Have Student Loans Contributed to the Rise in the Cost of College?

by Miranda Marquit · 10 comments

One of the big issues debated recently is whether or not a four-year degree is worth the cost. The cost of education continues to rise at a pace that outstrips inflation — and definitely outstrips wage growth.

But why is education so expensive? There are various explanations for the rising cost of a higher education, and two that I think are likely contributors are:

  1. The idea that everyone needs to go to college
  2. The ease of obtaining student loans

Does Everyone Need a College Education?


We are used to thinking that everyone needs a college education. Indeed, here in America, basically everyone is on a college prep course. We don’t see a lot of apprenticeships, and there isn’t a lot of encouragement for students to consider vocational schools.

I think this is too bad. There are plenty of good jobs out there that can be done with a vocational degree or certification (welding and car mechanic come to mind). And, indeed, some students are far more interested in developing more hands-on skills than they are interested in toiling through a four-year program at university.

While everyone needs an education, at least in terms of acquiring some sort of marketable skill, that education doesn’t need to be college. College isn’t for everyone, and there’s nothing wrong with that. Instead, students should be encouraged to explore their interests and develop compatible skills, rather than being pushed toward college without regard to personal preferences.

The idea that every should go to college means that there is more demand for a college education, and that means prices go up. Plus, more people have to get four-year degrees — and go on for advanced degrees — as the market is flooded with graduates. The bachelor degree is the new high school diploma, but you have to pay a lot more for that degree.

Student Loans and the Education Bubble

Of course, if you are going to tell everyone that they have to attend college, they have to be able to pay for it. This is where the student loan racket comes in. Even if you go to an inexpensive school, chances are that you will need to borrow money to help pay for your education. Student loans are readily available, and that means that this easy financing contributes to higher education prices.

After all, if everyone qualifies for student loans, then everyone can “afford” to pay higher costs for a higher education. This only encourages higher prices. However, we could be in an education bubble. Student loans exceed $1 trillion now. Graduates end up saddled with tens of thousands of dollars in debt, and in tough economic climates, they are unable to find jobs that can allow them to keep up with student loan payments.

The result could very well mean, at some point, that students become over-leveraged as a group (if they aren’t already!). But that doesn’t matter too much because student loan lenders, guarantors and even the government make more on defaults than they do on properly paid loans.

And it’s this state of affairs that means things will go on as they are — unless we get involved and start demanding a change in the way higher education functions.

What do you think is the cause of growing higher education costs?

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{ read the comments below or add one }

  • Charles P says:

    The upward spiral for college costs has very little to do with student loans and everything to do with the “keeping up with the Jonses (or Havard)” attitude that college administrators now have. Many schools now build luxury dorms with big screen TV’s in every room, lavish sports facility’s and gustatorially exotic cafe’s where everything from steaks to sushi are offered on the meal plan. “Well we here at such-and-such state college have to offer those goodies to keep up with other school’s offerings or gosh-darn-it kids just won’t want to come here.” is the argument often made. Many administrators these days come from business backgrounds, not educational ones and so miss the point of the land grant college system: an affordable high quality education available to most everyone in the society. My answer? Tear down the luxury dorms, the students will do just fine in a room as bare as a monks cell, get rid of the bloated sports teams that pull out more money than they produce, give kids a decent meal with out all the frills and charge everyone less and put educators not business men in charge of it all. The student will not miss any of the frills and won’t be so burdened by debt when they move out.

  • Thad P says:

    I have to believe the availability of easy money can cause a bubble anywhere. Very little else explains the obscene rate of college costs compared to the overall cost of living increases in the past 30 years.

  • Long says:

    I agree with everything already mentioned. I also think that the rising cost of education is partly to blame on students taking longer than 4 years to graduate as well. A few extra semesters can easily tack on thousands of dollars in tuition and interest expense on student loans that can take many years to pay down.

    • Carl Lassegue says:

      I agree Long. Young college students fail to realize that just by taking a few extra credits each semester, and finishing up early they might end up saving thousands of dollars in the long run.

  • Pete says:

    I do know some people who go to trade schools, to learn skills that they can be immediately employed using, like welding or truck driving classes. It’s a shame that that kind of very focussed, practical education can’t be applied to other fields too. It would get rid of many of the unnecessary courses that are just there to fill out enough hours to qualify for a degree.

  • KM says:

    I think part of the reason for the idea of needing to go to college these days is because the high schools fail to teach the kids what they need. In Europe, the schools offer a stronger curriculum, far surpassing the American students at graduation. Our college system catches up to the rest of the first world, but since we are so far behind before college, it is now a necessity. If students received a good enough education by high school graduation, this would be less of a problem. Have you seen the level of math and English courses that colleges offer? That should have been covered in 9th grade. College is supposed to build on your existing education, not make up for the lack of it.

    • Charles P says:

      I agree in part with what you say. The only country I have any direct experience with is Germany. In that country once you graduate you have the choice of a two year military service or two and a half years of public service followed by college, if you have the grades, or a state funded vocational school. If later in life, you get laid off, the state will retrain you in a field that is needed and give you unemployment benefits while you do so. In the US vocational training is paid directly by the trainee or in the past, by belonging to a Union, you could get training and apprenticeships.

  • The education systems is really screwed up, especially the UC schools with soaring costs from year to year. I think the next generation really needs to know why they are going to college if they intend to go. There are tons of free and alternative ways to educate yourself these days besides traditional 4 year BA or BS.

  • Icarus says:

    I agree that we kinda took a wrong turn when we eliminated a lot of the vocational routes that high school students could choose. That’s because we switched from manufacturing to services industry in America.

    Today a Bachelor’s degree isn’t always enough especially if every other person has one. Many people have to get a master’s just to stay competitive and this drives up the cost. Of course Universities could do their part to bring costs down too. They make students take course that will not benefit or be of use under the name of Liberal Arts and Sciences and balanced curriculum. Does an engineering student really need two years of French? Or Art Appreciation?

    • KM says:

      Totally agree on the frivolous courses. I hated all those extra classes that were supposed to make me “well rounded.” However, they failed to realize that I was already very well rounded, just not in the areas they wanted me to be. Their choices for filling certain areas of general requirements were clearly biased.

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