“If you want to know the future, look at the past.”
Albert Einstein
Looking at college tuition and student loans 60 years ago, 30 years ago, and Today
Before we start going back, let’s go back even further and hit the key points in the history of college tuition and student loans.
- Harvard, the country’s oldest university, has offered financial aid for almost its entire existence, at least since 1643.
- Centuries later, the US Department of Education was created in 1867, leading to the creation of schools across the country.
- The GI Bill, signed into law by FDR in 1944, helped send nearly 8 million World War II veterans to college. States and schools poured funds into student growth during the postwar economic boom. In 1944, tuition for an esteemed school like U Penn was $400; the government was giving $500 to each student.
- The National Defense Education Act created the Federal Perkins Loan program in 1958, offering low rates and and ample payback periods while ignoring credit scores and “opened college gates even wider.” (NPR) In 1958, tuition for a school like Dartmouth was $1,400.
At a time when students were piling into college, and the only concern was how fast universities could erect new buildings, these institutions could’ve charged way more for tuition. Simple supply and demand. But, they didn’t. Until around 60 years ago…
60 years ago
Through the 60’s, college was pretty affordable. A student could typically cover the cost of tuition with a summer job. The government saw college as an investment in our country’s future, and supported state universities with funds and tax breaks. Still, only 8% of Americans had a college degree.
This was a time of significant growth for colleges. According to one study, about 75% of American campus buildings were constructed between 1960 and 1985. Still, white men earned degrees at a far higher rate than women and certainly more than minorities.
Black, female and immigrant students were held back from the progress realized by their educated, white male counterparts. Segregation was made illegal by the Supreme Court in 1954 with the monumental Brown vs. Board of Education decision. However, it wasn’t until 1965 when universities opened up the coffers to help minorities and women attend college under the Higher Education act.
Students of all backgrounds were attending university in mass numbers. They saw education as a means for a better life.
The 70s hit the country hard. Oil prices exploded, as did inflation. All help to students from local governments stalled out. Despite the Education Amendments of 1972, the state governments needed help from private banks to offer funds for tuition. To further expand lending options, the federal government created Sallie Mae (the Student Loan Marketing Association).
This is when universities started raising tuition costs.They needed to generate revenue that was previously supplemented by the government.
As tuition rates increased, national income growth slowed. So, students had to borrow more in order to get a college education that was attainable just a decade ago. For all the government did for equal rights, minorities still couldn’t afford college as tuition costs increased.
In the 1980s, student tuition covered about 25% of public college revenue with state and local governments covering the other three-quarters. Today, that split is almost 50-50. It can be said simply: The government stopped funding the state colleges and those schools continued to increase the cost of tuition to cover the profit gap (and then some).
By this point, families realized the importance of a college degree. But, not just any degree. As demand to attend college grew, universities realized the value of a degree from an elite institution. Schools hiked tuition rates as the willingness to pay increased for elite schools like Harvard and Stanford. In response, the majority of all universities, including state schools, increased their cost of tuition, too.
By the 1979-80 school year, tuition for a four-year college was $9,438 annually, including room and board, in today’s dollars. Since 1980, college tuition and fees in the U.S. have increased by 1,200%.
National Center for Education Statistics
30 years ago
Entering the 90s, tuition costs were rising faster than the national inflation rate. Small, prestigious schools led the way, exceeding $20,000 for tuition, room, board and fees. State universities hovered around $5,000 nationally on average.
Schools said tuition increases were caused by defunding by the government, and to cover salaries for administration and improvements to facilities. Since 1990, average tuition and fee rates have increased 130% after adjusting for inflation.
In the 2000s, state governments defunded public universities to the tune of $7 Billion. Most cuts were caused by the Great Recession starting in 2008.
Today, state and local taxes fund less than half of regional university costs for things like teachers’ salaries. Flagship public research universities in the US often receive less than 20% of their budget from the state. The rest is made up by student tuition.
In the first two decades of the new century, the average sticker price of tuition and fees increased $12,990 (inflation-adjusted). In this timeframe, American college tuition and fees increased 50% beyond inflation. The price to attend a state university increased 5x faster than consumer prices, as real median income grew just over 2.1%.
Paying for college has become completely untenable. Borrowing to cover tuition, namely taking on student debt, has become necessary for the vast majority of Americans.
45 million Americans, about 15% of our population, carry between $25k – $50k in student debt from attending school in the 2000s. We’re talking about $1.7 Trillion dollars in student debt. That’s more than the government spends on defense, health and social security each. It’s a lot.
Basically, the current generation of fathers will be paying their own student loan debts while accumulating their kid’s student loan debt.
This student debt hits Black, Hispanic and immigrant families hardest per CBPP. Hispanic and black households pay 20% of their income for school; the national average is around 15%. This is a population that gained societal traction through education in our public school system, only to have the door shut on them as they attempted to earn a degree. The government appears unwilling to help families who have ‘pulled themselves up by their bootstraps’ in the way so many politicians have always said they need to do.
The median national income for a family of four in the fiscal year of 2021 was $79,900 a year. This means to save for college for a single kid, a parent making the median income would need to save 4.5% to 9% of their income for their child’s future. (Fatherly)
By the 2019-20 school year, a full-time student paid $48,965 at a private nonprofit college and $21,035 at a public university.
Today
The average tuition and fees in the 2021-22 academic school year:
Private = $38,185 per year
Public, out of state = $22,698
Public, in state = $10,338
The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 created the Higher Education Emergency Relief Fund (HEERF), which pushed more than $6.1 Billion to colleges (mostly public). The CARES Act also paused loan payments, temporarily set interest rates at 0%, and distributed more than $18 Billion to students in emergency grants.
To help cover costs, President Biden proposed forgiving $10,000 in student loans for a parent who earned less than $150,000 in the previous year, or less than $300,000 for married couples filing jointly. This has created two camps:
- Those in favor of forgiveness believe loans have created unjust financial burdens and reducing loan amounts will stimulate the economy by paving ways for more people to earn and spend in other areas. We need to realize the importance of a simple amount like $300 to poor fathers and parents. This is the amount of the Child Tax Credit under Biden. It means preventing “2 million children from going without enough food.” Similar logic applies to loan forgiveness.
- Those against student loan forgiveness believe they were more ‘responsible’ with their money and it would be unfair for others to receive debt relief after they’ve paid in full.
These are just summaries and there are far more ins and outs of each argument.
Loan forgiveness and stimulus payments have been helpful. Eventually, though, the debt will need to be paid. The debt always needs to be paid.
The most difficult part of paying off the debt is the interest.
This is the case for so many other debts we carry, from credit cards to home loans. As few as 25% of Americans are paying down the principal on their student loans. When as many as 75% of fathers and parents only pay down interest, they’ll never make a dent in the actual loan they owe and their actual debt will grow.
The projected cost of college in 2025: A full-time student will pay $55,477 at a private, 4-year college; and $24,236 if paying in-state rates for a public, 4-year college.
Dads can’t predict the future. But, the past is always a great indicator of what’s to come. You need to plan like hell to help ensure your children’s future success. Use this knowledge and go to our resources page to start planning for your kids to attend college in the coming years or decades. You got this, Dad.
