Index IntroductionIncreased DemandThe Rise of FundersMore Fun, More FundsPossible ObjectionsConclusionIntroductionCollege tuition has been rising at a rate faster than people believe to be sustainable. This has led to overwhelming student debt in America, which has reached levels so high that some are calling it the “student loan crisis.” Many people blame the greed of universities and student loan providers for the high prices. However, it also has a lot to do with the simple laws of supply and demand as they relate to the supply and demand of a college education, the increase in money to pay for school, and the competition for students among college. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay One of the biggest problems facing American students today is the ever-increasing cost of attending college. The issue of student loans and their repayment is a very polarizing political issue in the United States today, as total student loan debt pushes higher and higher, reaching $1.56 trillion as of February 2019. Today there are over 44 .7 million borrowers, who each owe debts ranging from $1 to well over $200,000. People are pushing for various solutions, ranging from keeping things as they are to having college tuition completely covered by the government. With tuition rising year after year, often at a rate faster than inflation or the Consumer Price Index, many people are wondering how to pay for college, need to resort to increasingly large and unavoidable student loans, or they fail to attend college. Neither of these options is preferable, as high debt delays the time when people can afford to make major purchases, such as a home, or invest and save money for retirement, and not having a college degree leads many people to never be able to capitalize. how much they could earn in their lifetime. The question that arises is: what made college so expensive? With so many programs around today to help people afford college, such as federal or work-study grants, scholarships, need-based state grants, and more, why are people increasingly unable to afford college ? This is not a single-cause problem, as there are many things that have helped lead to the avalanche of debt people have to take on to afford college. Some might say it is the universities' fault for being greedy, even if they are not for-profit universities. Others say it's the borrowers' fault for taking out more loans than they could handle and perhaps not working hard enough during college to avoid that mistake. Instead of pointing fingers, it's better to find degrees of truth in people's statements. College tuition has increased dramatically due to increased demand, increased lenders, and college competition for prospective students. Increase in demand Two basic concepts of microeconomics are the laws of supply and demand. Simply put, the law of supply states that as the price increases, suppliers will supply more of the product. This is a positive correlation. On the other hand, the law of demand states that as the price increases, consumers will consume less of a product, which is a negative correlation. Typically, an increase in both supply and demand will increase the quantity of a good supplied, while the price remainsrather stable and sometimes indeterminate. However, there is not an infinite supply of places, so more space needs to be created or more colleges need to be built. This requires more educated professors, a small group of people who can command higher salaries. William Baumol and William Bowen, in their 1966 book Performance Arts: An Economic Dilemma, wrote about a process known as “cost disease.” The basic premise is that prices of services rise rapidly because they follow the trend of service sector costs rising faster than the cost of producing most goods. University professors, not being able to produce a greater capacity, cause costs to increase over time. Because there is a greater demand for college professors, they are able to charge more for their services. Furthermore, due to their limited production capacity, universities have to hire more teaching assistants to assist professors. While this is a cheaper option than hiring more professors on an individual basis, they cumulatively add to the cost paid to a college's workers in wages. Students want a quality education, and so, to attract high-quality professors, colleges often must have high salaries offered for those professors. In Tuition Rising, Ronald G. Ehrenberg writes about how “central administrators want their [professors] to be paid generously” to both “attract and retain high-quality faculty.” However, “absent the desire to reduce the number of faculty and staff at an institution, there is an inevitable trade-off between administrators' efforts to moderate the rate of tuition increases… and to provide generous salary increases to faculty.” . Increased demand leads to the need for more professors, which can saturate the market, so to keep staff happy, salaries are increased, which in turn increases tuition. A college education hasn't always been affordable for many people. In The Student Loan Mess, Joel Best and Eric Best explain how education, even K-12, was seen as “a private, individualistic affair; if you wanted your child to get an education, you paid… all the way through college.” However, a more informed population is more beneficial to society. “More education reduces all kinds of social problems: educated people live longer, are healthier, have more stable families, are less likely to get into trouble with the law... more education benefits individuals at the same time as which benefits the community". And so, as time went on, the state and federal governments began to build public schools, and they required education up to a certain point, at first only up to the eighth grade, and today up to the age of sixteen or seventeen in most states. Many people were educated to a certain level that increased as time passed, but college remained elusive to those not wealthy enough to afford it or to the private tutors needed to get the grades for entry. However, this was about to change, and the event that contributed most to the increase in college enrollment was President Franklin D. Roosevelt's passage of the Servicemen's Readjustment Act of 1944, more commonly known as the GI Bill. Veterans benefits were not a new idea. In The GI Bill, Glenn C. Altschuler and Stuart M. Blumin write about what veterans have received in the past. “Veterans' benefit laws went back at least as far as the measure adopted by the Plymouth colonists... to retain for life any maimed soldier in the colony's service. Virtually every military conflict... has produced at least one lawon veterans' benefits." The difference is that these benefits almost always took the form of pensions. Furthermore, they were paid only to soldiers disabled during service or to the families of deceased soldiers. The GI Bill allowed all veterans access to benefits once their service ended, from health care to affordable housing to access to college education through subsidies. 