College tuition has gone up 46% over the last decade. The Government lent out 120 billion in tuition money just in 2014. Student Loan debt is over 1 trillion dollars. Is there a connection?
A just released study shows what should be obvious – Federal Student loan aid is creating the problem. It is a simple supply and demand issue. The government is artificially creating the demand by supplying the money to pay for it. Thus, the demand increases along with tuition costs. Without student loans, the demand wouldn’t even remotely be as high as it is considering current tuition levels.
The study was conducted by the Federal Reserve Bank of New York. They found that for every new dollar made available in student loans, schools increased their rates by .65 cents. Of course, this was more evident with Private colleges. For Every dollar generated by Pell Grants, schools increased their tuition by .55 per dollar.
The entire student loan debt balance increased by a little over 10% just in 2014. At what point is that not sustainable? Don’t forget, unlike any other debt, student loan debt owns you. You can’t escape from it. Although there are those trying to fight the current bankruptcy discharge laws, student loan debt cannot be discharged in a court of law.
Politicians will continue to further socialize this country through the use of the student loan program. However, there is a tipping point. When that tipping point occurs, what will happen to the business of college? The saddest part about college education is that it appears to be more about the business of college than the education of students. After all, it would be tough to justify the increase in tuition rates just for educating alone. You also don’t get those big buildings and sports programs without the increase in tuition dollars.