Is student-loan debt becoming a crisis?
Economics editor Chris Farrell
TEXT OF INTERVIEW
Bill Radke: For those aspiring college students who got their applications in promptly, the early acceptance letters are starting to show up in the mailbox. It is such a weird college market right now. Enrollment keeps on rising even though tuition keeps going up, at a time when people can least afford it. Marketplace's economics correspondent Chris Farrell is here to explain it. Good morning, Chris.
Chris Farrell: Good morning. And Bill I have to tell you that I am living this right now because my youngest has been accepted to college. Wonderful day, but now I have to think about how to pay for it.
Radke: Yes. OK. Well then maybe you can explain this to me, Chris. How can it be that tuitions keep rising like they are, but enrollment is rising right along with it?
Farrell: College enrollment is a socially-acceptable form of unemployment. You know, it's a terrible job market. So even though most people graduate from high school now do go on to college, those numbers are even bigger than before. So that's one aspect of it. The other aspect, though, is take a look at these colleges and universities. Their endowments have been devastated. State funding has been cut. So their finances are terrible. So what are they doing? They're raising tuition.
Radke: This economy may or may not turn around by graduation time. What kind of student loan burdens are these young people going to be facing?
Farrell: I'm really worried about this. I think the student-loan debt burden is coming close to a crisis. I just can't come up with a scenario over the next couple of years of a lot of job growth in this economy. Secondly, here's the most disturbing number that anyone can contemplate. Since 2000, the real wage of young college graduates has fallen after you adjust for inflation. So I don't know about you, but here's the basic mathematics: you borrow more, you earn less. Let's a recipe for trouble.
Radke: Do you think the model we have now for college financing is sustainable or is it changing?
Farrell: I don't think it's sustainable. And I think that's what the Great Recession has really pointed out. That this model of high tuition, high student-loan borrowing has reached its endpoint. The pendulum swung too far. No one disagrees that young people should own part of their education, and pay for part of their education, but I think that we have reached a point where we need to rethink the model. And quite frankly, the public needs to support a college education more than it does right now. Families and young people are tapped out.
Radke: Marketplace's economics correspondent, right in this particular pickle. Chris Farrell, thanks so much.
Farrell: Thanks a lot.