The future of college tuition, and therefore student loans; seems to be going only up with no relief in sight. In order to get a better understanding of why, this might be a good time to look back at when the first federal student loan and grant programs were established and how it has fueled the rising tuition costs.
Back when most of our grandparents were attending college, the number of graduates in 1940 numbered only 186,500. For the population at the time, this meant that less than 5 percent of adults 25 and older in the U.S. had a college degree. Of that total, 109,546 of them were men. As an additional reference point, if one of these graduates attended Yale University, it would have cost them $450 per year. Adjusted for the rate of inflation, that $450 in 1940 is worth about $7,200 in the dollars of 2013.
By 1950, the number of college graduates nearly tripled to 432,058. This was due to the passing of the Servicemen’s Readjustment Act in 1944, more popularly known as the GI Bill. This legislation provided for veterans of the Second World War to attend college using federal benefits. Even with these additional numbers, the percentage of adults 25 and older in the U.S. with a college degree was still only 8 percent. Half of these numbers were veterans and 328,841 of them were men.
The first actual student loans backed by the Federal Government were offered in the 1950s under the National Defense Education Act. These were offered as a way to encourage students to pursue math and science degrees after the launch of Sputnik by Communist Russia.
By 1970, the number of college graduates just receiving bachelor degrees had increased to 839,730. Although more than half were men (475,594), the number of women earning a college degree had tripled in just twenty years. By this time, 68 percent of federal aid to college students was in the form of grants. The cost for college had not significantly increased by this point and a Pell Grant could cover approximately two-thirds of tuition annually at many universities.
Education Costs On The Rise
In the late 70s though tuition costs began to rise and have continued to do so steadily every year to today. Here is a short comparison for a four-year degree in 1980 and 2013 in three categories:
- Tuition at a Public Institution – 1980 – $2550 2013 – $7196
- Tuition at a Private Institution – 1980 – $5594 2013 – $15,786
- Average Total Tuition Amount – 1980 – $3449 2013 – $9733
In the last decade, the situation has not improved. The rising cost of higher education has greatly surpassed the general cost of living expenses and medical expenses. While the U.S Government has made it easier for anyone to attend college with the various student loan programs currently available, they have also helped fuel the rising cost of higher education by lending too easily. That degree that was once sought after and had a great impact on someones financial life, is now less valuable due to such a high number of college graduates, yet more expensive to attain. Medical school loan debt has also continued to increase at a rapid rate.
Americas Student Debt Problem
In 2010, the amount of total student loan debt in America reached $830 Billion. This was the first year that another form of personal debt exceeded that of credit card debt, which was $825 Billion that year. In 2013, that number has now grown to over $1 Trillion and will continue to do so at an estimated rate of 10 percent annually. The average debt amount per household with student loans is over $25,000.
Currently, there are 37 Million people in the U.S. with some amount of student loan debt. That is almost 10 percent of the country’s population. To make a bad situation even worse, over half of all recent graduates are either unemployed or jobless. Of the recent graduates who do have a job, many of them are not working in their field of expertise. The biggest employers for this group are Best Buy, Starbucks, Target and Wal-Mart, according to a recent survey of 4 Million profiles on Facebook. What they earn each week in terms of purchasing power is less than what their counterparts made twenty years ago. This all while the federal government is reaping massive rewards on the backs of college students.
For those of you graduating this year and in the near future, here is what you have to look forward to. Over $25,000 in debt at a 6.8 percent interest rate for your Stafford Loan and a ten year repayment plan that many of you will not be able to meet. If you can pay it off in eighteen years, you will have to make a minimum loan payment of $200 every month. The total interest you’ll be paying over that time will be $18,000. That’s over 60 percent of your original loan. If you can’t pay that $200 every month, the length and the amount of the loan will quickly grow into a lifetime of debt. All the while you may have a lender who will profit more off your loan if you are in default, thus making it difficult for you to borrow for a car, or home.
There’s no doubt that higher education leads to a higher level of income earned over a lifetime, but constantly rising tuition and what some call predatory lending are making that impossible for many people. Already 60 percent of those attending college have to take out loans. Despite recent efforts to keep interest rates low, it does not address the basic problems of growing costs and long-term debt.
If you are trying to repay your student loan debts or are just beginning college and want to find the best options, contact us here at Student Debt Relief. Getting you ready to face college and the world after is what we specialize in. Good luck!
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.