Page 161 - Crisis in Higher Education

132 • Crisis in Higher Education

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bachelor’s degrees borrowed money, but in 2015, it was 68%. Student loan
debt is the only form of consumer debt that has grown since the debt crisis
in 2008. It has surpassed car loan and credit card debt, placing it second
only to mortgage debt. Almost 30% of borrowers delayed getting married
and moved back with their parents, over 40% delayed starting a family,
over 60% delayed buying a car, over 70% delayed saving for retirement,
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and about 75% delayed buying a house. The impact of student loan debt is
substantial for the U.S. economy.
To most people, purchasing goods or services, even a $500 flat screen
television, without debt seems out of kilter. Debt is the “American way,” so
there is a natural bias to use debt to pay for a university degree. Children
see their parents and others use credit cards repeatedly to buy things,
but the children rarely see the consequences of repaying debt. They only
see how easy it is to buy things. With the rising costs of higher education
and this cavalier attitude toward debt, it has become an important and
accepted way to attain university degrees. Consider the following.

1. Debt replaces planning: Families often ignore or postpone financial
planning for retirement, university costs, and other major purchases
because it is a daunting task to identify future needs and deny cur-
rent and sometimes impulsive consumption. For many people, the
here and now is real and pressing, while intermediate and long-term
needs are amorphous and uncertain. Instant gratification is satisfy-
ing, so the short-term path of least resistance is to spend more, work
longer to build retirement, and borrow to pay for higher education.
But, in fact, planning works to reduce the costs of higher education.
The average borrowing by students in families with financial plans
was 40% less than borrowing by students in families without plans.
In addition, students in families that borrowed were less likely to live
at home, only 40%, and incurred higher costs compared to nonbor-
rowing families where 53% lived at home. 1
2. Borrowing begets borrowing: Once parents and students accept bor-
rowing as an important, even necessary, part of the solution, it is easier
to borrow more, so students can work less and live more comfortably.
Students do not have to compromise, just borrow.
3. Borrowing is the contingency plan: Borrowing is the way to deal with
change and uncertainty. As problems arise, students are very com-
fortable with borrowing more to pay for things like repeating failed
courses, taking extra courses because they changed their major, or