The following is an excerpt from a longer essay by Jeff Williams on student debt, which can be read by clicking here.
[…] Student debt is not the result of the recent financial crisis or a blip in the economy, but a long-term development from a constellation of policies beginning in the 1980s in the United States. In particular, it is the result of the deregulation of credit and personal loans implemented under the presidency of Ronald Reagan, on the one hand, and of the defunding of state and federal institutions, on the other. (College tuition was still relatively low and largely state-funded in the U.K. until the past decade, although the Cameron conservative government has quickly tried to catch up to the U.S. model.)
“Part of the reason that debt has increased so much and so quickly is that tuition and fees have increased at roughly three times the rate of inflation.”
The average undergraduate student loan debt in 2010 (the most current figures available) was $25,250; given average increases, one can extrapolate that it will rise to about $27,840 in 2012, at the time of writing (Project on Student Debt, “Student Debt,” 2011). If one adds personal charge card debt, averaging $4,100 in 2008, two-thirds of American students receive not only a diploma but a debt burden of about $32,000 (“How Undergraduate Students,” 2009). To gain a sense of its dramatic ascent, in 1982 student debt averaged $2,000 (about $4,450 in 2011 dollars), rising to $9,200 in 1992, and $18,900 in 2002 (Digest of Education Statistics).
Also consider that many people have significantly more than the median—in 2008, 25% of federal borrowers have over $30,000 in student loans and 14% over $40,000 (NPSAS, 2010). Added to federal loans are private loans, which have ballooned since 1996, when 1% of students took them, to 14% in 2008, and which have risen in total to $17.1 billion in 2008, a disturbingly large portion in addition to the $68.6 billion for federal loans that year (Project on Student Debt, “Private Loans,” 2011). On top of that, consider as well that graduate student debt, for over 60% of those continuing their educations, more than doubled in the past decade, to a 2008 median of about $25,000 for those with Masters, $52,000 for doctorates, and $80,000 for professional degrees (NPSAS, 2010). That is on top of undergraduate debt. Lastly, these figures do not include the debt that parents take to send their children to college, through federal PLUS loans (Parents’ Loans U.S.) or through other means, such as home refinancing or personal equity.
This graph illustrates the rise of student debt, compared to the rise in the average price of a domestic car in the U.S. (“Average Price,” 2008). Note that the average price of a car rose by a factor of about 2.2, near the rate of inflation (recall that $2,000 in 1982 is equivalent to $4,450 in 2010 dollars), whereas student debt rose by a factor of 14!
The American system of federal student loans is a relatively new invention. The Guaranteed Student Loan (GSL) program only began in 1965, a branch of Lyndon B. Johnson’s liberal “Great Society” programs intended to provide supplemental aid to students who otherwise could not attend college or would have had to work excessively while in school. It was altruistic, oriented toward helping poor, often minority students to attend. In its first dozen years, the amounts borrowed were comparatively small, in large part because college was comparatively inexpensive, especially at public universities. From 1965 to 1978, the program was a modest one, issuing about $12 billion in total, or less than $1 billion a year (Lipsky 1994, 114-118). By the early 1990s, the program grew immodestly, jumping to $20 billion a year, and now it is over $100 billion a year, accounting for the majority of aid that the federal government provides, far surpassing all grants and scholarships.
Part of the reason that debt has increased so much and so quickly is that tuition and fees have increased at roughly three times the rate of inflation. Tuition and fees have gone up from an average of about $1,500 in 1982 to about $10,000 in 2002. The average encompasses all institutions, from community colleges to Ivy League universities, like Harvard, Yale, Princeton, and Columbia. At private universities, the average jumped from about $4,000 to $24,000. The more salient figure, tuition, fees, room, and board (though not including other expenses, like books or travel to and from home), has gone up from $3,489 in 1982 to $7,077 in 1992, to $11,380 in 2002, and about $17,600 in 2012 (Digest of Education Statistics).
This has put a disproportionate burden on students and their families—hence loans. According to the Census Bureau, the median family income in the U.S. was $23,433 in 1982, $36,573 in 1992, $51,680 in 2002, and about $61,000 in 2012. Beside the debt that students take on, there are few statistics on how much parents pay and how they pay it. From the 1990s through the mortgage crisis of 2008, it became common for parents to finance college through home equity loans and home refinancing. While it is difficult to measure these separately, paying for college no doubt forms part of the accelerating indebtedness of average American families.
There used to be a quaint saying that “I’m working my way through college.” Now it would be impossible to work your way through college unless you have superhuman powers. According to one study, during the 1960s a student could work 15 hours a week at minimum wage during term and 40 during the summer and pay his or her public university education; at an Ivy or other expensive private college, the figure rose to about 20 hours a week during the school term. Now, one would have to work 52 hours a week all year long, even during school, at a state university; at an Ivy League college you would have to work 136 hours a week all year (there are 168 hours in a week) (Mortenson 2003). Thus the need for loans as a supplement, even if a student is working and parents have saved. In addition to the steep rise in debt, many students are working more than 20 hours a week during school, as Marc Bousquet has tirelessly pointed out in How the University Works and elsewhere. You don’t need a Ph.D. to realize that neither debt nor excessive work during school cultivates good educational conditions.
The reason tuition has increased so precipitously is more complicated. Sometimes politicians blame it on the inefficiency of academe, but most universities, especially public universities, have undergone financial cuts and cost-saving measures over the past twenty-five years. Tuition has increased in large part because there is significantly less federal funding to states for education, and states fund a far smaller percentage of tuition costs. In 1980, states funded nearly half of their universities’ costs; in 2000, they contributed only 32%, and it is certainly less now (Heller 2006: 18; Lyall and Sell 2006:11). Universities have turned to a number of alternative sources to replace the lost funds, such as “technology transfers” and other “partnerships” with businesses, and seemingly endless campaigns for donations, but the steadiest way, one that is replenished each fall like the harvest, is through tuition.[…]