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Student Loan Crisis: Does Over $1 Trillion in Debt Prove that College is Now a Scam?

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First Posted: Jan 09, 2014 11:08 AM EST
College
College students walking. (Photo : Flickr / COD Newsroom)

American students are saddled with approximately $1.2 trillion in student loan debt. Tuition hikes, declining four-year graduation rates and a poor job market upon graduation makes paying off students loans a tall order. The college debt crisis is fueled by an insistence by parents and educators to go to college. But is college really the only way to a bright successful future, or can education be substituted by work and determination? According to The Institute for College Access and Success (TICAS), the average student loan debt amounts to a whopping $26,600, interest notwithstanding. Meanwhile, Forbes found out that two-thirds of 4-year college graduates have student loan debt to pay off.

For high school juniors and seniors dead set on attending college one avenue to explore is Federal Student Loans. Federal Students loans offer lower interest rates than private loans, like those offered by Discover, for instance. Yet $1 trillion of the $1.2 trillion in total debt is linked to Federal Student loans.

Facebook's first investor, PayPal co-founder and former CEO Peter Thiel, doesn't think that college is for everyone. That may sound hypocritical to those familiar with Thiel's educational background. After all, the visionary investor received two degrees from Stanford University, one of the most prestigious universities in the world and ranked fifth nationally by U.S. News and World Report. But regardless of Thiel's past he makes a very strong case for forgoing college by offering an alternative path to college. The common saying "put your money where your mouth is" applies to Thiel when he advises current high school students to steer clear of higher education.

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Thiel created The Thiel Foundation to encourage things like entrepreneurship among young people. The Thiel Fellowship, alternatively known as the "20 under 20 program", is one part of the The Thiel Foundation. The fellowship encourages innovation and entrepreneurship among young people. But the competition to get accepted into the Theil Fellowship is cut-throat due to the fact that the program awards $100,000 to those accepted. In order to qualify, the student has to cease being a student essentially.

Is it a good idea to give highly motivated young adults directly out of high school $100,000 in exchange for skipping out on the college experience? The once-in-a-lifetime program even has led to current college students to drop out.

Once accepted the fellows are responsible for creating a startup business venture. They are paired with mentors and exposed to ideas that simply cannot be achieved by just going to class. The following quote is prominently displayed on the Thiel Foundation website and sums up who the program is marketed too.

"Every tech story is different. Every moment in history happens only once. All successful companies are successful in their own unique way. It's your task to figure out what that future history will be," says Peter Thiel.

Another quote on the website, this time by Mark Twain, furthers Thiel's message.

"I have never let my schooling interfere with my education," said the late, great author Mark Twain.

Yet achieving the so-called american dream has always traditionally called for getting a college degree, along with marriage and a house with a cutesy white picket fence. Various studies show that those with a college degree make significantly more money over the course of their careers. College graduates also command significantly higher salaries (or more earning power) than their peers who only have a high school degree. Career mobility is one reason why Americans go to college. The thought process goes something like this: in order to make more money you need to spend more money. Sure, your non-college buddy may make a lot more than you for the first first year after high school, but you'll have the last laugh. This is nothing more than groupthink. The very same educational groups that argue about the importance of a college degree will probably not hire you come graduation because of staff cutbacks.

It's important to realize that nothing in life is guaranteed. Yes, colleges make blanket statements promising everyone an enriching future but, after all, they need to make money too. College may not be a scam, but it's certainly not the only option high school students should be looking into.

So are you thinking of attending college or not? In your experience is the value of a two or four year degree worth its sticker price? Share your thoughts in the comments section below.

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