Ever-Growing Tower Of Student Loan Debt
By Aiden Messet and James Murray | Staff Writers
There is unlikely to be a single college student in our entire country who is not irked by the amount of debt they will soon find themselves in upon graduation.
Student loan forgiveness has been a hot political topic of late, and understandably so. According to research conducted by SoFi, an American online personal finance company that specializes in student loan financing, the average cost of tuition has increased by more than 144% (post-inflation) since 2001.
During the 2000-2001 school year at The University of Scranton, tuition for a full year of attendance cost $19,330. 20 years later during the 2020-2021 school year, we paid $46,684 for a full year of tuition which is a 141% increase from 2001.
By comparison, the inflation rate of the U.S. dollar since 2001 was 62.34%, which means tuition prices have increased at more than double the rate of inflation since 2001. How could this be?
Many of us have heard our college educated parents boast about how much lower their tuition costs were over two decades ago, but the nature of a college education has drastically changed since our parents attended. The college experience has rapidly shifted away from being solely about obtaining a degree and more about building a well-rounded lifestyle experience.
Dr. Satyajit Ghosh, professor of Economics and Finance at the University of Scranton, attributes rising tuition costs partly due to “infrastructure development and better amenities-ranging from state-of-the-art classroom buildings, research facilities to attractive sports and athletic departments all of which are very costly.”
Right here at The University of Scranton, we have access to high quality science laboratories in LSC, an authentic looking mock Wall Street trading floor, sporting facilities treated with artificial grass, nationally ranked dining services, health and counseling services, a well-funded campus police department, and an endless list of amenities that stretch far beyond the basic provision of a degree.
Any of our students with parents who attended The University of Scranton are likely to hear about how little they recognize our campus during their family campus visits. Universities like ours in Scranton did not used to face such pressure to provide such a large number of amenities to students as they do now, which partially explains why prices have increased so drastically from our parents’ day.
Clearly, an increasing need to provide higher quality amenities and classroom features has contributed significantly to rising tuition costs over recent decades. However, this is only part of the explanation.
All of us have likely suffered through the dreaded FAFSA applications and semesterly updates of our income status for our student loans. In fact, without FAFSA, many of us would have never been afforded the opportunity to attend university at all.
In 1993, the United States government passed the Student Loan Reform Act shortly after creating the Free Application for Federal Student Aid (FAFSA) program in 1992, both of which allowed the federal government to begin to issue tuition loans to student directly.
Prior to this legislation, students had to apply for tuition loans from private banks which meant much higher interest costs, smaller loan sizes, and much stricter lending standards. After the passing of the Student Loan Reform Act and FAFSA in the early 1990s, students began to see a much easier access to loans to attend college with a corresponding decrease in the interest they paid to borrow for education.
This may seem like a tremendous development since students from lower-income families can now attend university and obtain an education. However, this relaxed lending policy has been somewhat detrimental.
For instance, a 2020 study by the Congressional Budget Office found that “Between 1995 and 2017, the balance of outstanding federal student loan debt increased more than sevenfold, from $187 billion to $1.4 trillion (in 2017 dollars).”
For our non-business student readers, the basic laws of supply and demand state that an increasing amount of demand for a particular good or service increases the price of that good or service, since supply is somewhat limited in the short-term.
Ghosh accurately points out that “Since student loans are readily available, colleges may not feel the pressing need to control tuition hikes.” In other words, colleges can drastically increase their spending on amenities like science laboratories or sporting facilities and easily pass on the cost to students because of the extremely liberal lending practices being promoted by the FAFSA process.
Easily accessible student loan policies allow federal money to be thrown at kids just out of high school to encourage them to borrow money to attend college, no matter the cost.
FAFSA supported federal student loans and parent PLUS loans have significantly increased the demand for college educations and universities have aptly taken advantage of this by increasing on-campus amenities and hiking tuition costs without consequences in attendance numbers.
An increasing access to college educations for students in the United States comes with its downsides. An educated society is undoubtedly a crucial element of our country’s political and economic progress, but if our government continues to allow such relaxed lending standards for incoming college students, we may be putting a significant strain on our country’s future economic growth when our interest payments come due.
Not to mention, a relaxed lending standard for high school students looking to attend college may encourage a sense of disregard for the long-term cost of their education and an eventual dissatisfaction with their decision to attend college.
Unfortunately, the skyrocketing student loan debt present in this country will become unsustainable. Changes must be made to both the standards of federal student loan lending and to the financial education we provide recent high school graduates who are about to take on a lifetime of debt payments.