When I began conducting research on this topic, I soon felt foolish for believing I could  contribute truly meaningful insights to a social issue most educated scholars and policymakers have difficulties answering. As a college senior eight weeks from entering the workforce, the stresses of financing a college education are still vividly fresh in my mind. A first-gen college student, the nuances of completing forms such as the FAFSA, CSS Profile, Income and Expense forms, etc. were quite difficult for me. The lack of clarity as to whether I completed these forms correctly left me in a constant state of worry. With the US is in an election year, many politicians reference the “student debt crisis” and the debate continues as to how we should nationally finance university education for all. I aspired to research this topic, in some fashion or another, to provide a level of empirical analysis to find what are the real drivers of the dysfunction in financing postsecondary education. Naturally, there are hundreds of peer-reviewed articles written on this topic, and most focused on specific areas of college financing instead of the system as a whole. For these reasons, this paper now is by no means complete, and will surely never be. What I have published here are what I believe to be the most relevant commonalities among the papers I researched. As my research continues, I will edit this paper accordingly. To be clear, my intention was to explore many of the questions American society has about paying for higher education. For example: should the US follow other nations and completely subsidize a college education (make college free)? Is our current system truly inhibiting aspiring college students from attending college? For those who do attend college, is difficulty of repaying the loans bringing into question the efficacy of a college degree increasing earnings potential? Finally, how can we fix this system? What I have found, and what I will argue are the reasons for the flawed higher education system are the following: The lack of transparency in all forms of college financing, whether it be financial aid or university reporting is creating a massive barrier in our ability to properly assess and fix the student loan debt issue, whether it exists or not. Current academic studies on student loan effects lack empirical evidence, sticker prices vs. net prices of university tuition can mislead prospective students, and media outlets often deceive the public by overdramatizing the student loan crisis. Finally, the lack of financial advice for young students making such a large personal investment in education also deserves blame for the issue we face today.

To begin, It should be clear that making college completely free to all would be a misuse of our country’s financial resources. This is due to the largest demographic of college attendees are those who do not have as much trouble paying for it. If we unquestionably make a college education free, the students who do not need the subsidy will be the ones to benefit most from it. It could not be summed up better than Matt Bruenig has, “At age nineteen, only around 20 percent of children from the poorest 2 percent of families in the country attend college. For the richest 2 percent of families, the same number is around 90 percent” (Bruenig 2). Why should the federal government provide such massive subsidies to families who are not in need? Forgoing such a massive overhaul in the education system and instead using the saved funds to invest in other struggling governmental programs would be more cost effective. However, we should invest in making college attainable and stress-free for the lower-income families who need it most, which is far less than the bulk of students who would unnecessarily receive these subsidies should college be free.

Despite the fact that I am not for completely subsidizing a college education, I will present reasons why it should be unequivocally attainable for any person, from any background. Due to technological change, employer preference, etc, it is nearly impossible to have a meaningful career without a college degree. In recent years, demand for high-skilled jobs mostly related to technology have increased along with demand for low-skilled jobs; while demand for middle-skilled jobs have decreased during this time. Philip Oreopoulos and Uros Petronijevic, attribute this to the fact that machine automation has rendered those employees obsolete (Oreopoulos and Petronijevic 50). This evidence could lead one to believe that a major reason for the shrinking middle class and rise for the 1% in the US is mostly due to the rise of technology and lack of educational attainment following suit by Americans. If we were to encourage educational success with much higher subsidies for education, would this begin to ease the gap of income inequality? Not necessarily. There is sufficient evidence that technological change is NOT the sole driver of the college premium, if we look at the book- Academically Adrift: Limited Learning on College Campuses: the book asserts that lesser study time and grade inflation have hampered a college education’s ability to really drive students to develop new skills (Arum, Roksa 2010). Additionally, according to the signaling hypothesis presented in the book, students do not acquire marketable skills while in college, but merely use their college degree to signal to employers that they have some type of intangible ability over lesser educated individuals (Oreopoulos, Petronijevic 53).

