On Student Loans

Current Events Sep 09, 2009

A while back, I asked, “If student loans weren’t an option, how much would tuition cost?” The answer comes to us courtesy of the Wall Street Journal:

Also, the rising levels of borrowing may ironically be contributing to the accelerating cost of college, say some college-finance experts. Loans can give colleges an artificial sense of a family’s ability to pay tuition. To some extent, that false sense of security gets built into the assumptions schools make when setting prices, say experts. The idea is that as prices rise, families borrow more and more, spurring prices to rise further, which in turn requires more borrowing. Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, says this phenomenon is playing a role in why tuition grows at about twice the rate of inflation. “Instead of imposing tougher choices” on college costs, he says, it’s “easier to raise prices…because this additional loan amount is made available.”

My point exactly.

This article came to my attention via CollegeScholarship.org’s article “Student Debt Loads – Is a College Degree Becoming a Negative Investment?” –also a fascinating look at today’s college financing.

Here’s the bottom line: Debt is Dumb.

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