Based on the title of this column, many of you probably think I have been listening to too much of the Elvis Channel on satellite radio during my extensive travels. No, seriously, young people in America are accumulating student debt at an alarming rate, which in turn limits their opportunities up to a decade or more.
Yes, things are different now compared to the days I worked on Dave Dodge's farm and other farms disking fields, baling hay, chopping corn, milking cows and cleaning calf pens for $2 an hour. A half- summer’s work paid for my tuition and books as well as gas and upkeep for my Corvette and later my Mustang GT.
Student loan debt is nearly a trillion dollars, with 9% of student borrowers now 90 days or more delinquent on loan payments. The average debt per student is $23,000, with those under 30 years old owing $292 billion of debt, and those in the 30-39 years of age range owing $307 billion.
Which state has the highest percentage of students leaving college with debt outstanding? Iowa leads the way with 74%, followed by Minnesota, New Hampshire, Maine and Vermont, which all have an average of above 60% of students leaving college with debt.
One must start asking why college tuition continues to rise while increases in other prices and personal incomes are modest or actually declining. First, the federal government and many states have sharply reduced funding. The demand for college educations remains strong. Some estimate that by the year 2020, three-fourths of all jobs will require a college degree. I disagree with this requirement in that some students would be better prepared with a vocational or technical school education or a series of lifelong learning experiences. That being said, historically, earning power is higher and unemployment rates are lower for those with a college degree.
Core inflation, which does not include food and energy, has been modest while college education costs have dramatically increased. As a case in point, from 1985 to 2011, consumer prices increased by 115%, while tuition rose 498%, according to CNBC, with data provided by Tim McMahon of InflationData.com. From 1999 to 2009, tuition at four-year public colleges rose 73% while the median household income fell 7%.
These trends are not sustainable. Many colleges are adding new buildings that, in some cases, look like the Taj Mahal, and they are becoming bloated with administrative staff. Is this the next asset bubble that is ready to burst? Observing this generation of student debt holders in the financial jailhouse for one or two generations, many will start questioning whether the high-priced degree is worth it, or has enough value in an economy with sluggish or no growth.
P.S. I am sitting in the Delta Crown room at the Atlanta airport listening to the bartender and a graduate of Syracuse University arguing over this same subject and college sports. College tuition is one topic that seems to be on everyone’s minds!
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]