While the opportunity to pursue a course of higher education was once a fundamental part of the American Dream, it is now a trail fraught with risk and cumulative debt. Collectively, graduates in the U.S. currently carry $1 trillion in student debt, which is hindering their ability to establish businesses, create job opportunities and take their first steps on the property ladder. While some may consider rising levels of student debt to be an inevitable consequence of the global recession, subsequent education cuts are only serving to exacerbate the situation.
According to research conducted by the Center on Budget and Policy Priorities in 2012, 26 states were set to slash spending during the current fiscal year, while 35 local authorities continue to invest at a lower rate than before the recession. At the same time, college fees continue to rise at a faster rate than inflation, meaning that students are effectively investing in inferior educations that can no longer guarantee employment or a suitable level of future remuneration.
Higher Education and the Job Market
The combination of soaring tuition fees, diminishing employment prospects and reduced government spending has changed the face of higher education in the U.S. and left many questioning whether it still represents a sound financial investment. The fact remains that students pursue higher education in order to gain specific academic qualifications, which in turn ensures that they are employable within their chosen fields. As the U.S. job market continues to sustain a weak and sluggish recovery, parents and aspiring graduates are reluctant to invest in education that is unlikely to secure financial and professional security.
The U.S. economy created 175,000 jobs during May 2013, and while the unemployment rate increased slightly to 7.6%, this still represents a significant improvement on the corresponding figures from last year. These statistics are misleading, however, as they distort the weakest labor market recovery since World War II. Essentially, the majority of job opportunities that are being created deliver less than living wages. A recent report by public policy group Demos suggests that various forms of government investment in the private sector have created nearly two million jobs that pay just $12 an hour or less.
The Changing Nature of the Job Market and the Ability of Students to Capitalize
Thanks to numerous technological and social advancements, the nature of the workplace has changed considerably since the turn of the century. This has led to a rise in the number of self-employed citizens and freelancers, with approximately one-third of the U.S. workforce now operating independently. A look at the demographics behind these figures suggest that while self-employment has risen by 24% among individuals aged 65 and over since 2010, it has fallen by 19% among those who are 25 and under during the same period.
While some may argue that this statistic is simply reflective of the fact that formal education lends itself to the traditional employment market, it also suggests that the burden of student debt is weighing heavily on graduates. The share of 25 year olds carrying student debt has risen by 18% since 2003, and along with the rising cost of tuition, this offers an insight into the issues facing graduates nationwide. More specifically, the sheer weight of student debt is placing huge constraints on students once they have qualified for a loan, especially in terms of their ability to take risks and establish a business venture.
Living the American Dream: Can Students Afford the Trappings of Adulthood?
While the effects of economic stagnation are not reserved solely for graduates, there is an interesting contrast between the levels of student and consumer debt. While U.S. citizens have held total consumer debt to a respectable 9% increase since 2004, student debt has more than tripled to approximately $1 trillion during the same period. This underlines the severity of the financial issues facing those who have pursued higher education, and hints at their relative inability to reinvest money into the economy.
As graduates continue to grapple with a sluggish job market and soaring debt levels, they are unable to invest in the trappings of adulthood and contribute towards a sustainable economic growth. Given that the college enrollment rate among high school graduates has risen steadily since 1959 and reached a high of 70.1% as recently as 2009, this leaves a potentially vast demographic of citizens who are unable to purchase houses, cars or invest in their long-term financial futures. In addition to creating a generation of adults who are unable to fulfil the American Dream and achieve their full potential, the implications for a long-term economic recovery are also extremely worrisome.
The Bottom Line
Placing the economic implications of post-secondary education to one side, however, the steadily rising college enrollment rate proves that many individuals still believe in higher education as a sound investment opportunity. While it is unclear whether this is the result of enduring faith in the education system or a failure to appreciate the changing nature of the economy and its workplaces, it cannot be denied that rising tuition fees and an ailing job market continue to perpetuate a cycle of spiralling student debt and lost opportunities. Unless this can be addressed, higher education will continue to represent an increasingly risky and uncertain investment in the years to come.