Student Loans

Government-Guaranteed Debt Stalls Economic Growth?

Mark Cuban (follow him on Twitter), owner of the Dallas Mavericks, tells Inc. that he believes a future crash is eminent for colleges as their tuition fees have increased due to students’ easy access to loans guaranteed by the federal government. His predictions are very similar to the crash of the housing market initially created by banks over-lending. He suggests that the government has over-extended loans to students thus pushing colleges to respond with huge increases in their tuition prices; “why wouldn’t they take it all?”. The government debt that this has accumulated is quite alarming and Cuban boldly suggests that this is a direct link to the lack of economic growth in the United States. Cuban’s explanation is that “anything that’s not an absolute necessity, kids coming out of school today, can’t spend their money on”, which leads to a lack of growth in housing, retail and other businesses. He predicts a “cap on student loan guarantees” which will eventually lead to “bubble burst” for colleges, with some of them even going out of business.

But is the student loan really that high? Is it a larger problem than we make it out to be? According to Project On Student Debt the average student debt incurred in Oregon is $26,639 and an average of 60% of college graduates have accumulated student debt.

Okay, so that’s a lot. But a degree ensures these students will earn a higher wage in an industry/field of study that they have spent years obtaining knowledge in. This mean they’ll be able to pay off this debt….RIGHT? Actually, it appears this isn’t always the case. Mail Online states that one in five workers in low skilled jobs holds some type of degree  and are largely over-qualified for their positions. As the government tries to boost economic growth by encouraging workers to go back to school, are they telling these students that there may not be enough high-skilled job positions available in their field of study once they graduate? Probably not.

Perhaps the amount of debt these students are graduating with and the additional opportunity costs involved in attending college isn’t the large payoff society has always thought it to be. Borrowers beware: is the increase in college tuition and the increased amount of guaranteed borrowing from the government going to lead to what Mark Cuban calls a “bubble burst” within our economy?

Only time will tell for certain, but Rich Duncan Construction can knows one thing for sure: careers in construction and the trades may be able to offer you something a college degree can’t: no student loan debt. Through apprenticeship programs, workers can learn viable skills and earn a living wage high enough to support themselves and/or their families.

We foresee a huge gap in the amount of skilled workers to take over as a generation begins to retire: are YOU ready to fill that gap for our industry?

 

Sources:

Oregon student debt numbers & figures in photo & text from: State-by-State Data

Figures for low skilled workers from: Mail Online 

Mark Cuban interview comments from: Inc.