Even though it is now less true than previously, it is still commonly believed that a college degree is a guarantee of higher lifetime income.  So, let’s make it easier for those who cannot afford to get that degree by lending them enough money to get it.  Let’s put them in debt for $1.3 TRILLION, which is more than total credit card debt and more than all car loans in America.  The hoped-for consequence of this lending tsunami was that the students would graduate and make more than enough additional money to repay these.  The unintended consequences is that graduates are now delaying marriage, delaying having kids, and delaying buying a home.  Consumer spending is almost 70% of GDP, and these delays don’t help America.  It is a big number, estimated at 40 million young people or 70% of recent graduates — that’s right, 70% of recent graduates have student loan debt, which averaged $33 thousand last year.

Imagine you’re a young person chasing the American dream and borrow $33 thousand to get that degree.  Then, there is the Great Recession, and you wind up working a retail job.  You are under-employed and under-paid.  Incredibly, 45% of graduates age 24 or under are still living at home or with relatives, because they cannot afford to live independently AND pay back their college loans.  We have a generation rapidly losing faith in the American Dream.

The final nail in the coffin is the impact of student loans on entrepreneurship.  The percentage of businesses started by someone under age 34 has dropped from 26.4% to 22.7% over the last ten years.  Recent research at Purdue shows that only 16% of those with student loans exceeding $40 thousand started a business, compared to 40% who have no debt.

There is a clear moral responsibility to hold down the cost of college, which is the only major cost rising faster than the cost of health care. It has been too easy to raise tuition to pay for the elaborate pension plans of faculty and staff.  It has been too easy to set-up for-profit colleges that advertise constantly for new students and then hook those students on college loans.  They are no better than drug dealers!

There is also a clear moral responsibility to provide financial counselling to college students about the depressive impact of student loans.  There is a clear moral responsibility to help the 70% who took out student loans, ignorant of financial planning, in order to chase the American Dream.  We don’t need to forgive the debt directly, unless they do appropriate volunteer work of some sort.  Or, we can ease the amortization terms.  Or, we can just apologize for leading them to believe in the American Dream that a college education pays for itself.