North Carolina has some of the best colleges and universities in the country. Four schools rank among the top 100, according to a Wall Street Journal study of U.S. colleges. But North Carolina also has some of the worst numbers on student debt. It shot up by 285% in the last decade, the second highest increase of any state.
According to last month’s report by the Center for Responsible Lending, approximately 1.2 million North Carolinians now hold $44 billion of student debt, and more than one in six are “severely” delinquent on their loans.
Those numbers should spark concern among North Carolina lawmakers because high levels of student debt can harm our economy. That’s not a hypothetical worry. Research has repeatedly shown that student loan holders delay home purchases, put off marriage and postpone families — all events which fuel consumer spending. The Federal Reserve Board found every $3,000 of debt will result in a one year delay in purchasing a home. Since almost 60% of North Carolina’s 2017 graduates left school with an average debt of $26,000, that’s close to a nine-year delay.
Reluctance to take on debt has encouraged some high school students to forgo a college education. That’s a mistake. More education generally leads to higher paying jobs. In fact, those who take loans to get a college or associates degree are more likely to become homeowners than high school grads.
But the data does raise questions for North Carolina. Why is student debt growing so rapidly here?
Part of the answer, according to the Center for Responsible Lending, is that the legislature cut inflation-adjusted funding per student by almost one-fifth while tuition at North Carolina’s public colleges by 150%.
Another major driver of North Carolina’s debt? For-profit schools. Tuition at for-profits is higher than at North Carolina’s public universities, while completion rates are markedly lower. In fact, completion rates at North Carolina’s for-profits are the lowest in the nation.
Students who do manage to graduate from for-profits carry substantially more debt than public school grads, and they’ll earn less, so they’ll have a harder time paying off the loans. National data shows some who earn certificates from for-profits earn no more than those with just a high school degree. So it’s not terribly surprising that the three-year default rate for grads of North Carolina’s for-profits is almost double that for public university alums. That bad credit history will affect their ability to get jobs, apartments, and move forward with their lives.
Sadly, earlier this summer the U.S. Department of Education decided to abandon a rule requiring schools to report on the income and debt of their graduates, even though that information could help students make better choices. For-profits argued students would have been the losers, but one study found that when for-profits close, students enroll instead at lower-cost, higher-value community colleges.
With the federal government abdicating its responsibility, Raleigh needs to step up. It must shut down schools that drive up delinquency rates while granting essentially worthless degrees.
It must also face the fact that cutting support for our public institutions has not controlled the growing cost of education, but instead helped create a problem that can injure our economy. At the very least we need an honest debate about increasing support for our schools.