College education is America's next economic bubble. Student loan debt in the United States is $914 billion, which far surpasses credit card debt. This should not come as much surprise to Brown students. Tuition for the 2011-2012 academic year at Brown was $41,328.
The rising cost of higher education across the country is not a pretty picture, either. From 1980 to 2010, tuition at public and private four-year institutions has increased 247 percent, adjusted for inflation. The question in the back of every student's mind is: Why? Why do professors' salaries, blackboards and teaching supplies total to tens of thousands of dollars per student? And why does tuition steadily increase each year? If anything, one would expect college tuition to have declined over the decades - considering the advances in technology that have made many aspects of teaching faster and cheaper. The answer is clear but hard to accept. The U.S. government is responsible for today's exorbitant surge in the price of college.
The government subsidizes the cost of college in a number of ways. There are Pell Grants, given to low-income students. The Federal Supplemental Educational Opportunity Grant is another grant given to low-income students. The Federal Work-Study Program is a grant given to students who agree to hold a part-time job.
Stafford Loans are the most popular loan program. These are low, fixed-rate loans to undergraduate or graduate students regardless of financial need. Many college students are familiar with the Stafford Loan program, having completed the Free Application for Federal Student Aid. To put these programs in context, 66 percent of current U.S. undergraduates receive financial aid of some kind, and 34 percent of all undergraduates receive Stafford loans averaging $5,000.
These federal aid programs have a noble goal - educating more Americans so that more may lead productive lives. But intentions do not always match outcomes. The outcomes of many of these federal loan programs are, ironically, the very opposite of the intentions.
Federal college aid leads to higher tuition in a straightforward way. Colleges and universities understand that students can easily get loans guaranteed against default by the government. Private companies would not sell these low-rate college loans because the risk of student default is too great. But with the taxpayer base, the government is well equipped to finance cut-rate loans - eerily similar to the government-guaranteed loans that brought on a housing bubble.
Colleges and universities can hike tuition and students will simply take out more low-interest loans, and politicians in Washington will likely call for more federal aid at lower rates. Thus, there is an endless cycle of tuition increases and greater college debt.
Students and taxpayers get the stuck with costs of the loans. The students are forced into paying ever more for college each year. The taxpayers are forced to devote more and more money to programs that will eventually require massive bailouts when rates of default increase.
Colleges are the winners. They raise tuition, let the government absorb the risk of student loans and finance whatever pet projects they see fit. Take Brown, for instance. Look around campus and ask yourself if Brown is striving to reduce costs to make a Brown degree more affordable. Hardly. The University is engaged in every construction adventure imaginable - from a state-of-the-art aquatics center, to renovations of campus eateries, to a new hockey field.
Why not? The University has no incentive to cut costs and make college affordable so long as government loan programs increase demand. What would happen if federal college loans were abolished tomorrow? Would colleges classrooms empty and colleges be forced to close down? No. Few could afford to attend college without student loans, but that would force colleges to cut costs and reduce tuition to attract students. College would become affordable.
In fact, throughout most of U.S. history, there were no federal college loans, and college tuition was cheap and stable. Consider Yale. From 1810 to 1832, tuition at Yale held to $33. From 1874 to 1910, Yale's tuition increased by just 14 percent. Compare that to the overall 247 percent increase over just the last 30 years. If your grandparents went to college, ask them how they could afford it, and they will probably say they worked through college. But at $41,328 a year, who could work their way through a college like Brown today?
Unfortunately, even though the government has led many students into lives of debt, most students support student loans believing that without them, they could never attend college. Ironically, government programs have made college unaffordable, prompting students to have to ask for more government aid. If instead these programs were phased out, college would be a far better deal for students. The lesson in college loans is twofold. One, intentions do not equal outcomes. Two, the government pretends to be your friend, but is anything but.
Oliver Hudson '14 believes affordable college education is possible. He may be contacted at oliver_hudson@brown.edu.
