For decades, the country’s outstanding student debt has only moved in one direction: up.
Today, approximately 44 million Americans owe a total of $1.7 trillion for their education. But it didn’t have to be that way.
Legislation like the GI Bill, the National Defense Education Act, and the Higher Education Act of 1965 paved the way for greater access to college, and enrollment grew while costs remained low.
But ultimately, severe cuts in public funding for higher education paved the way for significant increases in tuition fees and pushed more of the costs of the university onto the students.
Today, tuition makes up about half of public college revenue, while state and local governments provide the other half. But a few decades ago, the distribution was very different, with tuition fees providing roughly a quarter of revenue and state and local governments picking up the rest.
In the 30 years between 1991-92 and 2021-22, average tuition prices have more than doubled to $10,740 from $4,160 at public four-year colleges, and to $38,070 $19,360 in private institutions, after adjusting for inflation, according to Collège Planche.
Salaries did not follow. “Household income has stagnated,” said higher education expert Mark Kantrowitz.
Because so few families could afford the rising cost of a college education, they increasingly turned to federal and private aid to help pay the bills.
The shift to “high tuition, high aid” has caused a “massive total volume of debt,” according to Emily Cook, an assistant professor of economics at Tulane University.
“The federal government should get out of the student loan business,” said Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the Department of Labor.
With almost no limit on how much students can borrow to help cover the rising cost of college, “there is an incentive to raise tuition,” she said.
Now, “schools can charge as much as they want,” Furchtgott-Roth added.
Once families reach their federal student loan limits, they turn to parent student loans and private funding to be able to send their children to college, a step that is increasingly necessary for people to have a decent chance of landing in the middle class.
More and more students feel they need to pursue higher education to be competitive in the job market. And more time in school means more costs and a greater need for borrowing. About 40% of outstanding federal student loan debt is now incurred after college for masters and doctoral programs.
The average parent student debt balance was over $35,000 in 2018-19, up from about $5,000 in the early 1990s.
Meanwhile, the private student loan market has grown more than 70% over the past decade, according to the Student Borrower Protection Center. Americans now owe more in private student loans than in overdue medical debt or payday loans.
Every year, millions of new students are pumped into the student loan system while current borrowers struggle to get out.
According to Kantrowitz, many recent college graduates cannot afford the standard 10-year repayment term.
“Generally, people choose the repayment plan with the lowest monthly payment, which is also the plan with the longest term,” he said.
Therefore, it takes an average of 17 years for people to pay off their student debt, Data by the US Department of Education shows.
Many borrowers have put their loans on hold through forbearance, causing their debt balances to explode with interest, and the widespread failures of government forgiveness programs have left those who expected to see their debt forgiven after a certain period.
The average graduation loan balance has tripled since the 1990s, from $10,000 to $30,000. About 7% of student borrowers now have more than $100,000 in debt.
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Without any intervention, over the next two decades, Kantrowitz estimates that outstanding student debt could reach $3 trillion.
“Given the linearity of student debt growth, this makes these events easy to predict,” he said.