Debt, credit contraction and consequences

According to a report in Wednesday's New York Times, the cost of a college education is rapidly escalating beyond the reach of an ever larger percentage of the U.S. population.

... college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.

“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” said Patrick M. Callan, president of the center, a nonpartisan organization that promotes access to higher education. ...

Among the poorest families — those with incomes in the lowest 20 percent — the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families’ median income last year, up from 40 percent in 1999-2000. ...

While tuition has risen at public universities, his report said, that has largely been to make up for declining state appropriations.

That is, the states, which can't just print more money like the Feds, can't afford to subsidize their public institutions. And since colleges are easier to cut than prisons, they get axed.

So students borrow more and more to get the education that is a ticket to get into or stay in the shrinking middle class.

This hits close to home. My partner teaches at a private university where students need to take loans to pay substantial tuition. And loans are becoming harder to come by in the credit crunch. And at her school, according to its President, 95 percent of operating cash comes from tuition payments. Many students who were enrolled in the fall semester now have "holds" on their spring enrollment because they are not fully paid up. Fewer paid up students means fewer class offerings. So my partner will probably lose one of the classes she expected to teach -- and get paid for.

The illustration at the head of this article comes from a contest the Consumers Union is currently running among student cartoonists illustrating the consequences of debt expansion. Through December 5, you can vote for the cartoon that best expresses your sense of what debt is doing to us at this site. The winner gets $1000 and undoubtedly needs it!