One of the largest epidemics that millennials are currently facing is, you guessed it, college debt. We all either have it, will have it or have heard of it. There are currently an estimated 44 million student loan borrowers with nearly a $1.5 trillion student loan debt total in the country. In the 2015-2016 academic year, the national average yearly cost for a public four-year university was $19,000, while the costs for a private university was over $40,000. Averaging both private and public school figures, the cost of attendance to a four-year American university was a whopping $104,480. Compared to the same four-year degree in 1989 which cost $26,902 ($52,892 adjusted for inflation), the cost of a four-year degree doubled, even after inflation adjustments. Over that period, the cost of a four-year degree increased 2.6% every year. Meanwhile, over that same amount of time wages increased only 0.3% every year, from $54,042 to $59,035 from 1989 to 2016. That’s right, the cost of attending college increased nearly eight times faster than income. It is this discrepancy that is hugely responsible for the average of $33,654 of student loan debt that many students graduate with. These statistics are troubling considering that student loan debt often becomes an obstacle for graduated students attempting to pursue their dreams and accomplish their life goals.
So why exactly is college so expensive now, you ask?
First, more people are wanting to go to college. Like I learned in my one and only high school economics class, increasing demand coupled with relatively steady supply results in skyrocketing prices. Despite the fear of failure in life from not attending a postsecondary educational institution, the return on investment from a college degree has actually fallen precisely because of the increased prices of attendance. Additionally, another effect of the higher costs of attendance is the fact that students are borrowing more money.
On that note, there are theories that suggest financial aid causes increases in tuition. The Bennett hypothesis, named after the former education secretary, states that “knowing that students will get this financial-aid money, the university raises fees and takes advantage to capture that themselves.” Although this is a highly debated political topic, there is some compelling evidence for the hypothesis. For instance, a statistic from the Federal Reserve Bank of New York shows that for every new dollar of federal student aid, tuition is raised by 65 cents.
Another reason for increased tuition prices is that state funding cannot keep up with student enrollment. Logically, the less the state pays, the more the student pays. This is particularly impactful for the 80% of American students that attend public universities. Studies have shown that tuition rates are flat when state financial support is steady or increasing. However, when state support declines, tuition goes up. More specifically, the significant numbers are those of state support per student, which is what has been decreasing as enrollment increases.
To accommodate for these increases in enrollment, colleges need to recruit and pay more professors. Some possible solutions for this particular problem would be to have larger classroom sizes, less full-time professors, and more adjunct teaching faculty. However, because these options are highly unpopular with parents, students and the general public, schools have no choice but to increase their tuition to pay their professors. An estimated 30% of a college’s budget is dedicated to paying their staff and providing them with health insurance and other compensations.
Lastly, another large contributor to the rising college costs is the increase of non-instructional student services. Services such as extra academic support, counseling, healthcare, fitness centers and entertainment are becoming increasingly more popular and demanded in institutions of higher learning across the country. Once a university begins to offer such services, they are reluctant to take them away in order to maintain their members’ satisfaction. What many people don’t realize, however, is that all these services cost an abundance of money, and it is coming from their own pockets.
Is the cost of college worth it?
While it is true that the return on investment for college has fallen, and that the advantage of a degree is less than it was 10 years ago due to the high cost of attendance, many would still argue that college is a good investment. Annually, those holding a bachelor’s degree make about $32,000 more than those whose highest degree is from high school. This is a substantial difference. Furthermore, college is a crucial time for personal development, to meet lifelong friends, to find and develop passions and to create some of the best memories of your life. The key is to pick a school that fits your academic and personal desires, as well as your wallet.
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