There’s a famous Malcolm X adage: “Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” True to those words, millions of students all across the U.S. strive to achieve the highest echelons of education in the hope of securing a better future. However, over the last few decades, the issue of rising college education costs in the U.S. has been a thorn in the side of parents and students alike. Here’s a look at why college is so expensive and why the costs continue to rise.
Rising College Tuition Costs
Based on figures from the National Center for Education Statistics, the median annual cost of a four-year major in 1969 stood at $329. Today, a standard four-year course at a public school costs roughly $10,230. That means that in 50 years, the average cost of college education has increased by 3,009 percent. Therefore, the average American needs to make around $22,000 above the present annual median income to afford college.
Adjusting the average 1969 amount for inflation, the modern total equivalent comes to $2,323. Even with this inflation, the mean percentage increase lies at 340 percent. For private institutions, the rising education costs make for more dreary reading, as the prices drastically increased from $1,487 in 1969 to about $41,411 in 2020 for private schools. Adjusting for inflation in these private institutions, you get about a 243 percent increase, nearly two and a half times as much.
The Resulting Student Loan Debt
As the cost of higher education continued to rise, the median household income hasn’t been able to keep up. In the mid-70s, the average income per household in the U.S. was slightly under $13,000 a year. Today, that amount has increased significantly to $64,000 per year. While this increase indicates nearly a four-fold jump, the average annual cost of a private college education has increased from $2,000 to $31,000 in the same period.
The net effect of higher tuition costs has forced a lot of students to take substantial student loans to try and cover that difference. According to a report by the Federal Reserve Bank of New York, student debt rose for the 18th consecutive year as of February 2017. The average student debt stands at $37,172 per student, with roughly 2,858 dollars’ worth of debt accrued per second. According to Forbes, total student debt has hit an all-time high of $1.6 trillion, with 45 million borrowers nationwide.
Why the Massive Spike in College Tuition?
A handful of factors could explain the rise in college tuition costs, but perhaps the biggest catalyst is the huge number of students vying for a college education. Over the years, student enrollment in universities and colleges has risen steadily. According to the National Center for Education Statistics, undergraduate enrollment in the 18 years between 2000 and 2017 has witnessed a 27 percent increase. Higher enrollment has necessitated an expansion of federal financial aid programs to cater to the spike in student numbers.
There has also been a drop in financial support from state governments. For the ten years between 2008 to 2018, there’s been a cut of over $6.6 billion in state funding. Following the great recession, most colleges had to contend with notable cuts in funding. As a result, they reacted by raising tuition fees. Even though the economy bounced back, tuition costs remained high, escalating the financial burden on students.
The Impact of High Student Loans on Borrowers
Seventy percent of college graduates leave school with, on average, $38,000 of student debt. Paying off that debt could take anywhere from a couple of years to a few decades, based on your loan repayment terms. Students aiming to get their bachelor’s degrees to understand that they’re going to have to service their loans over some time, and that has an impact on their futures.
Buying a home is a lot harder. Some students opt to put marriage on hold or scrap the idea altogether. Doing so allows them to focus their time and energy on repaying their loans. The heightened burden of student debt also means that Millennials are less eager to delve into the business, given the financial risk associated with entrepreneurship. Economists argue that Millennials will have to save up almost double what Generation X did if they want to live comfortably post-retirement.
Handling Student Debt
Once graduation day comes and goes, the reality of student loans quickly becomes evident. Handling financial pressure requires a smart approach if there’s any hope of paying off the loan as soon as possible. Some students take advantage of the grace periods lenders offer, depending on the type of loan. These grace periods are an ideal time for graduates to better understand the terms of their loans. It’s also a good time to make a plan on how they intend to pay it back.
COVID-19 Relief
Following the COVID-19 outbreak, the secretary of education ordered the Office of Federal Student Aid to offer relief through suspended repayments and cessation of collecting defaulted loans. Interest rates were also set to 0 percent for 60 days. On August 8, 2020, President Donald Trump directed the education secretary to continue the previously mentioned measures until December 31, 2020. This was done to ensure to cushion graduates from the financial shock of the pandemic.
Some Semblance of Hope for Graduates
College degrees are an asset, paving the way for graduates to land potentially lucrative jobs, even in newer industries. With emerging industries cropping up each day, graduates are better equipped to fill these gaps. Having a college degree is likely to make a difference in securing distinct jobs that come with benefits such as healthcare and 401Ks. The U.S. Bureau of Labor states that college graduates earn, on average, 61 percent more than non-college graduates. For many students, this is the motivation for getting a degree.
In a Nutshell
Getting a college degree should be a great source of pride for any student out there. However, it carries its fair share of financial repercussions. For a lot of graduates in the U.S. today, the reality of student debt is an ever-present one. While debt forgiveness programs are a way to offer help to some, the most ideal, long-term solution would be to create more access to an affordable college education for all. Additionally, the increase in quality job training programs and alternative education options can help you advance your career or change careers. These programs are a great alternative for those who may be considering grad school but not sure if it’s worth it.
