College is Worth It. But at What Cost?

I really like the concept of borrowing for school based on how much you are going to be making in the future and not having to worry about paying it back til that point, but at the same time that seems like a lot of added pressure. What if you end up needing to take some time off before finishing, does that affect your potential future earnings at all? Or what if you don't end up finishing at all? Now suddenly you are stuck with a bunch of debt you were never planning to have to worry about. Making a decision based off of how much money you could potentially make in the future is very similar to that old staying, "Don't count your eggs before they hatch." But I guess that's actually kind of what college is in the first place, an expensive gamble for a better future. Anyway, I think the real issue is not simply how much is being borrowed, but rather how much colleges cost which causes everyone to need to borrow. Nothing is going to change until something can be done about that. There are so many people trying to get so little jobs that now having a college degree has almost became the same competitive wise as having a high school degree - everyone has one so it has become the baseline. Obviously college is important, and yet it is one of the most expensive things some of us pay for in our entire lives. For something so necessary, we need to find a way to make it actually accessible for all.

The meme about PLUS loans is completely wrong. Until we change our whole education system, the bottom line is that parents bear the primary responsibility for paying for postsecondary education in the USA. Over the years Congress had developed many loopholes friendly to middle-class and upper-middle-class voters, such as greatly expanding opportunities to become an "independent student" and exempting assets such as home equity from the federal aid formula. However, parents are the #1 place to look for funding to pay for dependent students' postsec education. Yet Parent PLUS loans are a tiny percentage of federal loan volume. In general, financial aid administrators over the past two decades have noted the reluctance of parents to borrow for their children. Some have even attributed this to selfishness. At least one credit company survey has backed this up recently, placing vacations as a higher priority for parents to save for than college education. Another factor in the unpopularity of PLUS loans was that, before 2010, lenders made the majority of federal loans. Lenders claimed their was a "donut hole" in their subsidy formula, making it possible that some years they would not qualify for the full subsidy. They said this reduced their incentive to educate schools and parents about the benefits of PLUS loans. As a result, during the 2002-2008 period parents turned increasingly to private loans, which lack the consumer protections of federal loans. Finally, for nearly two decades, parents could not defer their payments while their child was in school. The factor of immediately entering repayment on the loan perhaps made PLUS loans even more unpalatable for parents. Schools began moving to Direct Loan in 2008 and 2009, as it was not clear that lenders would have sufficient liquidity to meet their needs. Since 2010 all new federal loans have been through Direct Loan, and parent PLUS loan volume has been growing since 2008, when a credit crisis almost complete froze access to the private, non-federal loans and when Congress re-introduced a deferment that parents could use on PLUS loans while their child was in school. However, critics need to look at the math. Stafford loan usage also increased rapidly during the 2007-2011 period. Sure, Parent PLUS is bigger than before, but is the percentage really any higher? Finally, people have been having children later than before. If you have kids at age 20, then, yes, even if you borrow for their postsec education, you are likely to have those loans paid off by age 55. If you have kids at age 40, however, then, if you borrow for their postsec education, of course you are going to have debt in your 60s and even in your 70s. That is a chronological truism, not a student-aid-driven crisis. Parents should be taking on more PLUS loans, not less. It is a reasonable way to spread out some of the costs of their children's postsec education. If you look at Grad PLUS lending, on the other hand, the average loan amounts are larger, the influence on tuition increases more provable, and the generational shift more important. Shifting the burden of funding our social safety to younger Americans is more of an issue than young people pawning off their financial responsibilities on those in their 60s. Those in their 60s are not facing cuts in social security, medicare and medicaid. Politicians only propose cuts to those not yet using those programs. Those in their 60s have benefited from three of the greatest bull markets in investment history. No one argues that people in their 20s can depend on average annual stock appreciation of nine percent over the course of their lives.