One in four young Americans contemplated suicide in June: Will they feel better if they take out student loans and go to college?

The Center for Disease Control and Prevention (CDC) confirms what Americans already know: The coronavirus pandemic is harmful to our mental health.  And young people are particularly vulnerable.

According to the CDC, one out of four Americans ages 18 through 24 contemplated suicide in June. The CDC's study did not break down that age group between college students and other young Americans. Still, everyone knows (often from personal experience) that going to college can be depressing.

Experts worry that the financial downturn will be hard on college budgets, forcing schools to cut back on counseling services for students.  But maybe not. The Massachusetts Supreme Judicial Court ruled in 2018 that colleges have at least a limited duty to prevent their students from committing suicide. That decision is likely to prompt higher education to invest more resources in their students' mental health.

Personally, I think now might be the wrong time for young people to go to college. The job market is terrible, and no one knows for sure which industries will thrive after we conquer COVID-19. I think the financial turmoil will make it harder for undergraduates to pick a college major that will prepare them for a post-pandemic job.

The universities themselves are agitated by social unrest, with some institutions thinking about defunding their campus police.  Depending on how that goes, students may find themselves vulnerable to crime when they stroll across the quad on their way to Psychology 101.

And a college education has become incredibly expensive.  The National Center for Educational Statistics reported that tuition and expenses to attend a four-year college went from $5,504 a year in 1985-1986 to $$27,357 in 2017-2018 (in constant dollars). (My thanks to Steve Rhode for alerting me to those figures.)

That's a four-fold increase in college costs over 32 years. When prices are adjusted for inflation, the increase is less dramatic but not reassuring. Whose wages have kept up with inflation over the last 10 years? I know mine haven't.

If you are one of the millions of young people who graduated from high school and have no clue about what you are going to do for a living, don't take out student loans to find out. If you stumble into one of the flaky liberal arts or social studies majors (sociology, psychology, international relations, gender studies, etc.), you may well wind up with $50,000 or more in student debt and no idea how you will pay it back.

You think you are depressed now, how will you feel when your first student loan payment comes due?

If you decide to go to college anyway, do what you can to reduce the risk of depression. If you've read anything by J.D. Salinger, forget it and throw his books away. By writing Catcher in the Rye, Salinger has done more to depress young people than anyone with the possible exception of Bob Dylan.

Long-term student-loan repayment rates are shockingly low: A new report from the National Center for Education Statistics

Last month, the Department of Education released its latest report on three-year default rates for the 2014 cohort of student borrowers. DOE reported a three-year default rate of 11.5 percent, up slightly from the Department's 2016 report.

A student-loan default rate of 11.5 percent doesn't seem so bad. After all, nearly 90 percent of the 2014 cohort are not in default.

But wait a minute. Instead of looking at default rates, let's look at repayment rates. How  many people are paying off their loans?

It's not a pretty picture. A few days ago, the National Center for Education Statistics produced a report on student-loan repayment rates; and the NCES's findings are alarming. The report is packed with incomprehensible, technical jargon and far too many tables and appendices, but if you dig around in the report,  you get to the heart of the matter.

Among borrowers who were first-time students in 1995-1996 (more than 20 years ago), less than half had paid off their loans by 2015. According to NCES, only 41.3 percent of the students in this cohort had paid off their loans 20 years after first entering postsecondary education.

What is the status of the other 59 percent? About 31 percent were still making payments in 2015, 13.8 percent had their loans in deferment, and 13.7 percent were in default.

In the 2003-2004 cohort of borrowers, only 23.5 percent had paid off their loans 12 years after beginning their studies. Three quarters of borrowers in this cohort were still making payments, had loans in deferment, or were in default.

As we would expect, student borrowers who obtained bachelor's degrees or higher had the best repayment rates. Nevertheless, in the 1995-96 cohort, only half of these people had paid off their student loans twenty years after they first enrolled in college.

The bottom line is this.  By giving out deferments and encouraging student debtors to enter long-term repayment plans, the Department of Education has kept its official student-loan default rates artificially low. But the fact remains that almost 60 percent of a cohort borrowers who took out student loans in the mid-nineties had not paid off their loans 20 years later.

