When boomers complain that they paid for college and why can’t kids do the same today?
College costs have grown 2.7 times as fast as incomes (and for low-income students, it is even worse)
Yes, in 1970 college was very affordable but since 1970 college costs have grown 2.7 times as fast as median personal income.
A 4-year public college cost $1,432 in 1970. That’s not per year, that is the total cost of college for 4 years. By 2022, a 4-year public college now cost $38,342. Over the same time the median personal income grew from $4,550 to $46,001.
But the boomer says “You should take loans like we did”
In 1970, a student paying for college themselves paid 4% of their income towards student loans, now it is 11% for the same education
But what about loans? If a student took loans out for entire cost of college, in 1970 their monthly loan payments would have been just over $15 or 4% of their income. In 2022 those same loan payments are $427 per month, almost tripling to 11% of their income.
Ok, it’s higher but paying 11% of your income doesn’t sound that bad right? But 11% is almost 6 weeks of pay and you have a lot other costs. Take somebody that graduated and gets an offer for $60,000. That $60,000 turns into $50,000 immediately as taxes average around $10,000. Then your other major costs to live:
- Healthcare insurance is $1,300 / month
- Rent $2,000 / month
- Food $300 / month
- Car payment, insurance, fuel, and maintenance averages $830 / month
- Utilities average $390 / month
Total these up and this graduate has over $57,000 of annual expenses on top of their student loan payment.
But people will say “we had all these costs too”. Well, just like education, these costs have grown much faster than wages over the past 20 to 30 years: healthcare costs have grown 1.4 times faster, rent twice as fast, food 6 times faster, car costs 1.8 times, utilities 4.2 times.
It’s not the same as when you were graduating Uncle Dennis and Aunt Linda…
And if they talk about how they had no money and paid their own way…
In 1970, a student could work a minimum wage job over the summer and save twice what college costs… now that same kid would need to work all summer plus 21 hours per week all year
Education is supposed to be the primary way people attain the American Dream but for the bottom income earners, the story is even worse. Lower-income workers have had their income grow even slower – the bottom 40% of income earners have had their income grow 7% slower than the median wage earner.
When boomers complain about the minimum wage, point out that in 1970 a worker making the minimum wage of $1.60 per hour could work for 3 months over the summer and save almost twice the cost of a year’s worth of college ($748 of income over twelve 40-hour work weeks vs. an average cost of $358 per year for a public university).
That same minimum wage-earning student in 2022 makes $7.25 an hour and would save $3,480 over a 12 week summer. That comes nowhere close to covering the $9,606 average annual cost of a public university and would require that student to work 21 hours per week during school and through the rest of the year.
Sorry Grandpa Walt, we don’t want to hear about your summer job pumping gas.
“But there is so much financial aid” they say next…
Oh yeah, financial aid is worse now too.
Pell grants for low-income students covered 80% of the cost of college in the 1970s, now it is 25%
Pell grants, a federal student aid program for lower-income students, have not grown as fast as inflation and have far trailed the rising cost of college. In 2023, Congress has approved an increase of $400 per year in the maximum Pell grant, from $6,495 to $6,895.
So, for those boomer relatives that were lower income and paid for college themselves, the story is even more skewed when you take into account Pell grants. For a student in the 1970s that received a Pell grant and took loans for the rest of costs would pay $38 a year to repay their loans, or 0.87% of their income. In 2022, that same student with a Pell grant would still pay almost $3,600 a year in loan payments, or 7.8% of their income.
This is what happens when you complain about more education funding Aunt Shirley.
“But we shouldn’t give these handouts to people”…
Biden has proposed significant student loan forgiveness, up to $20,000 based on income qualification. This has many of our boomer relatives yelling “socialism”. Meanwhile when they yell “socialism” they aren’t even using the word correctly – socialism is when the means of production are owned by society, but I will ignore it and allow them the connotative use of the word.
Biden’s proposal would cost around $30 billion a year. Intelligent people can have conflicting views on if this is good or not, right or not – a society needs to decide how to use government resources.
But what people cannot do is complain about this and stay silent on other “handouts”. Handouts like $40 billion every year in subsidies to agriculture and energy… over $40 billion per year in benefits to the wealthiest Americans due to something called “stepped-up cost basis” which allows them to avoid paying taxes on capital gains through an inheritance… and $23 billion per year in something called the “pass-through deduction” which allows certain corporations to avoid taxes by passing income directly to the corporation owners.
If you don’t like the student debt forgiveness but stay silent on all of the others, guess what, you are a hypocrite Grandma Peggy.
In economics there is a term called “public good” which means something that benefits society as a whole and generally won’t be provided by the private sector without the government stepping in. Roads and national defense are the classic examples – they wouldn’t “just happen” by private companies. But what you consider a public good is not black and white, it is a valid debate that societies need to have.
Many will say the agriculture and energy subsidies above benefit the country and economy and they do to some degree. But for mature and profitable industries (which these are), subsidies are generally not required. Is educating the population affordably in the interest of a society? I’m not sure anybody would say no. But the view of our boomer relatives of “well, I had to pay so you should too” is like saying “I got into the club, now lock the door behind me”.
So to recap:
- College costs have grown 2.7 times faster than incomes
- It took a student in 1970 taking loans for the entire cost of college 2 weeks of working to make the loan payment, now those same loans take 6 weeks of pay
- College is even more inaccessible for low-income students because grants used to cover 80% of college costs and now cover only 25%
- A low-income student getting grants and taking loans in the 1970s needed to work for 2 days to pay their loan payments, now those loans take over a month of their pay
- All the other costs a new graduate has to pay like rent, utilities, healthcare, car, and food have also grown much faster than wages.