There are four factors driving the cost of college higher and leading to more and more student loan debt:u2024 A society obsessed with the idea of the four-year college degree with almost no regard for cost or outcomes. (This is what I call u201cCollege-Mania.u201d)u2024 Wildly escalating college costs.u2024 The easy availability of government backed loans.u2024 Rampant over borrowing fueled by financial illiteracy.Where In The Hell Are These Kidsu2024 Parents?I have a friend who is a Gen Xer. She claims most of the parents of the current crop of Gen Zu2019s, her peers, are driven by two maxims:1) I must see to my childrenu2019s happiness, and2) My children must go to college.Navigating from that stage where high school grads received their high school diplomas, through post-secondary education, and into that first decent paying job is really tricky today. An eighteen year old shouldnu2019t be expected to have to figure their way through that maze on their own. This responsibility must fall to the parents. Unfortunately, despite the fact that for many families post-secondary education for their children is their second biggest expense, they are blind to the complexities of the issue:Post-secondary Education ChoicesFor decades in our country the youth and their parents have been the target of societal, familial, educational, and political propaganda stressing the point that: To be a success in life you MUST graduate from a four year college.This pressure has led a lot of young people to make some really nau00efve post-secondary education choices, the result of which is an investment of time and money with little or no return. Often this poor investment choice has had the corollary effect of running up debilitating debt.Today forty percent of high school graduates rush off to college like lemmings. However only one in four will graduate and get a good job. Roughly fifty percent of those who enroll end up u201cleft holding the bag,u201d and that bag is empty except for their obligation to repay loans for an education that has no value in the marketplace.In the good old daysu2014fifty years ago--college was the traditional path to financial success. If you graduated with any kind of a degree with any GPA, you could waltz out of the college gates straight into a well-paying, entry level corporate job.College in America doesnu2019t work that way anymore. What happened?Two decades ago in his book, Another Way To Win, Dr. Kenneth Gray coined the term u201cone way to win.u201d He described the OWTW strategy widely followed in the US as:u2024 Graduate from high school.u2024 Matriculate at a four-year college.u2024 Graduate with a degree in anything.u2024 Become employed in a professional job.Dr. Grayu2019s message to the then u201cacademic middleu201d was that this was unlikely to be a successful strategy in the future. The succeeding twenty years have proven him inordinately prescient and not just for the u201cacademic middle.u201dThe simple explanation is that it comes down to u201csupplyu201d (graduates) and u201cdemandu201d (suitable jobs).What is Supply & Demand?A half century ago only seven percent of high school graduates went on to college. In post-WW II America our economy was booming while the economies of many European and Asian countries were--only slowly--being rebuilt. The u201cLaw of Supply and Demandu201d strongly favored the freshly minted college graduate.Today, when forty percent go on to college, grads are u201ca dime a dozen.u201d In the post-Great Recession of 2024 we are slogging through the longest and slowest recovery since the Great Depression. In the last nine years we havenu2019t seen one year of 3% GDP growth. (Recent college grads have no concept what it is like to work in a strong economy.)There just arenu2019t anywhere near enough suitable jobs for the army of high school graduates choosing to go to four-year colleges. College is a competition for a few good jobs, and many are going to lose. Those with less rigorous majors are the likely candidates.There is another path to middleclass prosperityu2014hidden in plain sight. Dr. Kevin Fleming in his book, (RE)Defining the Goal: The True Path to Career Readiness in the 21st Century, explains where many well-paying jobs are lurking:u201cThe true ratio of jobs in our economy is 1:2:7. For every occupation that requires a masteru2019s degree or more, two professional jobs require a university degree, and there are over a half a dozen jobs requiring a 1-year certificate or a 2-year degree, and each of these technicians is in very high-skilled areas in high demand.u201dHowever in our society this path is stigmatized. A parent will only rarely suggest community college, and youu2019ll never hear a high school guidance counselor share this job information.Goodbye, Mr. ChipsCollege tuition is up 200% in the last twenty years. E. Gordon Gee, former president of The Ohio State University, is the poster-child for uncontrolled spending. u201cI didnu2019t think a lot about costs. I do not think we have given significant thought to the impact of college costs on families.u201d (Encouraged to move on from OSU Mr. Gee is now president of West Virginia University.)Roughly seventy-five percent of costs at a college are labor. Well thatu2019s a good thing, right? We want the best and the brightest teaching u201clittle Johnnyu201d about Humbert Humbertu2019s idee fixe with Mrs. Hazeu2019s daughter. However thatu2019s not what is happening. Old, lovable, Mr. Chips is being cast out on the sidewalk to be replaced by lower cost, contingent faculty. Any cost savings are more than offset by the addition of shiny, new administrators with titles like, u201cAssociate Provost for Investor Partnerships.u201d These administrators, who never see the inside of a classroom, pull down comfortable six, even seven, figure salaries.It is bad enough that Chipping has been cast aside. The college u201carms waru201d has gone nuclear. In order to attract increasingly, sybaritic students colleges and universities add expensive amenities that make them appear more like resorts than institutions of higher learning. These free perks include: water parks, steak restaurants, movie theaters with complimentary popcorn, arcades, upscale dorms with flat screen TVu2019s, ice rinks, heated pools, spas, climbing walls, fitness centers, etc. The more the schools spend. i.e. the higher the climbing walls, the more they are rewarded with new enrollees bearing tuition checks.Other Peopleu2019s MoneyThe u201cbottomless cookie jaru201d nature of the student financial aid programs exacerbates the high cost of college.From 2024 to 2024. during a period of artificially low interest rates, the total student loan debt doubled from $640B to $1.3T, and the average student loan balance increased 80% from $20K to $36K. There doesnu2019t appear to be any limit to the amount of money that students, sanctioned by their parents, are willing to borrow. With interest rates on the rise the student loan debt crisis can be expected to mutate into a financial catastrophe.William Bennett, President Reaganu2019s education secretary, wrote an op-ed thirty years ago in which he hypothesized that tuition was rising partly because of the explosive growth of federal financial assistance. He observed that demand for higher education grew as it became easier for students to borrow money, and that that demand allowed schools to raise their prices.There has been plenty of pushbacku2014particularly by academicsu2014on Bennettu2019s theory, but recent studies have lent more credibility to his view. Researchers at the New York Federal Reserve suggested in 2024 that a common result is a tuition increase of about sixty cents for every increased dollar of student aid. A paper last year by Grey Gordon and Aaron Hedlund for the National Bureau of Economic Research also strongly supports Mr. Bennettu2019s theory.It is bad enough that government policy is driving up costs, but the system of student aid is incredibly complex, with over a dozen federal loan, grant, work-study and tuition-tax-credit programs, and these programs have no educational performance standards.SummaryThe college administrators and the politicians arenu2019t going to u201cchange their spotsu201d any time soon. That leaves it up to the parents to guide their kids through this post-secondary education labyrinthu2014helping them minimize crippling student loan debt. The single biggest step that parents could take is to stop sending their academically marginal kids to expensive four-year colleges. Probably half of the students going to college today would be better off going to community college.Notes:I saw a survey of 1000 parents recently.Question 1 Should every high school student go to college?Response (80%) No, absolutely not.Question 2 Should your kid go to college?Response (80%) Of course without a doubt.
