Origins of Cost of Higher Education in the US?

[Elheru Aran]

Inspired by these comments in the 'prostitution to pay for higher education' thread:

What I DO have a problem with is the student loan racket, which is really just a credit card scam, only you can never settle an out-of-control debt with student loans. I'm also disturbed to see Britain copying something awful from the US.

Yup, that's the problem. Back in my day and even today where I live, students could pay for their education by working at various entry level jobs for not much more than minimum wage. You can pay your tuition by flipping burgers on summers and weekends if you had to.

This isn't true in the US, higher education is unaffordable unless
a) your family is filthy rich
b) you've got a massive scholarship
c) you've taken out a loan that makes you a debt slave for the next 50 years
d) you're dealing drugs or whoring yourself out

The system is completely broken and needs to be burned to the ground.

Thirty five years ago the amount you could borrow for college in the US was much more limited. Minimum wage went a lot farther. I paid off my student loans without much problem and got on with my life. Younger folks these days...? Not so much.

I'm interested in exploring why exactly higher education in the US costs so much. Costs in other countries are worth discussing as well if relevant (seems like the UK is having similar problems to the US in this regard).

My two cents: College athletics is a huge slice of the pie. Those stadiums aren't going to build themselves. Add in the cost of employing a host of coaches, trainers, building athletic facilities, giving the third-string football players free rides in exchange for a vague chance at professional sports stardom...

[Alyrium Denryle]

There are a few factors at play, in no particular order.

1) Decreasing state investment. The less the state actually funds higher education, the more students have to pay to keep the lights on in the university itself. This is true for the faculty too. The amount of grant money a professor has to bring in (because ~48% goes straight to university overhead) to get tenure in those rare tenure track positions that still exist is insane. I've seen people denied tenure after bringing in millions because they "didn't have a good enough track record with grant funding".

2) Increasing administration costs. In the Good Old Days, most admin positions (like the president of the university) were filled by faculty members on rotation. Now they're people with MBAs who cost millions per year, and they have underlings.

3) Facilities. I don't mean academic buildings or the student union and gym but the the vast array of other amenities including really swanky dorms and the construction of the same. These things increase tuition rates. This includes athletics.

[Tsyroc]

I don't know how true it is but I've heard many people talk about the rising costs of higher education in the US happening as pretty much anyone could get student loans. More money to pay for school so school charged more because the students "had" the money to spend.

One would think that if the students were getting their money's worth they wouldn't go deeply into debt for an education that isn't likely to aid them in paying off that debt, but this is the US. We like to have our stuff and think we are doing well limping along making minimum monthly payments.

[aerius]

The short answer is because they can. This is what happens when all parties involved are allowed to break every anti-trust and consumer protection law on the books and get away with it. Government funding cutbacks don't help but they're not the main driver behind the cost increases.

Back when I was born, student loans were pretty limited and more importantly, they were dischargeable in bankruptcy. If someone was dumb enough to hand you a large loan for a degree in finger painting and you end up flipping burgers and going broke after graduating, they're on the hook for the entire amount. You file for bankruptcy, the loan is discharged, you keep your degree, and the lender eats a loss. This is why banks and other financial institutions didn't hand out 6-figure loans like candy. If you were a student in a field of study where a degree has a high rate of return then they'll give you something to help get you through, provided that they think you'll have a decent chance of graduating and succeeding in your field. Student loans were therefore fairly small and hard to come by.

Since you can't get into college without paying for it with the money that you've saved up and/or been able to obtain with loans, the schools have to take that into account when setting their tuition costs. They may want to charge $90k/year but if no one can get their hands on that kind of money they can't sign up and the school goes broke. So the college needs to set the tuition at something that students can afford and that puts a cap on their available budget, which means certain things you might want like that fancy football stadium, a finger painting studies program, or a dedicated admin staff of MBAs ain't gonna happen. And as long as the above conditions are true the costs will remain more or less reasonable.

Problem starts when folks realized that there's a lot of money to be made siphoned off from students in education. If loans are more easily available, then more students can afford to go to college and schools can make more money from tuition. Which leaves that pesky problem of loans getting defaulted on or tossed out in bankruptcy. It's great for the schools if $20k loans are getting handed out like candy, they get their money and if the loan defaults or whatever who cares, they've already got their money. It's like selling a home, if I'm the seller, I don't care if your mortgage/loans default after the closing date, the money's in my account and clear, someone else can deal with the fact that you're broke.

But that leaves a bit of a problem for the banks & other parties making the loans, students can still default on their loans and if enough of them do that the financial companies will eat a sizable loss. Solution? We'll make it illegal or nearly impossible to discharge student loan debts in any way. So they snuck some laws through Congress which did exactly that. And that's when the real fun starts. Not only can banks & colleges extract everything the students & their families have at the present, they can also get everything the student will earn in the future since the loans now attach to the students for life with few exceptions. That's when tuition fees really started to take off.

Then you get the rest of the fun stuff such as pushing the narrative that everyone needs to go to college if they want to make a living. Increase the market share, get more money. Families don't have enough money and fear they can't afford it? Don't worry, we got loans, the first one's free, cause then you're hooked for life. The schools & financial sector run their numbers and jack up the costs to maximize revenue & profits, and of course there's a ton of collusion in the industry so that everyone gets a nice fat share of the money.

In short, the US has financialized its education system and turned it into a wealth extraction business.

[Solauren]

Aerius hit the nail on the head.

Combine that with post-secondary education...
#1 - Being hammered into people as the road to success
#2 - Educational facilities advertising you WILL get a job in the field you are hoping to..

Its also rigged to make it look like it's a requirement for success.

[LaCroix]

Solution - make them defaultable again, and watch the banks deflate, and prices going down quickly after they stop lending like mad and universities are winding up empty.

[Solauren]

If you made them all defaultable again, you'd have a mad rush to the bankruptcy offices. I'm not sure if the resulting financial backlash would be a good thing or a bad thing.

[Alferd Packer]

It depends on the exact ratio of private/federal student loan debt that's out there. I would guess that most students get their loans from the federal programs first, since the rates are better, then resort to private loans once they've hit their borrowing limit.

In any case, discharging your Federal student loan debt through bankruptcy is probably not that big a deal, as the government will (eventually) recoup their lost loan money through normal taxation of your income--taxes which you now pay because half your income isn't going to service the interest on your massive student loan payments.

Remember, it's not as if bankruptcy is a magic reset button. You still need to meet proper criteria to have your debt discharged, and if people with fingerpainting degrees are still able to scrounge up enough money to pay their loans each month, they will most likely still have to repay their loans. And even if your loans are discharged, you're still bankrupt. Your life is on hold for seven years, because you have basically no ability to get credit for that time. It's not a good thing--it's just better than the alternative.