Wrestling with the debt albatross

January 27, 2014

January is a tough month not only for its charmless weather, which we’ve gotten a more than ample dose of in recent days, but also because it’s the time when the bills come due for the lavish spending many people engaged in during the holidays.

As Rick Shrum, the Observer-Reporter’s business writer, put it so well in a story that appeared Sunday on the explosion of consumer indebtedness, “Ho, ho, ho may lead to owe, owe, owe.”

But, as the story pointed out, whipping out the credit card once a year to splurge on toys for the kids or a parka for your uncle is just one component of what Madeline Innis, a caseworker with Community Action Southwest, described as “a much bigger picture, one piece of a large, complicated puzzle.” Americans are now shouldering an immense load of debt. The average household owes $149,925 on its mortgage, $32,258 on student loans which still need to be paid off years after degrees are framed on the wall and $15,270 in credit card debt. That comes to a nothing-to-sneeze-at $197,453. And that’s also not counting what many still owe on their vehicles.

The age at which people are still dragging debt around is also going up – the days of a middle-aged or elderly homeowner being able to burn their mortgage because they have it all paid off largely vanished somewhere around the time 8-track tapes did.

It should also be noted that the legions of consumers who slammed their wallets shut and spent the last five years or so wrestling with the debt albatross has been one of the reasons economic growth has been so sluggish and the job market has taken so long to stage a rebound.

Though there can be little doubt that some Americans live beyond their means and buy goods and services they can ill-afford, some of this mounting household debt can be ascribed to stagnating wages and the reduction in the value of homes, which has meant many owners can no longer draw equity from them. But the escalating costs of receiving a college education, which few would dispute is the key to attaining at least a middle-class life in America, also deserves hard scrutiny.

Because state legislators have been aggressively cutting support for public universities in recent years, parents and students have had to pay a much larger share of tuition. A 2012 study by the Bloomberg news service was an eye-opener to anyone who got their degree in the 1980s or before – the cost of a college has gone-up 12-fold in the last 30 years. Compared to the overall rate of inflation, college tuition and fees have far surpassed the pack and gone galloping off into the horizon. Not attending a college or getting a degree because of its cost has undoubtedly limited the opportunities of many talented and ambitious young people. Secretary of Education Arne Duncan warned around the same time as the Bloomberg report that “if the costs keep on rising, especially at a time when family incomes are hurting, college will become increasingly unaffordable for the middle class.”

Clearly, there is a need for some campuses to cut costs, particularly in the administrative realm.

But an increase in aid from Harrisburg, and other state capitols, would help ease the burden on students and their families, and make it easier for young people to buy homes, cars and start families if they have less debt when they graduate.

Last week, the Pennsylvania State System of Higher Education, which includes California University of Pennsylvania, announced a plan that would allow some campuses to experiment with their tuition rates. We can only hope those experiments will eventually lead to lower tuition – and less debt – for all students.



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