College loans could contribute to tuition hikes

It’s safe to say the hardest part to stomach about college is the tuition fees.

In order to combat the rising tuition rates, students engage in a staple ritual of college life: obtaining student loans.

Without them, most of us wouldn’t be able pursue a college career or afford the outrageous tuition. But most of us never thought one major culprit contributing to rising college costs may actually be the loans themselves, government-guaranteed student loans in particular.

College tuition increases all the time, and as we know, UC is no different, with a possible increase in tuition for the 2010-11 school year.

As it stands now, yearly tuition rates at UC for the 2009-10 academic years are currently $9,399 for in-state undergraduates and $12,723 for in-state graduates. Only a decade ago, yearly tuition rates were $4,998 for in-state undergraduates and about $5,880 for in-state graduates for the 1999-2000 academic year. Tuition has nearly doubled in 10 years; that’s a painful and significant difference.

So the more tuition goes up, the more loans students take out, which in turn will contribute to future increases, keeping the cycle going.

Peter Schiff, a free market economist and president of Euro Pacific Capital, said colleges and universities can continue to raise tuition fees to new heights simply because they know that students, through federal student loans, will pay them.

“See the problem with government guaranteed students loans is the universities get all the money, the students get stuck with the bill,” Schiff said in a recent video address on his campaign for U.S. Senate Web site. “Anybody who wants to go to school has access to the U.S. government cosigning their loan, so what happens is all the students bid against each other, they compete for slots in universities with government money and so they bid the prices up. There’s no restraint.”

Most of you reading this, myself included, would not be here if it weren’t for federal student loans. But by buying into the cycle, we are essentially contributing to the eventual rise in costs.

“Whatever the price is, they can cover it because they can get the loans,” Schiff said. “The universities know this. They have no incentive to reign in costs. Whatever they increase tuitions to, the students are going to get the money because the government is guaranteeing the debt, so prices always go up.”

It’s we, the students, who are entangled in this unfortunate tradition of borrowing money from the government and burdening ourselves with huge debts – while banking it all on the hopes of getting a degree worth all the insane prices we paid. So how do we correct the problem?

“What would happen if we immediately cancelled government-guaranteed student loans? Students couldn’t borrow money,” Schiff said. “Would that mean that they wouldn’t go to college, that the colleges would just have empty classrooms? Of course not. The colleges would immediately have to react to this drop in demand by slashing their costs and their overheads, so that they could bring tuition down to a level where people could actually afford to go.”

Sixty-seven percent of students who graduated from a four-year college or university had student loan debt in 2008, according to the Project on Student Debt. It also found that in 2008, the average level of debt for graduating seniors with loans rose to $23,200, a 42 percent increase from $18,650 in 2004.

A related burden we face is the increasing difficulty for graduates to find jobs with the degree that they just invested their time and money into. Having a four-year degree is no longer sufficient enough in many job markets, because more people are graduating than there are jobs available to them.

A generation ago, a simple high school diploma was all you needed. Now it’s increasingly clear that not even a four-year bachelor’s degree is the ticket to land the job you want; degrees are becoming one of the wrold’s most expensive pieces of paper. Increasing tuitions? Massive loan debt? The value of a college degree decreasing?

Loose the loans or keep on accruing all that interest? Let Jeremy know at daj8@mail.uc.edu.