Mired In College Debt, Millennials Need Better Options

As national dialogue continues about the usefulness of a traditional, 4-year college degree, data show the Millennial generation is falling behind previous ones in savings, net worth, even the ability to move out of their parents’ homes. Voices are emerging that question the orthodoxy of a static bachelor’s degree as the preferred path for all high school students, since it appears to be holding many back. Yet creation of alternative pathways, just like K-12 school choice, is an uphill battle against entrenched educational bureaucracies.

Across the income spectrum, more families today carry student debt than a generation ago. The biggest spike has come for the middle and upper-middle classes. This makes intuitive sense; poorest families are most qualified for government aid, and wealthiest families are likeliest to immediately pay out of pocket. Thus the middle class is bearing the brunt of tuition hikes. Researchers from the Federal Reserve Bank of Philadelphia and Pennsylvania State University warned the increase debt loads are impeding small business formation, a troublesome sign for future job creation.

There’s also been a huge spike in young adults living with their parents, a trend that researchers with the Federal Reserve Board show is due more to rising student loan debt than broader economic conditions triggered by the Great Recession.

A report by Moody’s Analytics cited in the Wall Street Journal shows Millennials still have a negative savings rate, even as other generations have recovered from the Great Recession. This is in large part due to burgeoning student loan debt, which has escalated in tandem with a decline in the net worth of people under age 35.

A copy of the the Moody’s Analytics report provided to me also shows that those who have a college degree are not saving more often than college graduates from a generation ago. And of those who do save, they are saving a smaller proportion of their income.

Putting these data points together, societal questions emerge: is a four-year college degree becoming more a hindrance than help for many people? Should we reconsider the default message to high schoolers that a bachelor’s degree should be their only option? As PayPal founder and tech entrepreneur Peter Thiel argues, does pushing a college-or-bust narrative create a caste-system of those who attend college and those who don’t?

“We are in fact experiencing something as pernicious as the bubble of tech and housing,” Thiel said in an Intelligence Squared debate on the usefulness of college. “We cannot afford to have a third bubble in this country. We had two already, they were catastrophically bad, they led to enormous misallocation of resources…a great deal of what masquerades as learning is nothing more than credentialing.”

Author Nicholas Wyman has done excellent research confirming Thiel’s argument in Wyman’s forthcoming book, Job U. Wyman argues that the United States should take a cue from Germans’ emphasis on the value of vocational education, particularly in the manufacturing sector, from an early age.

“The best way to do this here is to revive the kinds of successful vocational programs that were a standard component of every American high school education prior to the 1950s,” write Wyman. “We need to bring skills-based learning back into the mainstream. Vocational education in the United States need not be perceived as a track for underachievers; it is a solid educational path for any young person seeking to acquire the competencies, confidence, and knowledge to launch a career–while at the same time contributing to a productive workforce and flourishing economy.”

Wyman presents projections from the Georgetown Center on Education and the Workplace showing just 34 percent of jobs in the year 2018 will require a bachelor’s degree or higher. Counterintuitively, slightly more jobs, 36 percent, are expected to require a high school degree or less, and the rest, 29 percent, will require partial college or an associate’s degree.
Wyman argues that popular misconception holds that “the lack of a bachelor’s degree is akin to a life sentence of low-wage, low-skill service jobs with limited advancement opportunities. Yet the reality is that vocational high school graduates with certifications and some work experience are not only highly employable, they often earn higher salaries than their counterparts who graduate from traditional high schools and complete a few years of college–often even higher than college graduates without any skills training.”

So, to review: Millennials are loading up on college debt and it is hampering their occupational, geographic and financial mobility. And by a 2-to-1 ratio, jobs of the future will require less than a college degree. And another argument from Thiel is that students who load up with debt have no recourse, and administrators are not held accountable if students are unable to find work after graduation.

Our current system of student financing their own studies (with Pell Grant options for the neediest) is meant to help limit the moral hazard of wasteful education spending by students. Students are unable to discharge student debt, yet school administrators are the ones providing a service that ultimately proves imprudent for too many. We need new thinking about the pipeline from high school to the workforce; the Millennial generation deserves betters.