregated.

Some charters also seem like an attractive place to highly skilled, progressively minded teachers due to their less restrictive curricula (and, sometimes, substantially higher salaries). Which is good for kids who attend them, but not as great for kids who don’t.

So what now? Should we abandon run-of-the-mill high schools for charters? All told, I don’t think it’s charter schools per se that make a difference. There’s nothing special that somehow magically makes them generally better than regular schools (least of all the lack of a teacher’s union, no matter how much the Journal tries to hammer that point home).

But there is something special about some charter schools. Some of them attract really good teachers. People in education love to talk about a meta-study published by John Hattie in 2008, which aggregated the results of 50,000 smaller studies and tried to answer one question: what works in education? Hattie came up with a list of things that drive students’ performance. Turns out that a bunch of them are ultimately down to one person: the teacher (by the way, I love how the least important aspect on that list is, “Teacher subject matter knowledge”).

So what we really shouldn’t worry about is whether charter schools ‘work’ or ‘don’t work’, or whether the teacher’s union should be squashed (I think it shouldn’t, in case you’re wondering). We shouldn’t worry about that because charter schools in general are no silver bullet.

What we should really worry about is how we make sure that we get good people to teach in all of our schools, no matter who runs them or who pays the salaries. What we should worry about is how we can keep teachers motivated instead of using them as cannon fodder. What we should worry about is providing appropriate funding and making sure that everybody gets a shot at a decent education (that last point alone should be enough to keep people busy for a while).

There are some charter schools that could teach us a lot about addressing those issues. Both ‘ordinary’ public schools and other charters would do well to listen to them.

Using Skilled-Trade and Manufacturing to Rebuild the Middle Class

In the United States, manufacturing is finally rebounding.  After taking a huge hit at the onset of the Great Recession, manufacturing grew at 4% in 2011, more than 2% points higher than the aggregate US economy.  Moving in parallel with manufacturing, the demand for skilled-trade workers (ie: electricians, machinists, welders, etc.) has undergone a similar change.  After falling 13% from 2007 to 2009, skilled-trade demand grew 6.2% per year from 2010 to 2012.

Amazingly, despite this rapid growth in employment, the economy would like to hire even more skilled-trade workers.  Indeed, in 2012, the Wall Street Journal reported 600,000 unfilled skilled-trade jobs nationwide at a time when the US unemployment rate sat above 9%.  It therefore seems logical that skilled-trade jobs could help this country fix its unemployment problem.  Unfortunately, though, this shortage of skilled-trade workers doesn’t seem to be a relevant issue for US policymakers.  Instead of addressing it, the skilled-trade shortage is expected to increase, and the United States is likely to miss out on an opportunity to increase income mobility and strengthen the middle class.

According to ManpowerGroup, a firm specializing in workplace and business solutions, the shortage of skilled-trade workers is expected to increase given the age distribution of America’s current skilled-trade employees.  In 2012, 53% of skilled trade workers were over the age of 45, and 18.6% were between the ages of 55 and 64.  In contrast, the same statistics for the aggregate US labor force are only 44% and 15.5% respectively.  Furthermore, only 1.9% of skilled-trade workers are over the age of 65 (4.8% for the aggregate labor force), indicating that skilled-trade workers choose to retire earlier.  When assessed together, these statistics suggest that the quantity of eligible skilled-trade workers is likely to decrease even more in the next couple of decades as current skilled-trade workers choose to retire.  Doing so will likely exacerbate the labor shortage that US manufacturing is already experiencing.

To me, this shortage represents a tremendous opportunity for the United States to strengthen the middle class and increase income mobility.  In, “Inequality is Not the Problem We Should Be Worrying About, ” I have previously discussed my belief that income mobility, not income inequality, should be the primary focus of US economic policy.  In my mind, it is important to make higher wages accessible to more Americans, thereby strengthening the middle class and bolstering aggregate demand.  I have also previously suggested in “Employment is on the Rise, but is it the Employment We Want” that higher education might not be the solution to income immobility, as there seems to be a surplus of college-educated Americans forced to work low-wage service jobs when they cannot find high-wage employment.  An increase in skilled-trade training seems to be the perfect solution to both of these issues: by helping to promote skilled-trade education, I believe policymakers can help many Americans earning low wages enter the growing manufacturing industry, thereby increasing their wages and entering the middle class.