120 Years of American Education, a study conducted by the National Center for Education Statistics, shows the huge jump in bachelor's degrees awarded by institutions of higher education. There is a small increase in the 1920s, when “young people complete high school and consequently become eligible for college admission,” but the real increase occurs with the passage of the GI Bill. Between the 1945-46 and 1947-48 school years, the number of bachelor's degrees awarded doubled, from 136,174 to 271,186, and continued to grow rapidly. It occasionally slowed down during wars, but always came back, stronger than it started. America now had more access to college than ever before, and college fever wasn't going to abate anytime soon. The rise of lenders Many students resort to taking out loans to pay for their studies, as the cost is often too high to pay out of pocket. Borrowers have no doubt heard of Sallie Mae, one of the largest student loan providers in the country. It was founded as a government-sponsored enterprise in 1972. Their purpose was to provide loans to students since "students rarely have an established credit record or considerable assets", making them unattractive to commercial lenders. A market had opened up, with millions of people looking for money, and Sallie Mae stepped in to fill that gap. At first, Sallie Mae had access to low interest rates from the Federal Financing Bank until 1984, and when these ran out, they replaced this benefit with the Treasury Department allowing Sallie Mae access to variable interest rates for periods up to 15 years. These advantages, among others, helped Sallie Mae's capital grow rapidly, from $300 million in assets in 1975 to $39 billion in 1990, a monumental increase of 13,000 percent, while the S&P 500 Index and the US GDP increased by only about 470% and 341%. respectively in the same period. Eventually, Sallie Mae went private and took with it the huge amount of money and name recognition it had acquired over the years. One problem that lenders faced from the start was the risk of borrowers filing for bankruptcy to pay off the debt. they had matured. In Student Loans in Bankruptcy, Duke Chen writes “the most often cited reason for making student loans non-dischargeable is to prevent fraud. The legislative history of the Bankruptcy Reform Act of 1978 contains warnings that making student loans forgivable would be 'almost specifically designed to encourage fraud.'" To ease lenders' fears of non-repayment, "In 1976, Congress amended the 'Higher Education Act of 1965 prohibiting borrowers from paying off student loans through bankruptcy during the first five years of their repayment terms; in 1990, the ban was extended to seven years.” However, as credit card debt mounted, bankruptcies continued, and so Congress passed the Higher Education Amendments of 1998, which “made [government] student loan debt nondischargeable through bankruptcy unless the debtor could overcome the relatively high hurdle of demonstrating undue hardship.” Chen writes that “in 2005, theCongress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which amended the Higher Education Act of 1965 to make private education loans non-repayable, when previously it only applied to government loans.” With the passage of that amendment, borrowers now no longer saw their loans treated as unsecured loans, but as secured obligations, such as alimony, child support, and criminal fines. More Fun, More Funds As more and more people compete to go to college and have access to the money to attend those universities, universities now have to compete to get those prospective students. While there is still an admissions process and not all students can get into the college they want, students now have more options. As a result, universities must now do everything they can to appear more attractive. In American Higher Education in Crisis, Goldie Blumenstyk briefly discusses the beginning of U.S. News and World Report's publication of college rankings, beginning in 1985. “As critics of U.S. News have noted, its rankings are heavily influenced by factors directly linked to university spending. For example, by spending more on merit aid for top students, universities can improve the academic profile of their student body, which helps them move up the rankings.” There are other places to find college rankings, like Niche, but US News is seen as “the most influential [ranking] of American colleges.” In his book Breaking Point, Connell says colleges suffer from a “services war.” Even during the recession, university spending on infrastructure construction increased dramatically. “When averaged overall, the cost of university infrastructure projects has increased…with an average annual increase of 25%…since 1997.” These are increases in spending on buildings such as libraries, science buildings and residences. And while these buildings may be necessary, as they are built and renovated over the years, this comes at a huge cost to each student's tuition. These costs are not in vain, however, as prospective students want to know a college's educational standing relative to its peers, as well as the cost of attendance. This leads to increased spending on infrastructure along with increased competition among colleges. In addition to spending on academics, universities have also increased spending on more “luxury” items that are unrelated to the quality of education they offer. As stated in Breaking Point, these include items such as “student activities, cultural events, intramural athletics. .. intercollegiate athletics… and college stores.” While they may not seem like high-ticket items at first glance, they often require much larger and more expensive buildings to house them, such as various athletic facilities for intramural athletics and intercollegiate athletics. These buildings help increase the already higher cost of infrastructure that universities apparently need to compete with others in their peer group. Students value a quality education, but that also coincides with the value placed on the extra things a campus has to offer. In a study conducted by the Delta Cost Project, the authors attempted to determine how students evaluate “academics, costs, and social services” in a college setting. They found that students tend to “value institution spending in terms of consumption…but do not value education spending.” This explains why, although colleges may be increasing spending on academic factors, they are also increasing spending on non-academic factors. Since many colleges.