There was a lot happening during the presidential election of 2020, so you may have missed the candidates’ discussion of what to do about student loan debt in the United States. 44.7 million borrowers in the U.S. now owe over $1.7 trillion in student loans, and that much debt owed by that many people impacts the entire country’s economy.
More money, more problems
The subject is back in the news because, after promising $10,000 of debt relief to many borrowers (and after some in Congress wanted to see up to $50,000 of forgiveness per qualifying borrower), President Biden’s proposed budget does not include any of these plans.
I’m one of those 44.7 million Americans with student loan debt, and I’ve been paying it off for a long time. Following the political back and forth between parties is exhausting, but as the parent of two teenagers I am interested in understanding why higher education is so expensive and why it leads to so much debt.
The economics of higher education
Our podcast guest this week, Preston Cooper, is exactly the right person to explain that. Preston is an economist whose research focuses on the economics of higher education. College tuition, Preston notes, “has risen in price far faster than most other consumer goods.” Economics can explain this. Higher education is a market that is difficult to disrupt, and it provides something for which we have relatively stable demand: the desire for credentialing that leads to a higher income.
Prices on many consumer goods decrease over time because competitors see an opportunity to make money and they enter the market and offer a good at a lower price.
Does Harvard face stiffer competition than it did 20 years ago? Are people less likely to want a college degree today than they did 20 years ago? In fact, there is more demand for college degrees and the financial benefits they lead to, but higher education is a market that new suppliers can’t enter easily. You can hear more about that in this week’s podcast, and read about the economics of higher education, student loan debt, and alternatives to four-year degrees in our five links this week.
What do you think about the cost of higher education? Should we encourage debt forgiveness? Are there better ways to minimize the debt required to achieve a higher income? Let us know by clicking reply and writing us your thoughts!
5 links worth your time
- Read this and instantly become the leading expert in your circle of friends on why college is so expensive!
- Student loan debt forgiveness would impact us all.
- Here’s who thought their student loans were worth it.
- What causes massive amounts of student debt?
- Trump and Biden agreed on the importance of apprenticeships.
Photo by Burlingham on Adobe Stock