Biden's Student-Debt Relief Plans Aren't Enough to Restore the Value of a College Degree as More Young People Decide to Skip It
October 29, 2022
The following article is from Business Insider.
While millions of graduates are feeling better about their decision to go to college after President Joe Biden announced student-debt reforms, many young Americans are deciding the experience isn't for them. And Biden's plans might not be enough to change their minds.
College enrollment has fallen over 1% since last fall, according to a recent report from the National Student Clearinghouse. Since the pandemic began, enrollment is down 6.5%. That's roughly 1.5 million fewer students pursuing degrees.
"After two straight years of historically large losses, it is particularly troubling that numbers are still falling, especially among freshmen," Doug Shapiro, the organization's executive director, said in the report. "Although the decline has slowed and there are some bright spots, a path back to pre-pandemic enrollment levels is growing further out of reach."
The decline in enrollment isn't a new trend, either — or one driven solely by the pandemic. Roughly 3 million fewer Americans are enrolled in college compared with a decade ago for reasons such as changes in age demographics, the availability of jobs that don't require degrees, and broader scrutiny over whether the steep cost is worth it.
This decline could very well continue. In an ECMC Group survey of over 1,000 students conducted earlier this year, only 51% of Gen Z teenagers said they were considering a four-year degree. This marked a 20-percentage-point drop since May 2020.
While the headline of Biden's August announcement may have been the up to $20,000 in student-loan forgiveness for millions of borrowers, it also laid the groundwork for making student loans less burdensome for students. But it might not be enough to offset the factors keeping students away from college campuses.
Even with student-debt relief, concerns over college affordability loom
Alongside Biden's announcement of broad debt relief, he released details about a new income-driven repayment plan, which seeks to give borrowers affordable monthly payments based on their income, with the promise of forgiveness after at least 20 years. The plan would allow some borrowers to have their payments limited to 5% of their monthly income, which would be significantly less than what borrowers pay on income-based plans now.
Additionally, students can enroll in the Public Service Loan Forgiveness program post-grad, which forgives their student debt if they work in the government or nonprofit sector and make 10 years of qualifying payments. The Education Department recently announced permanent improvements to the program to make relief easier to join by easing eligibility requirements and allowing one-time account adjustments to correct for past payment errors.
But unless the decline in enrollment begins to translate to a substantial drop in tuition prices, the cost of college may prove too large a hurdle for prospective students.
Adjusted for inflation in 2020 dollars, the annual price to attend a four-year college was roughly $10,000 in 1980. By 2020, it was nearly $30,000 in that year's dollars.
While Democratic lawmakers have pushed back on the idea that Biden's student-debt relief will cause tuition to spike, GOP lawmakers have latched onto that criticism. Sen. Tom Cotton of Arkansas said in August that the debt cancellation was "just going to encourage university administrators to raise tuition higher and spend more money on needless jobs like schools with 160 different diversity coordinators."
While there are few signs of a significant tuition decline on the horizon, the American Enterprise Institute's Mark Perry previously told Insider there had been a flicker of relief.
College tuition and fees increased only 0.9% last year, the smallest increase since at least 1978 and far below the average increase of 7% of the past 42 years, according to Perry's analysis of Bureau of Labor Statistics data.
It remains uncertain whether "the higher education bubble is finally starting to show signs of deflating," Perry said in a blog post. Until it does, young Americans are likely to remain leery of the cost.
Well-paying jobs that don't require a degree are becoming more common
Over the past few years, nearly record-high job openings amid the labor shortage produced wage gains for many workers without degrees. It also led some employers to ease their requirements, with a wider variety of careers accessible for those without college degrees. Others have explored alternative forms of education like trade schools, certifications, and apprenticeships.
Jasey Tragesser, 27, previously told Insider she dropped out of college in 2014. Today, she's earning $135,000 a year as a marketing manager for a software-as-a-service company. During her dozens of interviews over the past few years, she said her lack of a degree "never really came up."
After leaving a medical-receptionist job last year, Chyan Smith, 29, became a self-employed locksmith despite having no experience in the field, she previously told Insider. She said someone could "definitely" earn a minimum of $35,000 to $50,000 a year as a self-employed locksmith.
While job openings fell by over 1 million in August, according to a Bureau of Labor Statistics survey, they remain elevated, suggesting that plenty of opportunities remain for those without a degree.
The looming recession could change that, however, especially as the Federal Reserve aims to weaken the labor market as part of its efforts to cool inflation. And given that lower-wage workers are often disproportionately affected when a recession hits, it could be those without a degree — who earn less on average — who bear the brunt of it.