Monday, October 22, 2007

Easy Student Loans = High Tuition

Picture © AdsD der Friedrich-Ebert-Stiftung (via Wikimedia Commons)

Cumulative results [from 1993-2004] are average public tuitions growing 53 percent above inflation, and average private, nonprofit tuitions growing 47 percent above inflation. As of 2004, private, nonprofit colleges cost on average 3.3 times as much as public colleges attended by residents of their states. -Wikipedia (College Tuition)

Inflation is measured as the growth of the money supply in an economy, without a commensurate increase in the supply of goods and services. This results in a rise in the general price level as measured against a standard level of purchasing power. -Wikipedia (Inflation)

The New York Times just announced something most of us under 30 already know: college tuition increases are outpacing the rate of inflation.

I think I understand the reason for this scenario, and it relates directly to the quotes above. I'm not an economist, but I do understand some basic economic concepts like inflation. When cheap, easy money is dumped into an economic system, the cost of goods will go up.

Student loans pump cheap, easy money into students' hands. However, because most lenders cut a check to the school first, which then passes the remaining money to the students, the bulk of the money goes directly to the school. This means inflation hits college costs hardest.

Don't get me wrong. I don't mean to say that student loans are necessarily bad. However, when my parents went to college, they could pay their way through school by working. Doing this today is practically impossible. Student loans allow many more people to go to college.

Unfortunately, everyone who does so pays substantially more than they used to, even with inflation-adjusted dollars. This hurts those of us who borrowed a lot of money to earn a degree. It absolutely kills people who go for two years, and fail to graduate. And if they went to a private school? Whew.

I pay over $600 per month in student loan payments, and will continue to do so for the next 9 years. And I (mostly) attended public schools, received scholarships, paid in-state tuition at comparatively inexpensive schools, and worked full-time at a high-paying job while I was in college. KU Law School will cost $13,384.30 this year, and it's about as cheap as a Kansas resident can pay. It was something like $8400 when I started 4 years ago.

Check out this graph showing the tuition increases at the University of Kansas over the last 30 years:

Look at the last 3 years. Crazy.

No comments: