The systemic failure that is student loans
Cole Hicks
As we near the beginning of 2021, we are approaching a deadline for high school seniors to choose where they will spend the next couple years of their lives. While weighing out all of the options and attempting to make a decision, students are realizing just how daunting student debt can be, but what else are these younger generations going to have to adapt to and what, or who, is to blame?
In the past 20 years, there has been an increase in nearly 5.1 million freshmen students a year. College is more encouraged than ever before because without it, a person is considered to be unsuccessful in today’s society. However, are accommodations being made for an ever growing college population? Despite the necessity, not really. First, student debt is a prevalent topic, both for people in and out of school and within the U.S. government. As pictured in the chart at right, student debt is the fastest growing form of debt in America, with a rough 100% difference between it and the subsequent. What are the reasons for this dramatic increase? Experts are saying that an increase in demand for a college education has “made a degree less advantageous”, meaning students are no longer set for the rest of their lives with only a bachelor’s degree.
Another potential reason behind this increase is the consistent increase in the American inflation rate. Generally, the average inflation rate trends upwards, with the most drastic increases in the 1960s and 1990s. Despite these increases being decades ago, we are now seeing the full impacts of inflation with other additional impacts stacked on top. Another issue is minimum wage. While the cost of college has consistently risen in the past 10 years (see salary VS university chart), minimum wage has not, which impedes a graduate from being able to pay off student loans in a timely manner. Therefore, students become more dependent on government subsidized loans, and some economists theorize that this dependency contributes to the increase. If the government is going to provide money to the average student, universities attempt to price gouge to get more money, seeing if the government will eventually pay even more to the universities.
As we continue to see an increase in student loan debt, we are constantly reminded of the market failure that is government subsidized loans. Not only is subsidized loans a service that is not necessarily distributed fairly to those that need them most, but there are very significant flaws in this system. The system was not created in an effective way, nor should universities be allowed to price gouge the way they are. An effective solution would be a price ceiling on the cost of college and a better government system that provides fairer loans and rates. We have only seen an increase in the number of students applying to college, but the more the student loans cause economic disadvantages that affect a person for decades, we may see a decrease. We can’t afford a negative externality such as this. With a lesser amount of college graduates that means a less progressive and complex nation which would be a systemic failure that would fall at the foot of Capitol Hill.
Works Cited
Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse.
Hoffower, Hillary. “College Is More Expensive than It's Ever Been, and the 5 Reasons Why Suggest It's Only Going to Get Worse.” Business Insider, Business Insider, 26 June 2019, www.businessinsider.com/why-is-college-so-expensive-2018-4.
Rahim, Zamira. “Why Gen Z Will Be Hit the Hardest by the Financial Fallout from Coronavirus.” CNN, Cable News Network, 13 May 2020, www.cnn.com/2020/05/13/business/coronavirus-generation-z-jobs-intl-gbr/index.html.
“Student Loan Debt Grows 5x Faster than Wages.” Life Benefits, 21 Jan. 2020, www.life-benefits.com/growth-of-student-loan-debt-5-times-faster-than-wages-over-past-decade/.
While I believe that society is normalizing not obtaining a college degree (our school actually really supports students looking to go into the trades) I found your article to be super compelling. I just wrote the U2 assignment on raising the minimum wage and a huge argument against raising the minimum wage is that many minimum wage workers are teenagers. While that vague statistic is false, I found it super interesting that teenagers need the minimum wage to be increased as well! To be honest, I don’t know a lot about the subsidized loan system but I found it interesting that you claimed it was ineffective. Clearly the many factors that you stated such as an increase in the college population, inflation, and a stagnation of the minimum wage all factor into the student debt crisis. It is unfortunate the a college degree is seen as mandatory to be successful, yet so many student are set up for failure right as they leave college.
ReplyDeleteI think what's most startling about this is that it's not even private universities that have the highest increase in their price, it's the public ones, which were designed to be a cheaper alternative. I definitely agree some sort of price ceiling should be set for these institutions, but I also wonder if the colleges and universities will cut costs in other ways instead of taking from the highly paid administrators and presidents of these institutions. At most prestigious universities, and even some not considered prestigious, financial aid is a major cost to create a financially diverse student body. With colleges having to cap their tuition I am curious to know if these institutions will give out less financial support who especially need it.
ReplyDeleteThe topic of student loans is a complicated issue, because it’s not something that can be solved in an objectively correct way. As the demand for college goes up in recent years, it’s going to cost more and more, as a tactic for college administrators to make more money from it. They most likely realise that college is thought of as a necessity to kids’ futures, as you’ve stated, which is only a bad thing for us. After all, what kind of goods and services are considered necessary? Inelastic goods and services; ones that youth will continue to put their money into no matter how expensive it becomes. Even considering inflation, the absurd prices haven’t stopped millions of people from applying to colleges and hoping they get admitted like their life depends on it. This is likely the reason the trend in the chart will continue in the way it’s going; nobody will stop paying for college due to it being an inelastic service.
ReplyDeleteThis was a great topic to write about as it closely relates to a lot of us at PHS. It's so saddening that we've come to this point where individuals are terrified of college due to the financial debt it puts them in, and nobody should have to worry about being in debt in order to get a "proper education" and be successful in the future. It's absolutely absurd that the minimum wage hasn't been raised since 2009 (because it'll "ruin the economy") yet tuition prices have increased by roughly 25% in the past 10 years, meanwhile they paint this narrative that college is what you need to be successful. So in other words, they don't give a damn about your well being or financial stability but rather the money that they benefit from the situation. That is beyond problematic and flawed and I definitely agree that we need a price ceiling on college and a better government system that provides fairer loans and rates.
ReplyDeletePaying for college, in my mind, and I’m sure in many others’ minds, seems impossible. For all four years, the cost is an incredibly high number and some of our parents aren’t able to help us pay, so while doing all the math and adding up the numbers and looking at our $8.00 an hour paycheck every two weeks, it seems like somethings missing. I knew before that the price of college was increasing unproportionally, but after doing some research of my own and reading this blog post, it’s incredibly frustrating to see. I remember writing something about this in the past couple weeks and finding out that while minimum wage has seen an increase of somewhere under 10%, the price of college has seen an increase of over 100%. It makes students sit and wonder how anyone has let this happen. College shouldn’t be something that you feel like you’d never be able to pay off and it shouldn’t be something so incredibly daunting that you even consider not going. College should be a right of passage after high school for anyone who wants to go. Knowing that some colleges are over $100,000 for four years while other countries have free college is embarrassing. The student loan system is a complete failure and I agree with everything written in this blog and for me it serves to prove how awful of a situation this system has placed us in.
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