Which college is worth its debt

Students' debts: pay off until they retire

The cost explosion at universities and the associated debt crisis for university graduates in the USA are becoming a time bomb for an entire generation. The beginning of the winter semester at the universities, which is imminent in a few weeks, will make this bomb tick a little louder. Around 44 million Americans carry around with them some very high debts from their student days.

In total, the liabilities amount to 1.4 trillion dollars, which corresponds to the annual economic output of South Korea, the eleventh largest economy in the world. About one in five ex-students in the USA who are in debt can no longer service their loans because they do not earn enough. Even if you get a well-paid job after graduation, you sometimes have to wait a long time for the financial worries to end, because it can take decades before the mountain of debt is cleared.

Harry and Linda hear with incredulous astonishment that in many European countries there are no or comparatively low fees for studies. There is still broad consensus in the United States that funding for higher education is not a matter for the state, but for the individual. For example, only four states have public universities that do not charge fees. Only basic studies can be completed at these so-called community colleges - for a degree, at least four additional semesters must follow at another university.

Without board and lodging. For a long time the Americans drove very well with their system. In the 1970s, studying at the elite Harvard University cost 2,600 dollars a year, which was about a quarter of the income of a normal family at the time. Today, the same family would have to spend almost all of their annual income to pay a child the Harvard dues of more than $ 45,000. Board and lodging are not included. Study costs in the USA have risen by 400 percent in the past 30 years, reported the magazine "Atlantic".

Studying at a private university in the USA currently costs just under $ 33,500 a year - ten years ago it was still $ 26,400. In the past five years alone, fees have increased by 13 percent. Public universities are much cheaper at just under $ 10,000 a year, but they offer poorer chances of a well-paying job after graduation.

Inflation and the universities' efforts to provide better services to students - some universities, for example, have climbing walls - are some of the reasons for the development. The global financial crisis of 2008 had a much more drastic impact. Back then, states cut their education budgets an average of 30 percent to stabilize their budgets. The reduced subsidies for the universities resulted in higher costs for the students.

In addition, the respected universities can refer to rich donors, but not common universities. Harvard recently received a $ 400 million donation from a wealthy entrepreneur who wanted to thank him for his excellent education. Many other universities without financially strong sponsors have to cover up to 80 percent of their costs with tuition fees.

As a result, loans, most of which are borrowed from the US federal government, are the only route to a college degree for many young people. If a post with an attractive salary beckons after graduation, this is a calculable risk, even if many graduates have to turn over every penny twice despite good jobs. This has an impact on the entire American economy: instead of buying new cars, televisions and apartments, millions of US citizens tighten their belts for years.

Stories like those of Melissa Cefalu and her husband Andrew are typical. With their college education and jobs, Cefalu, a veterinarian, and Andrew, a chiropractor, are upper-middle-class in their home in Mississippi - at least in theory. In practice, they have been struggling with a total debt burden of $ 365,000 since college, as Melissa told USA Today: The couple earns $ 125,000 a year together, but drives a 13-year-old car and never goes on vacation. Cefalu wears her sister's discarded clothes and doubts that all the effort of studying was worth it. “I don't think my graduation was worth the daily sacrifices,” said Melissa.

Bankrupt at a young age. The Cefalus are still among the lucky ones, because after all they have an income. Last year alone, around eight million university graduates could no longer afford to repay their loans totaling $ 137 billion - an increase of 14 percent compared to 2015. The consequences can be dramatic. Lenders can seize collateral such as cars or apartments to get their money. Anyone who is noticed as a bankrupt at a young age will later find it difficult to get a loan for building a house or the like.

Critics of the system such as Senator Bernie Sanders, the bearer of hope for the American left, are calling for a free college education and a reduction in lending rates on existing student loans. You accuse President Donald Trump of leaving those affected alone with the problems. The Trump administration is proposing to repay all outstanding debt on state student loans after 15 years - so far the deadline is 20 years. But opponents of the president point out that the government wants to finance this relief by tightening the credit rules elsewhere.

Because of the high costs and the risk of getting into debt, more and more families are wondering whether studying is worthwhile at all. In addition, a university degree no longer automatically guarantees a higher income. According to a study by the Central Bank of San Francisco, the gap between the incomes of Americans with and those without a university degree has stagnated for years. The universities are becoming less attractive and the number of students in the USA has been falling since 2010.

This means that the country is losing a lot of talent. Today the skills of the individual are no longer decisive, but the family income, said Harvard professor Robert Putnam of the university newspaper "Harvard Gazette". While the university degree for intelligent young people from poor families is moving into the distance, one group remains at the universities: “Stupid children from rich families”.