Table of ContentsIntroductionIncreased DemandThe Rise of LendersMore Pleasure, More FundsPossible ObjectionsConclusionIntroductionTuition costs have increased at a rate beyond what people believe to be sustainable. This has led to crushing student debt in the United States, reaching such a high level that some are calling it a “student loan crisis.” Many people attribute high prices to the greed of universities and student loan agencies. However, it also has a lot to do with the simple laws of supply and demand as they relate to the supply and demand for college education, the increase in funds to pay for college, and the competition for students between colleges. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay One of the biggest problems facing American students today is the ever-increasing cost of attending college. The issue of student loans and student loan repayment is a very polarizing political issue in the United States today, as total student loan debt continues to rise, reaching $1.56 trillion in February 2019. It There are more than 44.7 million borrowers today, each of whom owes amounts ranging from $1 to well over $200,000. People are pushing for a variety of solutions, from keeping things as they are to having college tuition fully covered by the government. As tuition costs increase year after year, often at a rate exceeding inflation or the consumer price index, many people are wondering how to possibly pay for college, having to turn to either loans increasingly important and inevitable students, or unable to attend university. Neither option is preferable because large debt delays the time when people can afford to make major purchases, like a house, or invest and save money for retirement, and the Not having a college degree means many people can never capitalize. how much they could have earned over their lifetime. The question then arises: what made college so expensive? With so many programs available today to help people pay for college, like federal or work-study grants, scholarships, state need-based grants, etc., why Are people less and less able to afford to go to college? This is not a single-cause problem, as many factors have contributed to the debt snowball in which people must take on debt to be able to pay for college. Some may say it's the colleges' fault that they are greedy, even if they are not for-profit colleges. Others say it's the fault of borrowers who take out more loans than they could handle and who may not work enough while in school to avoid this mistake. Instead of pointing fingers, it's better to find the degrees of truth in people's claims. Tuition costs have increased significantly due to increased demand, an increase in the number of lenders, and competition among universities to attract potential students. Increased Demand Two fundamental concepts of microeconomics are those of the laws of supply and demand. Simply put, the law of supply states that as prices increase, suppliers will offermore products. This is a positive correlation. On the other hand, the law of demand states that as the price increases, consumers consume less of a product, which is a negative correlation. Typically, an increase in demand and supply will increase the quantity of a good supplied, while the price remains somewhat stable, and sometimes indeterminate. However, there is not an inexhaustible supply of places, so more space must be made or more colleges built. This requires more educated teachers, a small group of people who can demand higher salaries. William Baumol and William Bowen, in their 1966 book Performance Arts: An Economic Dilemma, wrote about a process known as "cost disease." The basic principle is that prices of services rise rapidly because they follow the trend in which service sector costs rise faster than the cost of producing most goods. University professors, unable to produce at a higher capacity, causes costs to increase over time. As the demand for university professors is higher, they can charge more for their services. Additionally, because of their limited production capacity, colleges must hire more teaching assistants to assist professors. Although a less expensive option than hiring more professors on an individual basis, these methods cumulatively contribute to increasing the cost of a college's worker salaries. Students want a quality education, and therefore, to attract high-quality professors, colleges often must have high salaries. offered to these teachers. In Tuition Rising, Ronald G. Ehrenberg writes that "central administrators want their [professors] to be generously paid" in order to "attract and retain high-quality faculty." However, "in the absence of a desire to reduce the number of faculty and staff at an institution, there is an inevitable trade-off between administrators' efforts to moderate the rate of tuition increase...and to grant generous salary increases to teachers. ". Increased demand drives the need for more teachers, which can saturate the market. So, to appease the staff, salaries are increased, which in turn increases tuition fees. A university education was not always within reach for many people. In The Student Loan Mess, Joel Best and Eric Best explain how schooling, even primary and secondary education, was considered “a private and individualistic affair; if you wanted your child to teach, you paid…all the way to college.” However, a more educated population is more beneficial to society. “More education reduces all kinds of social problems: educated people live longer, are healthier, have more stable families, are less likely to get in trouble with the law…more education benefits individuals in at the same time as it benefits the community. So, over time, state and federal governments began to build public schools and required schooling to a certain extent, initially only up to eighth grade, and today up to at age sixteen or seventeen in most states. educated to a certain level which rose over time, but university remained inaccessible to those not wealthy enough to afford it or to the private tutors needed to achieve entry grades. That would change, however, and the event that contributed most to the increase in registrationsat the university was the passage of the Servicemen's Readjustment Act of 1944, more commonly known as the GI Bill, by President Franklin D. Roosevelt. Veterans benefits were not a new idea. In The GI Bill, Glenn C. Altschuler and Stuart M. Blumin write about what veterans received in the past. “Veterans' benefits laws went back at least as far as the measure adopted by the Plymouth settlers...to maintain for life any soldier maimed in the service of the colony. Virtually every military conflict...has resulted in at least one veterans benefits law. The difference is that these benefits almost always took the form of pensions. They were also only paid to soldiers disabled during their service or to the families of deceased soldiers. The GI Bill allowed all veterans access to benefits once they left the service, from health care to affordable housing to access to a college education through subsidies. 