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Sunshine State News: Student Loan Volume Grows as Additional Options to Pay for Higher Education Dwindle

Thursday, June 28, 2012

By: ED MOORE, PH.D. | Posted: June 28, 2012 3:55 AM

There is a strong link between economic mobility and education that still remains, even in these toughest of times.

There is also a strong link between the values of our homes and how we perceive our economic futures to be. Each is intertwined for the late baby boomer generation as they seek ways to make sure their children have educational opportunities and the potential for economic mobility in their lives.

Floridians didn’t need to have the Federal Reserve tell us that we led the nation in reduced net worth. You feel it every day. You know you can’t sell your house for anywhere near what you had planned on doing one day down the road. If you own a home in many areas of Florida you are likely locked into your current job because relocating and selling your largest asset is tough to do when you are underwater. You also would not be alone as it is estimated that more than 50 percent of homes in Florida are underwater.

Working longer is the new norm. Retirement is something to postpone and 70 is the new 60. It is as if Ben Franklin’s Poor Richard’s Almanac planned this life all along by writing, “Be always ashamed to catch yourself idle,” or “God helps those that help themselves.” You just didn’t know you would be working to “help yourself” well into your 70s, just to find yourself back where you were in the ’90s.

A direct relationship exists between the drop in home values as an asset and the controversy about the increase in the total amount of funds borrowed for school loans. Looking only at the total without analyzing the factors that got us there, is much like a group of blind men describing an elephant; reality is much different than surmised at first touch. Three primary factors have driven this huge increase.

First is the huge rise of thousands of people heading to college for the first time to better prepare for the more challenging job market. Second in influence is the collapse of the housing market and the relative inability of families to use home equity financing for higher education financing.

What you do not have in the bank and do not have in an asset you can borrow against is now borrowed from a third party in the form of school loans. Additionally, several years ago the federal government essentially became the company store for student loans because they squeezed out most private lending, becoming the third factor in driving up loan volume.

Couple these three factors together and there is no surprise that loan volumes have grown. However, the average loan upon graduation is still only slightly more than $20,000. Graduating students who can find employment, which is a topic for another column, will have little problem paying the loans off over time. They chose to borrow to invest in themselves, taking personal responsibility to leverage for a better future.

Earning a degree creates a lifetime of economic opportunity. They will be less likely to be unemployed, even in bad times, and more likely to be prepared for any opportunities that come their way, as well as the growing trend of having to work years after the traditional retirement age.

Poor Richard also said, “It is hard for an empty bag to stand upright.” Floridians who pursue post-secondary education are taking the personal responsibility to fill their bags and in doing so will know they face a future where standing upright will be their constant normal. Good jobs are the issue of focus for Florida. A secure economic future requires it.

Dr. Ed H. Moore is president and CEO, Independent Colleges and Universities of Florida.

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