Depending on your idea of skilled-trade jobs, this proposal may come across as elitist.  Thanks to the impression skilled-trades developed in the 1980’s, many people consider skilled-trade jobs to be for the uneducated.  But according to the WSJ, this impression is not true.  While in the 1980’s, skilled-trade jobs were “80% brawn and 20% brains,” today these same jobs are “10% brawn and 90% brains.”  Skilled-trade jobs require “skill,” and accordingly skilled-trade employees are typically required to undergo rigorous technical training at 2-year vocational or technical schools.  In this way, skilled-trade jobs should not be viewed as simple; working as a skilled-trader requires significant training and brainpower and adds significant value to the US economy.

Skilled-trade employment seems to be an excellent way for the United States to address income immobility.  Given the huge emphasis this country places on a 4-year education, we are likely to experience an even larger shortage in skilled-trade jobs in the near future.  This shortage represents an opportunity for many Americans to escape the lower class and enter the middle class.  Through 2-year vocational training (which is typically much less expensive than a 4-year bachelors degree), many can develop the technical skills necessary to succeed in today’s manufacturing environment.  In doing so, they can bolster their earnings, as a 2012 study by Georgetown University’s Center for Education and the Workforce identified over 1/3 of those with bachelors degrees as earning smaller salaries than those with more specialized training.  Ultimately, therefore, it seems like an increased promotion of skilled-trade training is a policy that the United States should at least consider as it works to rebuild our quickly vanishing middle class.

 

Student Debt Hurting the Economy

Ever since it became relevant, most economists have seemed to believe that student-loan debt plays an insignificant role in the economy. However, the immense growth in student-loan debt in recent years indicates that its effect will soon demand attention, as it puts a damper on the US economy. An article in the Wall Street Journal (Student-Loan Debt Slows Recovery)  indicates that average debt has increased 25% in the past four years. Today, the average student-loan debt is $29,400. However, many of us know that attending a university like the University of Michigan can leave us with a debt of over $100,000 (even as much as $200,000).

The Federal Reserve Bank of New York reports that Americans have accumulated $1 trillion in student debt. Compared to the $10 trillion in mortgage debt, this may seem insignificant. But the biggest impact this is having on graduates is on their inability to accumulate credit, get loans, buy a car/house, get married, etc. Just when graduates are expected to go out into the real world and shape their lives, they are faced with these credit concerns which inhibit their potential.

Increasingly, graduates are choosing to default on their loans. According to the New York Fed, at the end of the quarter 12% of student debt was delinquent, compared to 7.6% four years ago. “The Fed defines delinquent as debt that hasn’t had a payment in at least 90 days.” More and more, graduates are deciding to simply stop paying their loans- presumably because they are not financial capable, not because they don’t want to.

On its road to recovery, the US needs the boost in consumption, which student-loan debt is hindering. A Bloomberg article, Fed Student-Loan Focus Shows Recognition of Growth Risk, reports that the Fed is noticing the restriction that student-loan debt is placing on car and house sales. More importantly, the article suggests that Fed is recognizing the overall negative impact of student loans on the economy.

So what can be done about this? I do not suggest that people not go to college. Nor do I suggest that graduates keep defaulting on their debt (it is only making their situation worse). Instead, I think the US should follow the wise example of most of the developed world, where college is much more affordable. Western Europe houses many of the world’s top universities, and their tuition is nowhere near top American universities’. Many universities charge a much more reasonable tuition based on household income, something the United States should also consider. I believe some things should not be capitalized on, and education is one of them. Not only would students benefit from lower tuition costs, but the economy would be alleviated from the huge burden it currently faces.

Student Debt Strikes Again – The Next Big Bubble

In a previous post, “Why College Graduates are Useless,” I discussed how high levels of student debt prevent graduates from actively participating in the economy, which in turn depresses economic growth.  In this post, I’d like to expand on that post and identify how student debt not only causes graduates to depress economic growth, but universities and creditors as well.

It is important to understand that high tuition not only hurts students, but universities too (seems ironic, right?).  As tuition at universities continues to grow, more and more students are opting for cheaper education alternatives.  Many students now attend community college or pursue associates degrees, and this trend is having a huge impact on four-year universities.  The Wall Street Journal recently found that over 25% of colleges have seen at least a 10% drop in enrollment.

