In my story on California’s budget woes, I mentioned a study showing that more qualified high school graduates are choosing not to attend college because they are priced out of the market for higher education. I should add that the ones who do choose to matriculate end up with a pile of debt after the fact. In fact, the New York Times ran a searing portrait over the weekend of a generation weighed down by student loans, which have become a necessary requirement for practically anyone seeking a college degree.

The facts are astonishing: 94% of all students with a bachelor’s degree have to borrow to pay for their education. Subtracting students on full-ride academic or athletic scholarships, that’s virtually everyone who goes to college. This number stood at 45% just 20 years ago. But since that time, the cost of college has zoomed, making it impossible for families to budget for it. There is now $1 trillion in outstanding student loan debt – and rising. On average, students owe $23,300 after college, in some cases much more.

The major reason for this explosion in student debt comes from the withdrawal of support for higher education at the state level. The cost of state colleges and universities in the 1950s and 1960s was miniscule. Now, funding for higher education on a per-student basis sits at decades-long lows, and funding for state prisons in many cases outstrips it. Faced with survival, colleges and universities have had to compensate for that loss of funding by raising tuition and fees. Public colleges will see their average cost double in 15 years if nothing is done, and the private college and university network has followed the trend.

While the political class debates an increase in the student loan interest rate, this increasing lack of affordability of higher education, a primary step for upward mobility in America, signifies the real problem. Student debt has a major impact on economic performance; young people drowning in debt tend not to buy cars or homes or other big-ticket items. This delay, along with the graying of America, means that demand halls on both sides of the generational divide, constraining economic growth. The buildup of debt, meanwhile, combined with a soft labor market, has led to increasing defaults and rotten private balance sheets, also hurting growth. And those who cannot make the choice for college at all get left behind completely.

The current system of higher education in America increasingly looks unaffordable and unsustainable, and nobody is considering any way to ameliorate it. And that has serious consequences for the US economy.

David Dayen

David Dayen