Crying About Student Debt? What Else Are They Spending On?

March 10, 2014

Recent news on student-loan debt shows that the average borrower graduates with a total debt of $29,400.

According to other recent news, the average price paid in December for a new car in the United States was $32,890.

I live in a town with three bricks-and-mortar campuses, all surrounded by parking lots. As I visit one campus or another I am regularly impressed by the sea of shiny cars in the student lots—all of them looking every bit above average. Oh, now and then there is a slightly less flashy model, but I assume that it belongs to some faculty or staff member who couldn’t find any other parking spot.

Student-loan debt is a hot topic across the nation—it is a matter for federal action, the subject of Congressional hearings. I haven’t seen much coverage of student debt for automobile purchases in any mainstream media, but let’s compare those two sources of debt for college graduates.

Student-loan debt is pictured as a crushing burden that requires immediate remedy. But consider the outcome: The college degree, whatever the major, has the potential of increasing in value from the original price. Studies continue to show that a degree brings greater lifetime income opportunities.

That long-term "market value" is interesting but doesn’t begin to include the added value provided to the degree holder with regard to quality of life, to the nonmonetary advantages the degree can bring. So an education provides a better life and an increased ability to appreciate that better life. Those value-added elements are important and can build through a lifetime.

But let’s stick with just hard-cash market price in comparing the college debt and the car debt.

The price of the new car includes only the vehicle itself. A tally of the total price of that car would include the per-mile operating costs that increase as the car ages, the cost of insurance, etc. We will focus on average sticker price, just to be more than fair to the car-debt total. But we cannot put aside the quick depreciation of the car as compared to the long-term appreciation of the degree. Once you drive your new car off the lot, it immediately sinks in value. It is "used," and it has experienced immediate depreciation.

That’s a primary difference in the two items that bring the similar debt levels. The more you use the degree, by using the education it represents, the more valuable it becomes. The more you use the car, the lower its value. The education ultimately, when done right, gathers facets that brighten its shine. The car, in almost every case, ultimately becomes scrap metal.

Sadly, most Americans will not buy a second degree, although few buy only one car in their lifetimes. So, the new degree comes with four to six years of campus experiences, potential for enhanced lifetime income, opportunity for improved quality of life, and carries a lifetime average debt of $29,400.

The new car, which includes added operating and upkeep costs and liabilities, depreciates finally to a point of being all but worthless and comes with an average price of $32,890. And the debt on that car generally has a term of three to five years. Again, this is only one of several cars to be bought in a lifetime.

And we worry about the crushing burden of student-loan debt for the degree?

Perhaps another day I’ll comment on student debt from annual Spring Break celebrations in this or another country. Then there is the cost of regular purchases of smartphones, tablets, laptops, and all that goes with them—all required by modern students, or so they think. I suggest that we begin to get real about what we spend and about the long-term value of each decision.

It would be a good thing if somewhere in freshman orientation somebody said something to the students about the wise use of money, and about what really is worth going into debt for. Then, at the graduate level, the comment could be on the difference between a purchase and an investment.

Meanwhile, sing me no songs of woe about crushing student-loan debt.

Robert L. Burns is a retired 
president of Peru State College 
who now lives in La Crosse, Wis.