If you’ve watched any of the 2020 debates, you know that everyone has opinions on how to address the rising cost of college. Here’s your Skimm on how college got so expensive, the ripple effect on society, and the solutions on the table.
We’ll get straight to the point: college can be expensive.
Colleges in the US date back to the 1600s and 1700s, when colonialists were trying to make sure people around them were down with G-O-D. Those first colleges – including Harvard, William and Mary, and Yale – were founded on the basis of religion, in order to prep students for things like life in the ministry. But as the population grew throughout the late 18th and 19th centuries, hundreds of schools opened, including the first public colleges.
Ok bring me into modern times.
Roger that. College enrollment skyrocketed in the 20th century, especially after WWII, when the GI Bill made college affordable for veterans. Millions flooded the higher education system. More colleges started opening in order to meet demand. Plus the federal gov started giving out loans, making college even more accessible. In 1980, a four-year college cost the equivalent of less than $10,000 a year on average in today’s dollars. Today, it’s more than $23,000 a year.
Thanks for reminding me that I have thousands in student loans. WTF happened?
Good question. We’ll break down some of the specifics in a sec, but essentially college tuition rates passed go, collected way more than $200, and have been outpacing inflation for decades. Wages haven’t kept up with these increases and states have rolled back funding for public universities. Meaning two things: 1. Heading to (or staying in) college is too expensive for some Americans or 2. Students and their families are taking out loans in crippling amounts.
How much are we talking?
Today, more than 44 million Americans have student loan debt. Students who take out loans graduate with an average of $30,000 in debt.
Excuse me while I go cry into my pillow.
We know. But here’s what’s driving people to continue chasing that toga party life: College access may help expand the US economy and improve social mobility. There’s evidence that more educated workers are more productive. Research shows that when kids from the lowest family income bracket get college degrees, they are over four times more likely to move out of that bracket. Studies show that Americans with college degrees on average earn 84% more than those with just a high school diploma, adding up to about $1 million over the course of their lifetimes on average.
Is there a but?
Kinda. The key words here are ‘on average.’ A quarter of people with college degrees don’t earn any more than the average high school student. One-third of college grads are underemployed (not making full use of their skills) and around 13% of recent grads are in low-paying jobs.
The Big Issue
Drum roll, please...cost. The US spends more per college student – about $30k per person per year – than almost every other developed country in the world. Most of that money goes to things like staff and faculty. But that fancy new dorm that looks like a high-rise apartment and the all-you-can-eat dining hall don’t pay for themselves either.
Why would college be so much more expensive in the US?
There’s some debate around that and it varies depending on the type of college (public, private, non-profit) we’re talking about. Here are some common explanations:
Demand…In the US, getting a college degree can be like having a gold star on your homework for life. Data show that on average, degree-holders bring home a lot more bacon than people who didn’t go to college. Enrollment has ticked upwards for decades, and that growing demand has encouraged some colleges to compete for students by offering fancy amenities like great housing and recruiting highly-educated faculty that require high salaries. But it’s more than that. US colleges have increasingly added non-teaching staff to their payrolls – people like sports staff, career counselors, and admissions officers whose work goes towards boosting a school’s reputation.
It’s worth noting, demand here goes both ways – families are paying up for things like test prep, and even allegedly resorting to bribery – to try to help their kids get into the college of their dreams:
States doing some belt tightening…Most Americans go to public universities, which rely on state funding. Many states have been slashing higher education budgets for decades, but things got especially bad after the 2008 recession, forcing colleges to increase tuition to make up the difference. The trend has shifted more of the burden of paying for college onto students, leading them to take on more debt. Which brings us to...
Federal aid itself...Most full-time students receive some form of financial aid. But one theory is that federal aid is actually causing tuition to go up. It’s known as the Bennett hypothesis. The idea is that colleges raise tuition knowing that most students will get some form of aid to help pay for school. This hypothesis is controversial because it’s been studied for years with a range of results. Some studies have confirmed it. But others have found little to no causal relationship between federal aid and tuition.
There are a range of opinions over what to do about the growing cost of college. One idea is to make public college tuition-free:
There’s a similar debate going down over student loan debt:
The escalating price tag of higher education has a lot of ripple effects. First there’s…
Student loan debt: In all, an estimated 45 million people carry student loan debt. The majority are young (in their 20s and 30s), but a growing number are in their 60s and above, which could be as parents take out loans for their children. If you’re dealing with student loans, we've got tips for how to pay off your debt:
But this brings us to...
The economy: The impact of all this debt is enormous – borrowers collectively owe around $1.5 trillion. That’s more than all credit card debt and all auto loan debt. Many see this as a drain on the economy: student loan debt is forcing younger generations to put off buying a home and preventing them from starting businesses of their own. They’re also delaying life milestones like getting married and having children, which could mean they spend less on goods. These are all important factors for a healthy, growing economy. Younger generations are also saving less for retirement, which could spell financial disaster down the road. The situation is especially dire for...
Students from low-income backgrounds: The ones who stand to benefit the most from a college degree can’t afford to stay. More than a quarter of all low-income students who attend a four-year institution reportedly drop out by the end of their second year. Many drop out because they struggle to stay in college while working part-time to fund their education. Of the students who drop out of college, more than half reportedly do so because of the cost.
I believe it.
The impact of dropping out can be financially devastating. Without the wage bump from a college degree, millions struggle to pay off their loans, and end up defaulting on their debt. Those who default are in especially vulnerable economic situations – not only are they making less than their college grad peers, but the government can now withhold part of their paycheck or tax refunds as well as part of their Social Security to repay the debt.
Many have long thought of the US as a land of opportunity, where everyone has a shot at a more prosperous life if they invest in their education. But in recent decades, a college investment has become significantly more expensive. It’s impacting students in different ways across a variety of income brackets, threatening our very notion of the American Dream.
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