Harvard University was the first to set up student loans in 1840 but these loans didn’t become mainstream until the 1960s? Source: Free from Broke.com
Did you know that in 1986, President Reagan eliminated student loan interest as a tax deduction. For 10 years, student loans were not deductible until President Clinton once again allowed the interest to be deductible in 1997 (Forbes). However, Clinton only allowed the student loan interest to be deductible for the first five years the loan was in repayment; in 2001, the law was changed to allow the interest to be deductible for the life of the loan.
Then in 2007, President G. W. Bush, reduced the student-loan interest rate from 6.8% to 3.4%.
A few more facts to put the student, college-loan debate in perspective and what the media isn’t telling us:
The US has the 2nd highest number of higher education students in the world—4.75% of the total population. The U.S. Department of Education shows 4,861 colleges and universities with 18,248,128 students in 2007.
However, the median cumulative debt among graduating Bachelor’s degree recipients at 4-year undergraduate schools was $19,999 in 2007-08 and 65.6% of 4-year grads with BA degrees took out student loans, which means 34.4% did not.
Of the 9 million that borrowed, one-tenth (900 thousand) borrowed $44,668 or more, which means 90% (more than eight million students) borrowed less.
Graduate and professional students borrowed more, with the additional cumulative debt of a graduate degree typically ranging from $30,000 to $120,000.
How many borrowed the most?
More than 80% of students that are majoring in graduate degrees in medicine borrowed an average of $127,272, while 61.6% of those that graduated with only a BA degree borrowed an average of $23,494. Source: FinAid.org
If you recall, my $7,000 student loan in 1973 had the same buying power as $36,178.96 in 2012, and I paid it off in a decade by eventually working two jobs for three years.
That brings me back to the media. Why has the media been creepy-crawling all over how horrible college student debt is today when the facts say, “On average, most college graduates earn back enough to pay off their student expenses within a decade or so. Two studies by Baum found that graduates with a bachelor’s and no further schooling—or as the earnings literature calls it a bit too on point, a “terminal bachelor’s”—are on average able to repay their college tuition and loans, living expenses, and lost income from skipping four years of work by the time they turn 33. Private-college graduates spend more on their degrees, Baum says, but as they also have slightly higher earning power than their public-college counterparts, they still on the average earn back their college costs before age 40.”. Source: Village Voice
How about those medical students graduating as doctors with all that debt? Do you think they will earn enough to pay off his or her student loans?
Although the following site is moaning and groaning along with the national media, take a look at how much an MD earns after she starts practicing medicine: “The mean annual salary of a MD specialist is $175,011 in the US, and $272,000 for surgeons.” Source: MD Salaries.com
I’m really feeling sorry for these poor, suffering MDs. Maybe we should all chip in and help them pay off those student loans so they will have more money to spend on bigger houses and fancier cars.
In addition, I found this revealing: less than half a percent (0.05%) of those who graduate from college have student loans above $200,000—that means 99.5% do not. This may sound callous, but I do not feel sorry for these people. I paid off my student loans and so can they.
In conclusion, there is one more comparison that must be made. In 1980, the average credit-card debt in America was $670 per household, but today that number is up to $7,800 (per household)—an increase of more than 1,160 percent. If we factor in inflation, that $670 would be $1,875.90 today—not almost $8,000.
In 1980, credit card debt was less than 4% of household annual median income. That number is16% today. In fact, in 1980 through 1994, the US saving rate averaged 8%, but in 1976, the personal saving rate was 12%.
However, in October 2011, that saving rate was at 3.6%.
Where do you think America’s so called debt-ridden college students learned to borrow to get what they want? If the nation lets young Americans (or their parents and/or grandparents) off the hook for that student-loan debt, these people will never learn.
Return to Student College Loans – Evil or Not? Part 4 or start with Part 1
Lloyd Lofthouse is the award-winning author of The Concubine Saga.
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August 18, 2012 at 12:15
Thank you very much, Lloyd for this down to earth description of the costs of higher education. I am humbled by what I’ve learned here. Especially, because I despise debt, the thought of these young professionals being in debt until their 40s, seems to me a very difficult burden to carry. On the other hand, the advantages of a college education, as you’ve pointed out, can make life easier, financially as well, all through one’s life. I noticed that you had no figures for the percentage of students who ‘work their way’ through college. Is that an unacceptable game plan in the US?