Graduates from the class of 2014 can thank President Obama that they’re exiting college with the highest student loan burden ever. They graduated with an average of $28,950 in student loans, according to a new study by the Institute for College Access and Success (TICAS).
When TICAS began recording student loan burdens among students at the time of graduation in 2004, the average was $18,550. Since then, it’s increased by 56 percent, more than double the inflation rate of 25 percent.
To put it differently, most graduates are starting their lives with a pile of student loans, and that burden has risen drastically in the past decade. To understand the current predicaments of today’s graduates, let’s go back to 2001. A recent study from the Federal Reserve Bank of New York examining how student loans rose between 2001-2012 concluded that the more government subsidizes education, the more colleges raise their prices.
The study explains:
Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012, with about 90% of originations in recent years occurring through federal student aid programs. Against this backdrop of increased borrowing, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200.
In the years examined, tuition increased about 55 to 65 cents for every dollar the federal government gave out in student loans or Pell Grants.
Surprise! A government program designed to lower the cost of education actually did the opposite. Once colleges saw they could rake in money from helpless taxpayers, they figured: “Why stop now?” Consequently, tuition has skyrocketed due to government involvement.
Under Obama’s leadership, the U.S. Department of Education has increased the maximum Pell Grant award from $1,000 in 2008 to $5,730 for 2014-15. Additionally, it has doubled the number of students slated to receive these funds. If history is any indication, this expansion won’t lower the cost of higher education. In fact, it will probably do the opposite.
What’s more, increasing numbers of these loans aren’t getting repaid. Currently, about 40 million people owe about $1.2 trillion in student debt. Last year, 11.8 percent of student loans subsidized by the government fell into default, which is bad news for taxpayers, who are left holding the bag.
The student-loan default rate is down this year from a peak of 14.7 in 2010, and the Obama administration has taken credit for its efforts in reducing it. However, a look at the default rates of yesteryear paint a very different picture.
For the past decade, both President George W. Bush and Obama have widely expanded federal subsidies for higher education, and the default rate has risen accordingly. Granted, this causal relationship isn’t something to conclude from a bar graph. The data does show, however, that students are graduating with more and more debt, and they’re not paying it off. Common sense indicates that soaring education costs, caused by federal subsidies, have forced students to increasingly rely on student loans to get by, and they can’t always repay them.
Instead of learning from these mistakes, Obama plans to expand federal funding to higher education with a new proposal to make community college “free” for everyone. Presidential candidates Bernie Sanders and Hillary Clinton have both stated they plan to tackle the impending student loan crisis by throwing more money at the problem.
If there’s one thing that’s guaranteed to make the student debt crisis worse, it’s increased federal spending in higher education. Young voters owe it to themselves to stop backing candidates with pie-in-the-sky plans to make college free. They deserve serious proposals from candidates who are willing to get serious about reducing the tax-dollar pipeline to American colleges, so they can be free to choose if they really want and need to spend four or five more years in school.