Mises.org: "But economic theory has yet another lesson to teach us. Because the supply of students who can afford college is artificially inflated due to the subsidized loans, colleges and universities have found that they can get away with raising their tuitions to stratospheric levels.
"Because the supply of students who can afford college is artificially inflated due to the subsidized loans, colleges and universities have found that they can get away with raising their tuitions to stratospheric levels."
Nevertheless, the students keep on coming, both because the loans are so cheap and easy to obtain, and because the education establishment has an arsenal of statistics and slogans at the ready to describe the huge financial gains to be had from earning a college degree. "The huge debt is worth it," they say. "You'll make it all back after a few years."
At one time this was probably true for most students; but now an increasing number of students are finding that the crushing debt required to attend most four-year universities simply isn't worth it, especially in light of the abysmal job market.
To make matters worse, the recession has prompted many universities to raise their tuitions even higher. According to a new study by the Project on Student Debt,
"Data show that for the past few years, around two-thirds of students graduating from four-year colleges had student-loan debt. The average amount these students owe has grown about six percent per year since 2003–04, reaching $23,200 for the class of 2008. For comparison, in 1996, only 58 percent of students graduated with debt, and they owed an average of $13,200."
Currently, only 70% of those under 20 who want to be employed have a job. This is not counting those who do not seek a job, and thus are not a part of the labor market.
Those recent graduates who can't work usually go to school, because that's what every has advised since grade school. They go to school to find out what they want to do, and bandy about the system for a few semesters on entirely borrowed money, and may or may not have a career yielding degree by the end.
The average graduate will have over $23,000 in debt. In the past, its been get a job, got to school, get done. Now, we have a situation where borrowing to pay for school has become the norm, and my generation will be paying student loans off for nearly the next 2 decades. It is not unlikely that many people going to class will finish paying off their student loans when their kids are about to start high school.
The other option, historically, has been to get a job, get to work and get things done but that option is far less prevalent, and far less available, because the entry level jobs that are available to high school grads are disappearing. Employers will not loose money hiring people, and if a job is only worth $6 an hour, the employer cannot pay $7 and make a profit with that employee.
Thus, we have those who are academically inept and unable to get a scholarship, unable to find any variety of gainful employment, borrowing up to their eyebrows in quicksand to pay for school because that is what they have been advised to do. Or they just list aimlessly for years before acquiring the same job they could have had, at the same skill level at Jr year in high school.
The end result of subsidized student loans, government academic grants and minimum wage?
A rationally lethargic, debt saturated, unthinking generation of adults, exorbitant prices for higher education whilst simultaneously removing the incentive and option to be a producing member of the labor force
Cease subsidized Federal Student Loans, University grants, government scholarships (GI bill notwithstanding) and educational tax shelters. They inflated the system to begin with.
Abolish the minimum wage law, it only narrows the market place down to those who are already employed.