Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 28, 2012

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

The student loan industry has received a lot of negative attention lately. The younger generations feel imprisoned by what they see as nothing more than corporate greed, while economists are growing uneasy watching the nation’s total student loan debt swell into what they believe may very well be the next financial bubble. Given the sheer amount of animosity festering amongst the lower- and middle-class towards the education system, college degrees, and the lack of jobs, it comes as little surprise that President Obama has brought this issue up time and time again in recent speeches.

But the Washington Post recently hosted a very interesting article that takes a unique approach towards this student loan issue—one that takes our materialistic desires and pits it right up against how we value our education. Raynard S. Kington, president of Grinnell College in Iowa, asks us all to consider the question, “Are car loans and college loans so different?

The Price of a Car

Kington begins by prompting everybody to think about their car. According to recent Federal Reserve data, Americans who took out car loans to finance a vehicle borrowed an average of $28,000.

As an interesting side note, student loan protestors don’t seem to have a problem with these expensive auto loans. Perhaps it’s because they can see and feel the value of their vehicle, but don’t necessarily see and feel that same value in their college degrees. Then again, it’s difficult to see any value in an education when unemployment and underemployment is so high.

Keeping that average amount in mind, Equifax reports that currently over 1.7 million new auto loans are originated every month. Economists and experts see little to no problem with that though.

In fact, recent media coverage has conveyed this information is a very positive light, making the claim that such activity is boosting our slumped economy. Be that as it may, car debt and college debt are very similar, at least in terms of numbers, Kington argues. Americans tend to go into roughly the same amount of student loan debt to attend a private four-year college as they do to purchase a new vehicle. But the differences between the two types of debt are vast: as soon as one purchases an automobile and drives it off the lot, its value decreases substantially, whereas as soon as one earns a college degree their lifetime earnings increase by an average of $241,000 to $1,090,000, depending on one’s area of study.

That’s one notable difference between the auto loans and student loans: their true value.

The Quality of a College

But the auto industry has something to teach the world of student loans as well. The lesson that can be learned is one about the subject of quality. The more money one pays for a vehicle, the better quality that vehicle will be. Usually the expensive automobile looks better, performs better, and is made better. Unfortunately, the same analysis isn’t necessarily true for education.

The example used by Kington is the Ford F-150. Ford can produce millions of these trucks and they will all wind up nearly identical. Every person who purchases an F-150 can expect it to look, perform, and be worth the same amount as their neighbor’s F-150. The quality can be both seen and measured.

However, two different F-150 owners can also pay the same amount for an education, but attend different institutions, and wind up with wildly different results. Whether a student’s particular field of study is worth little in the real world, or whether the college’s courses and accreditation is questionable, the fact remains: the quality of a college is difficult to measure.

Not only is quality difficult to measure, it’s a problem that’s difficult to fix. If we begin to cut funding, force colleges to adhere to certain standards, or require them to put “skin in the game” and guarantee their degree’s worth to some extent, then student loan costs may very well shoot even higher.

In the worst case scenario, colleges’ guaranteeing the quality of their degrees will become exclusive educational Mecca’s, where only the rich can attend (which, despite what some may argue, we are not yet experiencing a scenario such as this… everybody can currently attend college through some means or another). Kington warns that developing a value-based perspective of our educational system may produce a two-tier system where the wealthy get educational Lexus’s while the poor get Yugos.

But, as President Obama said in a speech in Ann Arbor, “We want you [students] to know how well a car stacks up before you buy it. You should know how well a college stacks up [too].”

A happy medium needs to be found. If we’re to become the top educated country again (currently we sit in fourth place), we need to protect our students. But similarly, our students need to be educated about student loans so that they can borrow responsibly and treat their educations’ funding with as much thought, obligation, and pride as they do their automobile or other material purchase.