College debt vs. education choices

Never ones to miss an opportunity to call for more government, politicians can’t stop talking about how to make the average $140,000 price for a four-year college education “more affordable.” Putting aside the obvious question as to whether politicians have the ability to make anything more affordable in the first place, there is an important distinction to be made here.

Affordability is only one side of the paying-for-college coin. The other is financing. Financing is the student’s ability to obtain college loans. Affordability is the student’s ability to repay those loans. Politicians love to conflate these two things, because understanding them separately reveals little need for political tinkering.

Financing a college education is a problem for almost no one in the United States, regardless of economic status. According to the College Board, the average student (or the student’s parents) receives grants, tax credits and federal work-study that pay for 30 percent of tuition and fees. After accounting for parental contributions, savings and scholarships, the average student who borrows ends up borrowing less than $30,000 to finance a four-year education.

Even students from the nation’s poorest households appear not to have trouble obtaining student loans. Almost 65 percent of students coming from the poorest quartile of U.S. households have borrowed at least $10,000 for college. That, combined with working 20 hours per week at a minimum wage job, would pay for four years at the typical public university.

Whether students have problems affording college, on the other hand, is largely up to them. The stories of college graduates mired in debt make great fodder for the evening news, but only 5 percent of undergraduate and graduate students combined have loans in excess of $100,000. And since graduate degrees in law and medicine are included in these numbers, the fraction of four-year college graduates who are $100,000 in debt is vanishingly small. Almost 90 percent of indebted students have borrowed less than $50,000. The few cases of students buckling under massive debt are due less to their being hit hard with the tuition hammer than to their having made poor educational choices. And here we see why politicians are so loath to tell the truth about any of this.

If done right, college is a great investment. If done poorly, it can be a disaster. Which it will be depends almost entirely on the student, not on politicians or tuition.

According to data from the Census Bureau and a Korn-Ferry analysis of 145,000 jobs, the average entry-level job requiring a college degree pays $25,000 more per year than the average entry-level job requiring a high school diploma. That means that the average college graduate could pay off that average $30,000 college loan in a little over one year. It’s a life-choices problem.

The data indicate that college financing and affordability aren’t problems that need fixing. As to lifechoice problems, all the legislation in the world won’t fix those. Only common sense will. Either way, when it comes to “making college affordable,” there is nothing that politicians can do short of creating problems that don’t yet exist.