This 10% decline in tuition revenue is forcing colleges to make significant faculty cuts, as universities can no longer afford to cover their overhead costs.  A study by the Goldwater Institute, a libertarian think-tank, found that at UM, there is 53% more administrative staff than there is faculty. This high level of administrative staff causes overhead costs to balloon.  Thus as tuition revenue declines, many universities are struggling to remain solvent, leading to reductions in credit ratings and lay-offs of faculty members.  Certainly, these lay-offs are not good for the economy.  Rather than fueling the economy by providing high-end, high-wage employment opportunities, universities are fueling unemployment.

Creditors are also suffering from high levels of student debt.  In the US, student loans now top $1 trillion dollars, and 81% of these loans command interest rates of 8% or higher. From a creditor’s perspective, this would be an extremely attractive situation if these were all low-risk loans.  Unfortunately for creditors, this is not the case.  As discussed in my previous blog post, “Employment is on the rise, but is it the employment we want?”, college graduates are mostly taking low-end, low-wage jobs.  Accordingly, many are at risk of default as they lack the liquidity to pay off high-interest student loans.  Defaulting on loans is never a good thing, and as the 2008 financial crisis demonstrated, defaults can have huge impacts on the greater economy.  My fear is that student-loan-backed-securities (if they exist) will become the new mortgage-backed-securities, and that widespread default will push this country back into recession.

Ultimately, there is some serious room for improvement within the higher education system.  If education is not affordable, nobody wins.  High levels of student debt hinder graduates’ ability to get involved in the economy.  High tuition costs are reducing college enrollment and forcing universities to make layoffs and fuel unemployment.  There is obviously a problem, but how do we fix it?

Personally, I believe that growth in high-end, high-wage jobs would help quite a bit.  If graduates can find high paying careers out of college, they will be less stifled by student debt, and the risk of default on student loans will decrease.  That said, fueling growth in high-end, high-wage jobs is not easy.  Another possible solution would be to restructure universities.  If universities could reduce the amount of overhead used (ie: reduce fixed costs), tuition would not need to be so high.  Accordingly, there would be less of a need for student loans in the first place, and the lower cost of investment will boost the ROI of a college education.

What ideas do you have for addressing the problem of student debt?

Why College Graduates are Useless

Is student debt good for anyone?  The answer seems to be a resounding “NO!”  Recent research reveals that high levels of student debt not only hurts students, but universities, creditors, and the greater economy as well.  By stifling economic activity and dragging the savings rate in the United States even farther below the Golden Rule savings rate, student debt has the potential to greatly reduce the quality of life in the United States.

Before looking at the effects of high student debt, it’s important to understand where this debt comes from.  A study by Mark Perry, a professor of economics at UM, found that on average, college tuition has grown at a CAGR of 7.45% since 1978.  Compare this value to housing prices, which have grown at an average CAGR of only 4.3% during the same time period (WSJ: “Degrees of Value: Making College Pay Off”).  Certainly, the average CAGR of incomes has not experienced such astounding growth, and some 40% of college graduates end up in low paying jobs that don’t even require a college degree (see my post: “Employment is on the rise, but is it the employment we want?”).  Consequently, more and more students are forced into debt as they attempt to bridge the gap between income and tuition costs.  Today, the average college graduate has $29,400 of outstanding student loans.

This rise in student debt has negative impacts on three main groups: (1) college graduates (2) creditors, and (3) universities.  In this blog post, I will address the impact this debt has on college graduates (I plan on analyzing the other two groups in a later post).  Certainly, the negative impact on graduates is obvious.  Stifled by excessive amounts of debt, college graduates cannot pursue the “American Dream” as freely as they’d like.  A study by the Consumer Financial Bureau found that many Millennials, because they are limited by student debt, delay home ownership, fail to save for retirement, and cannot take out small-business loans due to poor credit scores (USA Today: “Millennial’s ball-and-chain: Student Loan Debt”).  While this is certainly a shame for graduates, this limited economic activity is also a shame for the larger economy.  As we continue to recover from the Great Recession, limited economic involvement is not what we want to see; we want college graduates to buy houses and to save for retirement, as this type of activity makes economies thrive.

In this way, irony strikes again, as higher education seems to have the opposite effect as we would like.  Rather than increase economic activity, universities, by creating student debt, are suffocating it – at least for Millennials.  Furthermore, this post doesn’t even touch on the ways student debt prevents universities and creditors from contributing to economic growth.  To me, Millennials’ limited economic involvement is a cry for reform.  Somehow, students need to be able to attend college without crippling themselves with unmanageable amounts of debt.  But while the problem is obvious, finding a solution certainly is not.