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11.10.08

How Obama's College Plan Hurts My Generation

Obama's ideas do nothing to confront the real problem--that the cost of college is growing far too fast.

Obama's ideas do nothing to confront the real problem—that the cost of college is growing far too fast.

Senator Barack Obama devoted part of the Saturday before Election Day to an interview with MTV where he discussed one of the most important topics on the minds of young voters: paying for college. Obama told host Sway Calloway that both he and his wife had taken out large amounts of student loans to pay for college and law school and added that “When we got married, I think together our total loan payments every month was more than our mortgage when we bought a house, and that lasted for about 10 years.”

As a college sophomore who works as an editor at a personal finance website, I'm well aware of the problems facing students. I've gotten emails from peers who were forced to leave their first-choice colleges mid-year because of financial constraints. I have friends who have taken on $80,000 of debt to finance four years at a private college. One friend of mine was told by his parents that he will have to take on a substantial debt load for his final two years of college because of a decline in the value of the stocks they hold.

Students need to pay for college the right way: by working 80-hour weeks during the summer.

But Obama's ideas do nothing to confront the heart of the problem. The issue isn't just that students can't come up with the cash for college, it’s that the cost of college is growing far too fast. From 2002 to 2006, tuition and fees at public universities rose 57%, according to The College Board. That's more than three times the rate of inflation and, more troubling, far faster than our real economic and wage growth over that period.

Most of my peers supported Obama. Polls show he won the under-30 vote by 34 points, the largest of any candidate in a generation. A lot of students are attracted to his humble roots and commitment to education. And he has discussed plans for easing the burden of college costs: increasing the Pell Grant program, cutting out banks as middlemen in the direct loan program, tuition credits in exchange for participation in the Peace Corps, and perhaps helping recent graduates consolidate their debt.

Increasing the federal Pell Grant program sounds noble, but it really isn't. Given the state of the federal budget, is it really fair for people like me to pay for college by borrowing from the next generation? That isn't just irresponsible. It's immoral. The Baby Boomers have already victimized my generation this way by elevating the national debt to nearly $35,000 for every man, woman and child in America. This was a myopic act of selfishness that my friends and I will spend a good portion of our lives paying for, but the last thing we should do is pass it onto our children with interest.

Increasing the amount of money available for students and their families to borrow only exacerbates the problem by eliminating the natural ceiling that affordability places on costs. Why should colleges worry about cutting costs when the federal government is lending students more money each year to cover tuition hikes, and families are all too willing to take it? The most reprehensible of these programs is the Federal PLUS loan program, which allows parents to take out loans to help their kids pay for college. In 2004, the parents of 15.3% of graduating seniors took out Federal PLUS loans, with an average loan amount of $17,709, according to The Project on Student Debt. Think about it: If Boomer parents don't have the cash available to pay for college for their kids, what business do they have borrowing it? These people need to be focusing on their own retirement needs, which is why I would never dream of allowing my own parents to take out a Federal PLUS loan.

In fact, a tightening in the student loan market could be just the tough love students need to get them to pay for college the right way: by working 80-hour weeks during the summer, and taking advantage of work-study opportunities. It could push students to take summer classes at a community college (I did this last summer) so they can graduate in less time. Or do their first two years at a community college while working full-time and living at home, then transferring to a more prestigious school to complete their junior and senior years. Or how about this wild idea: spend a little less money on weed. As a student at a large public university, I can assure you that I have not observed a recession-driven decline in on-campus alcohol consumption. If students are unwilling to make these types of sacrifices to pay for their own education, why should we ask taxpayers—and future taxpayers—to make those sacrifices for them?

A fiscally and socially responsible approach to the problem of college costs needs to focus on actually reducing costs, not inventing novel ways of foisting those costs onto other people. Here are a few ways the Obama administration can help restore sanity to college financing:

  • Colleges depend on federal financial aid to help students pay their outrageous tuition bills. This provides the federal government with leverage: 5,400 colleges participate in the Federal Pell Grant program. The federal government needs to hold schools taking taxpayer money accountable for controlling their costs.
  • Re-tool the financial aid program to award more aid to students who are making decisions aimed at minimizing their college costs—and discourage students from using federal aid to attend expensive colleges when there are alternatives.
  • Change the financial aid formula to reward students who work hard and save money to pay for college. Under the current system, a huge portion of a student's earnings and savings are deducted from his financial need. This means that a student who spends every night playing video games is judged to have more financial need than one who works three jobs and buys clothing at thrift stores.
  • Push more students to attend community colleges for the first two years, and make transferring easier by requiring all colleges that participate in federal financial aid programs to establish clear and reasonable policies for accepting transfer credits from community colleges. Also, require that colleges set aside a certain number of places each year for students transferring from community colleges. Some colleges will no doubt object to this meddling. Be strong, Mr. Obama: tell them that if they don't like it they can find someone else to pay for their inflated costs.
  • Hold Congressional hearings on the cost of college, and haul in the chancellors of the five colleges that have implemented the largest annual tuition increases over the past five years. Ask them why they can't control their costs, and what they're going to do about it.

If we continue on this course of borrowing ever-increasing amounts from the future earnings of today's graduates, we will end with an enormous underclass of educated people whose career and life options are completely constrained by debt. This may already be happening: A 2008 Experience Inc. survey found that 40% of recent graduates took a job that offered higher pay, but less career satisfaction, in order to help pay off their student loans. 23% sacrificed continuing education in order to take a job and start paying back loans immediately. Other studies have found that high debt levels correlate with clinical depression, and that those with high debt are often forced to put off buying a home, starting a family, or starting a business.

Those are the inconvenient truths of college financing in America, and it will take a president of courage and creativity to fix it. Let's hope for the sake of my generation, and future generations, that Mr. Obama is up to the task.

Zac Bissonnette is an editor with AOL Money & Finance and its new personal finance site WalletPOP.com. He is a sophomore at the University of Massachusetts Amherst.