A Dysfunctional System That Bankrupts A Generation

Tuition has done it again: up by 8.3% for universities and by 8.7% for community colleges, according to the College Board. Here in California, tuition increases are outright ridiculous. Much of it will be paid for with student loans (though grants, scholarships, other aid, and tax credits will cover some of it). Student loan debt will exceed $1 trillion [7] by the end of the year—a stunning amount. But unlike other debt, it cannot be discharged in a bankruptcy.

The skyrocketing costs of higher education add to the strains already weighing down the middle class whose median household income has fallen 9.8% between December 2007 and June 2011 (Sentier Research) and whose real wages have declined 1.8% over last year (BLS) and around 9% since their peak in 1999.

We all support education; we want the next generation to be productive. So now, under increased pressure to "do something," the Obama administration has come up with a Band-Aid, which includes income-based payment limits and ultimate debt forgiveness in certain cases—an accelerated implementation of program improvements that would have taken effect in 2014. Looking forward, it is likely that more taxpayer funded relief is on the way.

But the system itself is dysfunctional. The cause: a misalignment of interests within the complex relationships between students, universities, the student-loan industry, and the federal government.

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