Student loan disaster looms
Since 1990, all consumer prices have increased 100 percent on average, medical costs 200 percent and college tuition 400 percent. Those numbers come from the U.S. Labor Department as cited by the Wall Street Journal.
How have Americans been able to pay for all those rising costs? Well, how much workers earn has risen 131 percent over that time. According to the Social Security Administration’s Average Wage Index, the average salary in 1990 was $21,811 and is now $48,642 (obviously, those numbers would be lower here in Mississippi, but our smaller cost of living offsets it).
Those wage increases are a good thing. It means people on average make about 31 percent more than they did back then. Our country is more prosperous than ever before, and we’ve been the wealthiest, most successful nation in world history for many decades now. That’s something to bring back to mind from time to time when the political bickering makes us forget how blessed we are.
But the costs of higher education have greatly outpaced people’s ability to pay. How can you explain that prices have increased 400 percent, while people are only making 131 percent more? In that case, you would think, universities would have overshot what their customers could pay and thus would see declining enrollment. But in the big picture, more people have gone to college over that time; what gives?
Here’s my simple synopsis:
Colleges found they could increase tuition, and students, who had been preached to from the womb that college is necessary for success, would just borrow more money to pay for it. So colleges increased again the next year, and students borrowed more — and the next year and the next year. The colleges had great incentive to do so; they get their money up front, and the loans are backed by the government. If the student can’t get a job good enough down the line to repay the debt, it’s not the university’s problem. That’s between the government and the student.
So realizing far too late what a mistake it had made, the government has begun forgiving student debt en masse. Of course, remember the bill was already paid to the universities years before. So who is eating the cost?
Simply put, this system is not sustainable. In fact, it’s already imploding now.
Ccongressional Republicans recently released proposed changes to the Higher Education Act, which regulates the $1.34 trillion federal student-loan program.
You probably haven’t heard much about it because of the furor over the tax bill, but it will be in the news over the next year or so as the details get hashed out. Surely, there will be criticism over certain points, and colleges will howl that they’ll go out of business. But don’t forget this one point that is the linchpin of the legislation: It places caps on how much students can borrow. In effect, that limits how much colleges can charge. No more 400 percent inflation on tuition and fewer taxpayers stuck with bills for failed college dreams.