College Financing: Should America Have Loaned $1.2 Trillion to Teenagers?
This week, the 2013 QS University list was released, revealing the much-awaited global university rankings. Predictably, the top twenty included many U.S. institutions, such as MIT and Harvard, and Britain had four universities in the top 10. However, there was one unlikely entry in the top 20 that might make advocates of free education raise an eyebrow.
The tuition-free Edinburgh University in Scotland is now placed in the 17th position, a mere three places behind the Ivy League powerhouse Columbia University, where tuition fees are upward of $45,000 a year for undergraduate school.
Five places ahead of Edinburgh in 12th position is ETH Zurich, which only charges tuition of about $700 per year.
In America, current student debt is $26,000 on average per person and has recently reached $1.2 trillion in total, which means U.S. student debt is more than the external debt of 173 nations in the world and would place 15th on a list ahead of China and Brazil.
About 1 percent of students accumulate more than $100,000 or more of debt and one in 10 end up with $40,000.
Since 2003, student debt has increased nearly 500 percent in just 10 years as colleges have increased tuition by nearly 600 percent since 1980, fast outpacing inflation. In addition, the amount of borrowers has increased by about 65 percent in only seven years, increasing the student loan balance by 50 percent. Needless to say, a majority of the debt (58 percent) belongs to the bottom 25 percent of America's households.
Clearly, America thrives on allowing all people to access education, and in order to access that education, financing facilities have to be available. However, Lawrence McDonald, author of the New York Times Best Seller, 'A Colossal Failure of Common Sense', says that the current student debt crisis has got way out of control.
"There's no conditions on the loans relative to the income you're going to produce. Anyone can get a loan," said McDonald. "What blows me away is that Elizabeth Warren was at the CFPB and the thing was up and running in 2010 when this problem exploded. This is like Sub-prime all over again. Somehow you can borrow money with no qualifications. The consumer financial protection bureau seems to be the least effective regulatory agency in my opinion and now student debt is over a trillion today. What have they done?"
In a recent tweet, Mark Cuban said that if there was a cap on how much debt there could be, college tuitions would implode. And McDonald said this is unlikely as long as self-interested people like Warren, now a U.S. senator and once a Harvard professor, are continued to be allowed to earn large salaries.
"All of the professors that are at these schools are making 200,000-600,000 a year and only teaching one course every six months."
At the moment debtors are lobbying congress to do something about the high levels of student debt and many are asking for debt forgiveness. McDonald believes that Obama is the most likely President to take that route, although currently the administration has plans in place to reduce interest payments by more than half.
But McDonald predicts good news for America's students.
"I think the debts are gonna go on the U.S. government balance sheet eventually," said McDonald.