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The Real Reason Why College is so Expensive in the U.S.

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At this time, more than 40 million Americans are in debt because of student loans, and the total of that debt escalates to almost $1.6 trillion.

College in America is incredibly expensive, excluding millions of youngsters from accessing higher education, with many others tied up for years in giant debts.

Over the past 20 years, average tuition and fees at private universities in the U.S. have increased by 144%. State tuition and fees at public colleges, however, have grown the most, by 212%.

Young people, and all those who for good reason care about those who want, yet don’t get higher education, as well as those who are tied up in loans, are making a huge mistake by asking the government for more intervention. The solution to the problem of astronomical tuition in the United States is precisely the opposite: to stop State intervention, specifically government spending.

The key to understanding the fraud Americans are victims of is the connection between increased federal funding and the price of college tuition.

What I am pointing out is not new at all; it has been observed for years, and is called the Bennet hypothesis. On February 18, 1987, in an opinion piece in The New York Times entitled “Our Greedy Colleges,” the then-Secretary of Education William Bennett wrote: “Increases in financial aid in recent years have allowed colleges and universities to cheerfully increase their tuition, hoping that federal loan subsidies would help cushion the increase.”

Since 1978, when the United States’ government began offering subsidized loans to all students, college tuition has skyrocketed by 1.375%. That’s more than four times the general inflation rate, according to Department of Labor data.

Adjusted for inflation, average annual tuition for full-time college students has increased from $3,610 in 1980 to $12,219 in 2016, an increase of approximately 238%. We’re talking about an even faster increase than the rate at which health care prices in the United States have risen over the same period. That’s saying a lot, we all know about the high prices of health care in the United States!

This means that for every dollar of state aid to education, college tuition increases by 60 cents to the dollar.

To make it simple: Universities can increase their prices because government aid allows students to enroll despite the extremely high prices.

This government “aid” is expressed in different ways, which impacts tuition prices in different ways, and so we are talking about everything from grants to government-subsidized loans.

In addition, there is another fundamental issue to understand this problem: the primary holder of student loans is the U.S. government.

With the Health Care and Education Reconciliation Act of 2010, Barack Obama virtually nationalized the student loan market. The federal government has $1.2 trillion of the $1.5 trillion in total student loan debt.

What we have, then, is this: in general, the federal government has allowed, by means of state aid to education, for tuition to skyrocket and at an overwhelming rate, as those tuition fees have gone sky-high, becoming the holder of a growing share of those student debts.

What has been created is a bubble in which -let the reader not be fooled- it is not only the students who are left in debt, or those young people who were not able to get an education who suffer, but all taxpayers. The Federal Government does not produce money, it gets it from its citizens, and it is then given by the State -both in aid and by paying off loans that many students cannot meet- to pay for very expensive educational programs. Again: this comes out of taxpayers’ pockets.

Americans pay very high tuition fees and, in addition, they get the astronomical education debt out of their pockets through taxes or inflation.

The ultimate solution, even if many don’t want to touch the issue because it is too unpopular, is to eliminate government aid, which is the cause of the tuition fees increasing so much. Of course, the elimination of aid and subsidy loans and grants must be done gradually.

Imagine that you are standing in front of a food truck and a stranger stands next to you and gives you money to pay for your food. If the stranger increases the money he gives you, and the seller happens to be aware of this, he can then raise the price of the product he is selling, and he will do so. The vendor will not stop raising the price of the product until the stranger doesn’t hand you money in anymore. It is also clear that you will not be able to pay for his uncontrolled price increases any longer. That stranger is the government and the food seller are the universities. Since the universities know that the government will continue to put up money, they continue to raise tuition prices.

The only way to stop the theft of which all Americans are victims is to phase out federal funding for education.

Vanessa Vallejo. Co-editor-in-chief of El American. Economist. Podcaster. Political and economic analysis of America. Colombian exile in the United States // Vanessa Vallejo. Co-editora en jefe de El American. Economista. Podcaster. Análisis político y económico de América. Colombiana exiliada en EE. UU.

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