What we can synthesize thus far on the necessity college education is the following, there is no doubt that technological change has sparked many new careers, which place these college educated individuals with technical degrees to an advantage (in that they have the highest lifetime earnings of any other college degrees). However, the growth of technology does not fully explain the reason for the exponential growth in the essentiality for a young person to attend college. For those not in technical fields (e.g. liberal arts), where their skills are less tangible, signaling becomes extremely important. According to an Armed Forces Qualification Test (AFQT) study, employers are much more comfortable hiring individuals that are transparent in their skills and abilities (college grads show this through transcripts, university attended, extra curriculars etc.) (Oreopoulos and Petronijevic 54) . Despite the fact that high school educated individuals and college graduates may have the same skill sets, an individual with only a high school diploma will not be of interest to the employers who want to know exactly what the skills of these new hires are. For this reason, making a college education more attainable is critical to help less financially equipped students signal their credentials to potential employers. As many people know, college educated workers usually make much more money than their less educated counterparts of similar job title in the workplace. A study by the Georgetown University Center on Education and the Workforce shows how within certain occupations, employers pay employees based on the level of education they indeed have. So it is not to say that higher educated people are necessarily preventing the lesser educated individuals from finding work, but they are indeed being paid much more.

Before a new financial aid program could be implemented, or restructuring of our current ones, in-depth due diligence must be taken to force universities to thoroughly report the actual cost of attendance. At this point, the lack of transparency in the university environment is creating a massive disconnect in our nation’s ability to properly assess whether providing a highly subsidized university education would be an effective endeavor. The California State University System has taken these concerns over college reporting and created the Voluntary System of Accountability (VSA)- the nation already has a universal VSA of its own, but the CSU VSA was created to set stricter standards of financial reporting, which will then be made available to policymakers and taxpayers (Alexander 443). It seems, the CSU VSA would be a proper structure for the entire nation to follow to ensure that we have enough data to make a properly informed decision on how the federal government should treat education moving forward. The VSA includes information such as: undergraduate student debt, data on degrees granted, economic diversity and degree completion. With this type of information provided from every university public school system. We could have the ability to take an informed look at how many students are getting into debt, how many are dropping out, what demographics are dropping out, etc. This information is dire as we could begin to realize the scope of how difficult it is for young people to pay for college.

Many factors go into deciding how a student should finance their college education: university of choice (public or private, in or out-of-state), degree completion, future occupation, etc. However, the the actual cost of tuition (In 2011, $2,490/year at a public university; full degree completion $9,960 – $12,450) and found that it is indeed quite low in comparison to the average income of college grads to high school grads ($56,000 and $32,000, respectively) (Oreopoulos and Petronijevic 59). Other researchers assert that the main reason for societal aversion to taking out loans are due to inaccurate reporting my various media outlets (Avery and Turner 21). In fact, there is such a high level of misunderstanding with students and parents that,”high school students overestimated the tuition cost of public four-year institutions by 65 percent; their parents, by 80 percent” (Oreopoulos and Petronijevic 59). Here again, lack of transparency in the university system and false media reporting has contributed to this anxiety on investing in a college education. A 2012 study by Christopher Avery and Sarah Turner found evidence that some students indeed borrow too little and therefore do not attain an appropriate level of schooling. Given these circumstances, we can be lead to believe that financing is not the issue, and if we are to make college more attainable for the masses, a substantial investment in the education of actual costs and the ease of borrowing should be considered. Furthermore, we have proof that despite hikes in college tuition and fees, the relative amount of students enrolling has remained constant. In summer of 2009, the University of California system lost $800 million of funding, and as a consequence passed these expenses onto students, but saw no subsequent drop in applications (O’Leary, 2009). Other school systems have done this as well, but there is not any evidence that schools lose in attendance numbers as a response. Even if they did, the minimal loss in student revenues from those not enrolling is extremely offset by the large amounts of higher tuition-revenue from the tuition hike. As stated previously, students enrolling in college remains relatively constant among all institutions, however, one paper shows that this is not the issue: the issue is the number of students who do not complete their degree, and are then left with five-figure amounts of debt to pay back with no additional income (Dwyer, Mcloud, Hodgson 2012).

