With tuition costs more than doubling over the past generation, and student debt now exceeding $1 trillion, everyone knows the cost of college is too damn high. About 40 million people nationwide are weighed down by education debts that often reach into the tens of thousands. But those numbers are just a sliver of the bleak shadow that Wall Street casts over higher education.
A new study on debt across the higher education system reveals that the massive debts borne by both students and their institutions has climbed to about $45 billion per year. So the debt-related payments to the financial sector—including Wall Street investors, institutional lenders and the mammoth federal student loan system—drive about one tenth of all spending on higher education nationwide. These debt-servicing costs are tied to tuition lending as well as financial debts accrued by schools themselves, which finance investments of all kinds, from professors’ salaries to libraries to indulgences like sports teams and administrators’ bonuses.
According to researchers with University of California–Berkeley’s Debt & Society Project, a project of the Center for Culture, Organizations, and Politics with research support from the American Federation of Teachers, the a key factor in the rising cost of college is driven by expenditures largely unrelated to either the quality of the education, teaching or maintaining campus facilities. Rather, college is getting unimaginably expensive for both institutions and students because it costs so much to finance the business of education, thanks to Wall Street lenders. While there are many controversial budget items in higher education—critics lament bloated administrations and the cost of sports teams and flashy amenities—the report focuses on debt itself, and the massive volume of borrowing, as a major overlooked burden on institutions.
Even among graduates of public colleges, the average debt burden has more than doubled between 2001 and 2009, from about $9,440 to $21,100, mirroring the debt trendlines for graduates of private non-profit institutions. That means that for a typical poor single parent, the projected cost of her student loans may well have doubled in the years it takes to earn her degree as she juggles a job and night classes. And she’s likely facing other crushing debts on top of that: a recent Pew study links high student debt burdens among households of adults younger than 40 with higher total debt, including mortgage and credit card costs, which in turn aggravates the lifelong wealth gaps that higher education was supposed to help alleviate.