Consider, really consider, the numbers: One in seven Americans is still paying off their college loans, which now total about $1.6 trillion. Recent graduates who borrowed money for their college education each owed an average of nearly $29,000 before landing their first full-time job.
The amount of outstanding student loans is staggering, so it’s safe to say that the debt forgiveness announced by the Biden administration last week could be life-changing for many of the estimated 45 million Americans who are paying their studies again. But this debate about canceling student debt—How much? For who? And should we do it at all? – hides a more systemic problem: there is a vast mismatch between what many students pay to attend college and the salaries they earn after graduation.
Too many students don’t consider the return on investment of their education when choosing a college or degree program; this, combined with the relative ease of borrowing for students and parents, has resulted in student loan debt that has more than tripled since 2006. Colleges and universities are at least partly responsible for this disconnect. The good news is that they can play an important role in the future by educating learners about the realities of learning and compensation.
Make no mistake: Earning a degree still has enormous value. For people from all walks of life, a university degree can lead to long-term social and economic mobility. The data shows a generally positive correlation between education and income: the more educated a person is, the more they are paid each week and over their lifetime.
But this is not an absolute rule. A recent report by Georgetown University’s Center for Education and Workforce found a significant number of people earning more than those with more advanced degrees. According to the report, “31% of workers with no more than a high school diploma earn more than half of workers with an associate degree. Similarly, 28% of workers with an associate’s degree earn more than half of workers with a bachelor’s degree, and 36% of workers with a bachelor’s degree earn more than half of workers with a master’s degree. . »
Students take out college loans believing, at best, that their education will help launch them into high-paying careers that will pay off their debt and set them up for lifelong success. But the fact that significant numbers of Americans are being overtaken by those with less education suggests that many students don’t realize how much — or how little — their degrees are worth in the working world.
It’s not hard to find examples of colleges and degree programs where the cost of attendance far outweighs the return on investment in the job market. The Georgetown center found that more than half of students at 1,233 different post-secondary institutions — 30% of colleges nationwide — earn less 10 years after enrollment than someone with only a high school diploma.
Many Americans realized that they had been wronged. A survey by Strada Education Network and Gallup found that only about a quarter (26%) of working American adults who have attended college strongly agree that what they learned is relevant to their life. career and their daily life. And a large number of people with a university degree – 41% of recent graduates and a third of all university graduates – report being underemployed, stuck in jobs that do not require them to use the skills and knowledge acquired at university.
To remedy this situation, colleges and universities need to do a better job of teaching the in-demand skills that students need and employers are looking for. Higher education institutions need to help learners from the moment they set foot on campus to make informed decisions about their career aspirations.
Colleges need to build bridges between the classroom and careers as soon as students arrive on campus. Institutions should clearly indicate which classes and programs lead to specific occupations, and they should provide all students with career counseling to help them stay on their chosen paths.
But most importantly, colleges need to be transparent about earnings — or lack thereof — for all of their majors and college programs. The University of Texas System, the California Community Colleges System, the State University System of Florida, and the US Department of Education’s College Scorecard publish valuable student debt and/or salary information for graduates of various colleges. and majors that can help learners make informed choices about their study paths and careers so that they can maximize their educational return on investment. This kind of detailed data, along with local and regional internship and job openings and growth trends for various industries and occupations, should be a standard feature of all colleges and universities.
In addition to making degrees more transparent, students and employers are increasingly interested in short-term, skills-based training programs that lead directly to a specific job. These short-term degrees are an efficient and cost-effective way to provide people with the education and training they need without putting them in excessive debt.
Employer-sponsored education could be a relatively low-risk way to finance a college education for those who would otherwise have to borrow. Having employers helping to create talent rather than just consuming it would go a long way to creating financially viable training programs.
President Biden’s announcement last week that he would cancel $10,000 for all borrowers and $20,000 for those who received Pell Grants, came after months of intense pressure for student loan relief from the share of young Americans. Going forward, our nation would be wise to address the underlying issues that have caused so many Americans to rack up so much college debt. Until the cost of college and vocational training programs becomes more transparent and aligned with market incentives for employers and job seekers – and until institutions and learners become laser-focused on the return on investment in education – every US president after Biden will be asked to settle the same student debt debate.