Kameleon007 / iStock.com
The cancellation of student loans has been in the news for two years. With 44 million Americans owing $1.7 trillion in student loans, critics are calling for schools to be held accountable and for the federal government to “get out of the student loan business.”
See: 5 collectibles worth selling for extra cash
Check Out: 9 Ways A Costco Membership Won’t Save You Money
Public funding of higher education institutions and a low and unchanged minimum working wage have not helped matters. State funding has declined substantially for more than a decade. Meanwhile, minimum wages have remained stable over the same period.
Rising tuition fees threaten access and affordability, leaving many students with two options: go into debt to attend college or give up altogether.
Many cite the Great Recession of 2008 as the starting point for declining public funding for public two- and four-year colleges. Compared to state funding before the recession, 41 states spent $1,220, or 13% less per student, between 2008 and 2018, according to a 2019 report by the Center on Budget and Policy Priorities (CBPP).
The CBPP report claims overall college funding in the academic year ending in 2018 was more than $6.6 billion less than 2008 funding. Per-student funding fell more than 30% in states like Alabama, Arizona, Louisiana, Mississippi, Oklahoma and Pennsylvania.
At the same time, the federal minimum wage for workers has remained at $7.25 an hour since 2009, despite demands for an increase. Although states and municipalities are allowed to set their own minimum wage rates — which would override federal minimum wage rates if higher — 20 states still use the $7.25 minimum wage rate. Students have no purchasing power when the cost of living is so incompatible with salaries.
As a result, tuition fees have soared far beyond the rate of inflation while state funding has shrunk and student and household incomes have remained unchanged over the years. According to the College Board, average tuition prices have more than doubled at public four-year colleges and private institutions over the past 30 years. Over the past 10 years, the average tuition increase has been $2,708 for a four-year public college, the CBPP claims in its report.
Despite the Biden administration eliminating billions in student loan debt and further extending loan breaks, universities and colleges have rarely been held accountable for the massive debt crisis the country is currently facing.
“The federal government should get out of the student loan business,” says Diana Furchtgott-Roth, professor of economics at George Washington University and former chief economist at the Department of Labor. Because there appears to be no limit to what students can borrow, “there is an incentive to raise tuition,” adds Furchtgott-Roth. “Schools can charge as much as they want.”
Without a clear plan for widespread loan cancellation and an increase in state funding for education and the minimum wage rate, the only way is to pay down federal student loan debt.
POLL: Do you think the Fed’s rate hike will help or hurt the economy?
Student Loan Forgiveness: Department of Education Forgave Public Servants $6.8 Billion – Do You Qualify?
“Given the linearity of student debt growth, these events are easy to predict,” says education expert Mark Kantrowitz, who estimates student debt could reach $3 trillion over the next twenty years. .
More from GOBankingRates