By Sarah Lovenheim
College commencements are just around the corner and while they’re cause for celebration, they’re also a reminder of a looming economic threat following graduates from the classroom into their careers: student loan debt.
Student loan debt has surpassed 1.2 trillion dollars, and despite being six years out of the Great Recession, Millennials are still feeling the ripple effects of the downturn. I can’t help but cringe as I consider how far we have to go to better prepare generation for the future.
States have divested in higher education since the Recession, causing tuition costs to soar to new heights. Today’s college graduate leaves school with roughly $30,000, on average, in loan debt. At for-profit colleges, the average amount’s even higher: a typical student leaves with $40,000. Debt loads are setting our generation back in the economy, potentially for decades, and our country can’t afford that.
Already, Millennials saddled with debt are delaying major life decisions, such as buying a car, a home, and even marriage. Pair high student loan debt with a difficult job market (wages have fallen more for Millennials than any other age group), and it’s no wonder Millennials have a savings rate is negative 2 percent.
With no savings, how are graduates with debt supposed to pay it off if they lose a job, or work in a low-wage sector? Across the country, state spending on higher education must return to pre-recession levels — and fast.
When hardworking young people struggle financially, that’s not just bad for their long-term security, it’s bad for our greater economy. The auto industry and real estate industry, for example, suffer when Millennials can’t buy a car or a home and that also can affect employment.
The good news? Lawmakers say they want to tackle student loan debt and rising college costs.
Unfortunately, most states have barely scratched the surface on reinvesting in higher education. State legislators acknowledge loan debt impacts their communities yet several governors have recently proposed budgets that would slash funding for higher education, forcing colleges to hike up tuition costs and perpetuate our debt crisis.
Even before governors advanced jaw-dropping budget proposals, such as this one in Illinois, we observed alarming trends nationwide. We graded the states on their higher education spending: more than 30 states received an “F” on spending for higher education, while nearly 20 states received an “F” in tuition.
New Hampshire, for example, as Young Invincibles’ Jessica Adair recently noted, is a recipe for disastrous student loan debt: “Not only must students pay the highest average tuition cost in the country (nearly $15,000 a year!), the state offers no student aid whatsoever. Zero.” The average student debt load is $32,700 – the highest in the nation.
Arizona students face another state of sticker shock. Tuition at four-year colleges has increased more than 80 percent since the Recession, while the state has slashed funding by 30 percent per full-time student.
As many states prepare to finalize their budgets in the coming weeks, we hope they’ll consider reinvesting in higher education so that more students can afford to earn the degrees our economy needs and lessen the threat of student debt. With 65 percent of jobs requiring some sort of postsecondary degree by 2020, we have significant steps to take to make that goal attainable, and state investment in higher education is where we must start.