And remember, people in the repayment phase who aren't paying down their loans or who are making token payments are seeing their loan balances grow larger with each passing month. An individual who hasn't paid back his or her student loans after 20 years is probably never going to pay them back because the loan balance is out of control.

That should scare Betsy DeVos and her minions at DOE. But she is focused on propping up the for-profit college industry and not the appalling data that show that a majority of college borrowers cannot pay off their student loans even when given 20 years to do so.

Presiding over a looming disaster

References

Andrew Kreighbaum. Post-Recession Borrowers Struggle to Repay Loans. Inside Higher Ed, October 5, 2017.

Jennie H. Woo, Alexander H. Bentz, Stephen Lew, Erin Dunlop Velez, Nichole Smith, RTI International,  (2017, October). Repayment  of Student Loans as of 2015 Among 1995-96 and 2003-04 First-Time Beginning Students. First Look (NCES 2018-410). U.S. Department of Education. Washington DC; National Center for Education Statistics. [Sean A Simone, Project Officer]

Another Day Older and Deeper in Debt: A Sobering Report on Student Indebtedness from the National Center for Education Statistics

If young people will just go to college, the higher education industry assures us, everything will work out fine for everyone.

 Indeed that was the message delivered in a recent New York Times op ed essay. Jonathan Cowan and Jim Kessler,  executives of Third Way, a so-called "centrist" policy organization, argued that the problem of stalled wages and growing income equality in the U.S. is being solved  because more people are going to college.

But reams of studies and reports cast doubt on this Pollyannaish notion. Earlier this month, the National Center for Education Statistics (NCES) released a report indicating that the economic

Pollyanna:
Just go to college and
everything will work out fine.

picture for college graduates is getting worse. Here are some highlights from the report, authored by Jennie Woo.

• The percentage of college graduates who borrowed for their undergraduate education went up from 49 percent among people who graduated in 1992-1993 to 66 percent for people who graduated in 2007-2008.

• Among college graduates, the average amount borrowed went up from $15,000 for the 1992-1993 cohort to $24,700 for people who graduated in 2007-2008

• Among people who graduated from for-profit institutions in 2007-2008, 90 percent had taken out student loans.

• In 2001, about two-thirds of college graduates were making payments on their loans one year after graduating. In 2009, that figure had dropped to 60 percent. The other 40 percent had either obtained a forbearance or were in default.

• Among college graduates who were employed, average annual salaries went down from $39,300 in 2001 to $34,400 in 2009 (measured in 2009 dollars).

To summarize: Over a 13 year period, more Americans were  borrowing to attend college, and they were borrowing more money. At the same time, salaries for college graduates went down and fewer graduates were making payments on their loans one year after graduating.

 Unfortunately, the data analyzed in Ms. Woo's NCES report are old.  She was reporting on the financial situation of people who graduated five years ago. But there is no indication that the financial outlook for college graduates has gotten better in the last five years.  On the contrary, the student-loan default rate has gone up substantially in that time period.

Does this trend have a happy ending? I don't think so. I don't have a sure-fire formula for getting college costs under control or for reducing the amount of money college students need to borrow. Nevertheless, we could brighten this dreary picture if we shut down the for-profit colleges and encouraged low-income students to attend low-cost community colleges and state institutions. And we could ease the burden on overstressed student-loan debtors if we allowed them reasonable access to the bankruptcy courts.

But almost no one is talking about serious reforms in higher education. Instead, we just keep telling ourselves that a college degree is a good investment--no matter what it costs.

References

Jonathan Cowan & Jim Kessler.  "The Middle Class Gets Wise." New York Times, October 20, 2013. Sunday Review Section, p. 4.

Jennie H. Woo. Degrees of Debt: Student Borrowing and Loan Repayment of Bachelor's Degree Recipients 1 Year After Graduating: 1994, 2001, and 2009. Washington, DC: National Center for Education Statistics, October 2013. Accessible at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2014011