120 Years of American Education, a study conducted by the National Center for Education Statistics, shows the monumental jump in bachelor's degrees awarded by institutions of higher education. There was a slight increase in the 1920s, when "young people completed high school and therefore became eligible for college admission," but the real increase came just as the GI Bill was passed. Between the 1945-46 and 1947-48 school years, the number of bachelor's degrees awarded doubled, from 136,174 to 271,186, and it continued to increase rapidly. Sometimes he slowed down during the wars, but he always came back, and stronger than he left. America now has more access to college than ever before, and college fever isn't going to die down any time soon. The Rise of Lenders Many students resort to loans to pay for their education because the cost is often too high to pay out of pocket. Borrowers have undoubtedly heard of Sallie Mae, one of the largest student lenders in the country. It was established as a government-sponsored enterprise in 1972. Its purpose was to provide loans to students because "students rarely have an established credit record or significant assets", making them unattractive for commercial lenders. A market had opened up, with millions of people looking for money, and Sallie Mae stepped in to fill that gap. Early on, Sallie Mae had access to low interest rates from the Federal Funding Bank until 1984, and when that dried up, they replaced that benefit with the Treasury Department allowing Sallie Mae to access variable interest rates for terms of up to 15 years. These advantages, among others, allowed Sallie Mae's capital to grow rapidly, from $300 million in assets in 1975 to $39 billion in 1990, a monumental increase of 13,000%, as the S&P 500 and the US GDP only grew about 470% and 341%. respectively over this same period. Eventually, Sallie Mae transitioned to a private entity and took with it the enormous amount of cash and notoriety it had gained over the years. One problem lenders faced early on was the risk that borrowers would file for bankruptcy to settle the debt. they had accumulated. In Student Loans in Bankruptcy, Duke Chen writes that “the most commonly cited reason for making student loans nondischargeable is fraud prevention. The legislative history of the Bankruptcy Reform Act of 1978 contains warnings that renderingDischargeable student loans would be "almost specifically designed to encourage fraud." prohibiting borrowers from discharging their student loans through bankruptcy for the first five years of their repayment period; in 1990 the ban was extended to seven years. " However, as credit card debt grew, bankruptcies continued, and so Congress passed the Higher Education Amendments of 1998, which "made [government] student debt nondischargeable through bankruptcy , unless the debtor could pass the relatively high bar of demonstrating “undue hardship.” Chen writes that "in 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which amended the Higher Education Act of 1965 to make private educational loans non-profit. dischargeable, whereas in the past it only applied to government loans. With the passage of this amendment, borrowers no longer see their loans treated as unsecured loans, but as secured obligations, such as alimony, child support, and criminal fines. More Fun, More Funds As more people struggle to go to college and have access to the money needed to attend these colleges, colleges must now compete to attract these potential students. Although there is still an admissions process and not all students can get into the college of their choice, students now have more options. As a result, universities must now do everything they can to appear more attractive. In American Higher Education in Crisis, Goldie Blumenstyk briefly discusses the early days of US News and World Report's publication of college rankings, beginning in 1985. “As critics of US News have noted, its ranking depends heavily on factors directly related to college spending. For example, by spending more on merit aid for top students, colleges can improve the academic profile of their students, which helps them in rankings.” There are other places to find college rankings, like Niche, but US News is considered "the most influential [ranking] of American colleges." In his book Breaking Point, Connell argues that colleges are suffering from a “war of convenience.” Even during the recession, university spending on infrastructure construction increased significantly. “On average, the cost of college infrastructure projects has increased...an average annual increase of 25 percent...since 1997.” These are increases in spending on buildings like libraries, science buildings and residence halls. And while these buildings may be necessary, as they are constructed and renovated over the years, it adds a huge cost to each student's tuition. These costs are not in vain, however, because prospective students want to know a college's level of education versus that of a college. peers, as well as participation fees. This leads to increased infrastructure spending as well as increased competition among colleges. Beyond spending on education, universities have also increased their spending on more “luxury” items that have no relation to the quality of education they offer. As noted in Breaking Point, these include items such as "student activities, cultural events, intramural athletics." ..intercollegiate athletics...and college stores.”.