Jeremiah Rice
9/4/13
Computer Skills for Econ. Analysis
Assignment #1
Who’s Paying for My Schooling?
If you asked most college students today if they have loans to pay for their schooling, most of them would say yes! In fact, the average college student will graduate with around $26, 600 dollars in debt. [i] In case you were unaware, most of those loans are actually backed by the federal government. So as a result of more and more people going to school the government is giving out more loans to help those new students pay for it. Don’t get me wrong, improving someone’s education is a good thing. Not only for themselves, but the economy will benefit as well someday. Assuming they graduate, and are able to find a job, and are actually able to put all the skills they learned to work. Here is where we run into some issues though. The government is already in debt, and though the economy is supposedly improving it still is not easy finding a solid job in the market these days. So since most jobs either require a degree, or the jobs that do not require a degree nobody wants to do, people are deciding to go to school with the hopes that they can pay for it. Then once they finish school they are still hoping, or even assuming, there will be a high paying job for them, and then they can pay back there loans that way. This address what Hazilitt calls the two main fallacies of economics, the endless fulfillment of self-interests, and the inability to make decisions based on there long term effects. [ii]
Let’s talk about self-interest when it comes to student loans. Obviously everyone wants to better themselves, and one way to do that is by going to school. Well, with everyone going to school, the government is continuing to give out loans and increasing their debt. Actually, student loans have become the second largest portion of where America’s national debt comes from only behind Mortgages of course (Forbes). Student loan debt is a whopping 1.2 trillion dollars, and from what statistics show it is only going to go up (Forbes). If you look at the chart from FRED, you can see just the amazing increase in student loans over the last 20 years.[iii] Now, one can assume that not everyone who takes out these loans will graduate college. So who has to pay for the debt from their loans? Well you do actually. If you think about it, the money used for loans can just be considered as tax dollars, so when someone does not come through with paying a loan back it is actually the tax payers who suffer (Forbes). So not only are people only thinking about themselves when they take out loans they cannot repay, but they are also not thinking in the long term.
More and more Americans who choose to go to school without the means to pay for it are risking the economies long term health. With 1.2 trillion dollars in student loans, and that number only increasing, the government needs to make sure they are not just giving loans out to anyone. After all, the loans they are giving out are tax payers’ dollars, and you wouldn’t want the government giving out your money to someone who cannot pay it back right? It is almost like someone making a careless investment with your money! So to be fair to everyone, consumers who know that college is not feasible for them should probably weigh their options more in depth before just deciding college is the right fit, and the government cannot just hand out loans to anyone and be careless with tax payer dollars.
Now even though it seems as if college is putting the economy in further debt and hurting our situation, that is not entirely true. Education is one of the greatest investments you can have in a country as a whole. It leads to inventing new things and ahead of the curve when disaster might strike. It does come with a cost though, and if people become more and more careless about taking out loans it will only hurt the economy long term. The same is true for the government as well; they need to be careful with the loans they do give out. That way they know the money they are giving out is not going to waste since it is the tax payers’ dollars to begin with. As long as both the government and the consumer consider not just themselves in their decision, and take into account the long term effects, then everyone is much better off.
[i] Forbes Article: http://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-parents-and-the-economy/
[ii] Hazilitt Readings: http://www.fee.org/files/doclib/20121116_EconomicsInOneLesson.pdf
[iii] FRED: http://research.stlouisfed.org/fred2/graph/?id=FGCCSAA027N