Thus far, it appears that many people suffer from a lack of education on how to properly take on financial debt, which thereby hinders their ability to reap financial success of postsecondary education later in life. However, there is a responsibility for public policymakers to create a framework of sorts, which would analyze the cost benefit analysis of students taking on a certain amount of debt, and looking at their prospective college degrees and career paths. Many experts firmly believe that these factors play a major role in a young person’s decision to attend college, and more importantly finance it. A 2009 study found that, students who received assistance in completing, and knowledge of the FAFSA were 25% more likely to attend and complete a college degree, why cannot we invest in programs to provide students this level of knowledge when making such a large financial decision (Bettinger 2009). Does such a complicated form transcend an individual’s investment in a post secondary education? No. But the research proves it indeed does. Personally, I never received any help when completing my FAFSA OR CSS Profile, both highly intricate documents for a young and low-income individual to fill out. Investing in a program for this would undoubtedly be cheaper than subsidizing the entire education system.

After researching my first few peer-reviewed journal articles, it was overwhelmingly apparent that a lack of clarity is majorly affecting our nation’s ability to properly analyze the benefits of attending college. If this assertion is true, we all must be rational; attending a postsecondary education is one of the most important decisions a person will make in their life, and it no doubt will affect the rest of their life. So why are there such inadequacies in the amount of information a young person is afforded when making such a large financial decision? Would the CEO of a large multinational firm give the greenlight to acquire another firm without having absolutely every amount of information possible? Because they need the utmost of due diligence to make proper financial decisions. If the most successful and educated people in the world demand this level of financial assurance, then why cannot all college prospective students be afforded this as well? When making the decision to attend college, we must look at it as a business decision. As I have learned during my time studying business, any decision that does not yield a company a positive financial return is a decision that should not be made. This may not necessarily be true for all individuals, take for example, an aspiring artist who would like to attend a famous private university, at a base tuition of about 50k$ a year, it is unlikely an arts major would have an easy of a time paying this debt back as an engineering major. Does this mean we should ignore our aspirations? Not necessarily, but an aspiring artist with an inability to pay such high tuition should know every financial aspect of the decision they are about to make; this may sound obvious, but the level of student loan confusion in the US proves it is obvious not a universally known fact. We know, students who have Science, Technology, Engineering, Mathematics (STEM) degrees are to earn significantly more than those who do not, so we should do something to ensure that those who partake in fields with lower earning degrees should be aware of what they are getting into, or be diverted from the decision.

As stated previously, a public education should be free for all, but an education should be stress-free for all. Clearly, taking on average amounts of debt can increase a student’s chances of completing college, and if we invest in a program to properly educate lower income students on how to properly manage debts, we could push this number higher. Perhaps, an algorithm of sorts could be created to properly assess prospective students for their ability to properly pay back loans. A Princeton University paper supports this claim that aid can be extremely effective, but only if we create, “well-designed programs producing large increases in college attendance and completion” (Dynarski and Scott-Clayton 86). If students are really dropping out around junior year due to concerns over rising debt, a roadmap of an entire four-year education would be helpful for students to have an idea of the financial stress to expect after school. Such program would need to be highly thorough, and incoming college students have enough stress to deal with; educating them on how to properly manage debt could increase these stresses even further. It may be more cost effective to subsidize education more heavily altogether at the current levels we know to work now. I do not believe debt is that actual issue for seeming crisis we have in the US today, but instead a lack of education, and particularly for students coming from low-income families. The question is: how do we reach these students? Clearly, the programs we have in place now are not working, and costs are going to come from somewhere whether we invest in financial education or higher subsidies? Which one is it? Nothing is wrong with students taking out debt while in college, after all, we are intentionally forgoing joining the workforce for what we know is going to pay off later with higher income due to our degree. The issue we must not ignore is that students and families are still struggling with ultimatum to take on this debt, and it is our social duty as a nation to help these individuals. Baum, McPherson, and Heller articulate why subsidies should be increasing below:


Expanding enrollments are a public good that should perhaps be subsidized to a greater degree than in recent years, especially with grant aid to less advantaged students. The current trend, however, is declining state subsidies and increasing private debt tuitions (Baum and McPherson 2008; Heller 2008).


