Why Americans can't pay their student loans

Young people face a cruel irony. Most can’t land a decent job without a college education, yet many graduates are locked into poorly paying positions that don’t permit repayment of student loans.

For two generations, college price tags have risen much faster than inflation and families’ ability to pay. More importantly, costs have leaped faster than what graduates can earn over working lifetimes, and many diplomas do not offer a positive return on investment, as measured by graduates’ ability to service their debt.

Working professionals, including some lawyers, are moving in with older relatives—they simply can’t pay both rent and student loans.

Many never get out of debt.

About 17 percent of delinquent student loans are owed by folks over the age of 50, and Americans over 60 still owe $36 billion in unpaid loans. Too frequently, social security checks are garnished and debt collectors are harassing borrowers in their 80s.

Employers may be partially to blame. It was commonplace in the 1950s and 60s for jobs as diverse as copy editors and reporters at newspapers, retail store buyers and managers, insurance adjusters, and laboratory technicians to have only a high school education and some employer training.

Now, despite the fact that employers must often still train new hires, they require some college or even a diploma. Requiring some higher education may be an easy way of screening an applicant’s native intelligence, but many jobs simply don’t pay enough for students to repay six figure debts in a decade or so.

K-12 public education is also partially to blame. During the late 1960s, a sense emerged that the performance of high schools had declined—judging from their critical thinking abilities and the  English and math skills of college freshman, employers were probably right.

A few years of college became a proxy for employers that young applicants had what a decent high school diploma should guarantee but no longer did—the ability to do more than read and add sums, but also reason and string together four grammatically correct sentences into a coherent idea.

With half of the population headed to college, universities churned out too many graduates with little more than a general education—the ability to think critically, write a composition, and read poetry. Most college majors don’t prepare graduates for much.

In recent decades, states cut aid to higher education when tax revenues dipped during recessions but did not adequately restore those when times got better. Consequently, community colleges, where some of the best, cost-efficient technical training is offered, and some universities cut more-expensive programs in engineering, nursing and the like. Too many students are herded into liberal studies of some kind.

What students do in college really matters. A worker with a bachelor’s degree in petroleum engineering earns about $120,000, while a degree in counseling psychology fetches just $29,000. Even business degrees differ dramatically in value—finance, accounting, and supply chain majors are worth a lot more than general business and human resources management graduates.

Sadly, many incoming students often don’t want to take the tough majors—engineering programs are stuffed with foreign students—but that problem goes back to the high schools.

Growing up in the New York State public schools—back before the discovery of the computer chip—I studied Iroquois culture, early 20th Century child labor problems and Governor Al Smith’s reforms, but we also wrote essays about Thomas Edison and the Wright Brothers.

Now, students read Maya Angelou, get a steady portion of liberal theology about the exploitive history of white European culture, and are encouraged to find themselves, instead of learning something useful.

No surprise that many students come to universities only to enjoy intellectually pleasing but practically useless programs, and end up lost in poorly paying jobs and adrift in a sea of debt.

Peter Morici is a economist and professor at the University of Maryland Smith School of Business, and a widely published columnist. Follow him on Twitter@pmorici1.