8 Reasons College Tuition Is the Next Bubble to Burst

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Tuition has been increasing at such an alarming rate that some say we’re witnessing yet another bubble in America — this time not in the stock market or in housing, but in college tuition.

Stephen Burd, of the Education Policy Program at the New America Foundation, explains in this interview how federal student loans became non dischargeable in bankruptcy in 1998, and then private loans became non dischargeable as well in 2005. Taken together, these laws mean that students who are overpaying for degrees now with borrowed money will suffer the consequences for life.

Here are 8 reasons to believe we’re in the middle of a college tuition bubble (that’s about to burst).

1) Tuition is, and has been, increasing at double triple the rate of inflation

On average, college tuition increases at around 8 percent per year, which means the cost of college doubles every nine years. Because colleges know that students will simply borrow more money to cover tuition increases, colleges have been relying on steady tuition hikes to solve all of their money problems. If this continues a college degree will soon cost as much as a house.

2) Students are borrowing more than ever to pay for college

The number of college students graduating with over $25,000 in student loan debt has tripled in the past decade alone. Today, 66% of students borrow to pay for college, taking on an average of $23,165 in debt. Twelve years ago, 58% borrowed to pay for college, taking on only $13,172 in debt.

3) For profit colleges are paying homeless people to take out federal loans to enroll

Because student loans are so easy to acquire, enterprising colleges are paying homeless people to enroll. The math makes sense when you think about it: if paying someone a $2,000 “stipend” gets the college $20,000/year in tuition courtesy of the federal government, that’s money well spent. Unfortunately, many people who accept such “stipend” offers never graduate, become overwhelmed with student debt, and destroy their already bad financial records.

4) Colleges are on a non-teaching staff hiring spree that far outpaces enrollment

Why hire a full-time professor when you can hire an “environmental sustainability officer”? According to the a New York Times article, over the past two decades colleges have doubled their non-teaching staff, while enrollment has only increased by 40%. Often times staff members have exotic duties like monitoring environmental sustainability, or their focus is on student “lifestyle.” Economist Daniel Bennett, who conducted this study, says u201CUniversities and colleges are catering more to students, trying to make college a lifestyle, not just people getting an education. There's more social programs, more athletics, more trainers, more sustainable environmental programs.u201D Of course, much this exotic hiring and lifestyle catering is made possible by student loan money.

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