We now see that loans can appear to be non-intimidating as a student begins to take them out early in their college career; as they move through college, anxiety may arise as they begin to question if they will in fact be able to repay these sizable loans. This implies that the largest detriment of student loans is that they have they do not necessarily deter students from attending university, but they certainly can inhibit students completing school (Bowen, Chingos and McPherson 2009; Buchmann and DiPrete 2006). The authors’ paper shows that low-income individuals are beginning to more commonly drop out of school after their debt increases over $10,000. If students are beginning to drop out of college once accruing debt around $11,835, the real issue again appears to be a lack of education on the student (Dwyer, Mcloud, Hodgson 2012). Not that this is their fault, they are young people, and young people have rarely seen debt balances exceeding these sums of money. But students incurring debt up to around this $10,000 balance does help them graduate; so it seems a proper balance between appropriate debt and education could be a promising solution.

Despite that it appears so far that the actual student loans are not the issue, there are experts who disagree, and argue the national debt crisis is genuinely real. In the academic paper, The Burden of Borrowing, the authors quantify the severity of the crisis,


More than 39 percent of student borrowers graduate with unmanageable debt (over 8% of their gross income goes towards debt service), but lower-income students borrow significantly more than their higher-income counterparts and have a more difficult time with loan repayment (King and Bannon 2002)


This data directly contradicts other research already referenced in this paper (Oreopoulos and Petronijevic), which claims college graduates earn around $56,000 with only about $12,000 to pay back in loans. Payments on a $12,000 loan for an individual with an annual salary of $56,000 would be far less than 8 percent.. We cannot forget these claims present now are going on 14 years old, so more research is necessary to find if the validity holds true today as it did then. Even still, if in fact, 39% of student borrowers do rise to this level of debt, there is indeed a glaring issue with the cost of attending college. Furthermore, the authors of the paper, Debt and Graduation from American Universities, acknowledge the research on debt has not materialized into reliable research and the contradictory evidence unveils both positives and negatives of the student debt (Dwyer, Mcloud, Hodgson 2012). What we see here is that, clearly, this data shows us that college must not be as attainable overall as Oreopoulos and Petronijevic’s article. Due to the nature of how the US government solved the problem of the “College for All” campaign- high tuition, some grants, and higher loans have stagnated our nation’s ability to graduate more students. This is proven by the fact that completion rates have not grown near as quickly as enrollments have.

Evidence continues to mount that the bureaucracy of the American education system has made it incredibly difficult for families, especially low-income, to fully estimate the actual cost of college. Again, the actual cost of attending college is not the issue, but the manner in which we go about it. The potential solutions for this issue begin to extend beyond the scope of this paper, but the problem is becoming increasingly apparent. The lack of empirical evidence on the effect of educational loans students use to pay for college is affecting our ability to fully assess the situation. Before our government can even begin to think about possible solutions, we must first be confident on what the actual influence student loans have on attendance, completion of school, and graduates ability to pay back the loans. I have presented evidence in this paper the effects of loans on students staying in school, but as this data still appears to be in its infancy, the future outlook on the eventual solution to financing college education remains uncertain.



Works Cited


Alexander, F. King. “Maintenance of State Effort for Higher Education: “Barriers to Equal Educational Opportunity in Addressing the Rising Costs of a College Education”” JSTOR. University of Illinois Press, Apr. 2011. Web. 25 Feb. 2016.


Avery, Christopher, and Turner, E. Sarah. “Student Loans: Do College Students Borrow Too Much—Or Not Enough?” Journal of Economic Perspectives 26, no. 1 (2012): 165-92. 23 Feb. 2016.


Baum, Sandy, and Michael McPherson. 2008. “Introduction,” Pp. 1-7. The Effectiveness of Student Aid Policies: What the Research Tells Us. Sandy Baum, Michael McPherson and Patricia Steele, editors. New York, NY: The College Board. 5 Mar. 2016.


Bettinger, Eric P., and others, “The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment,” Working Paper 15361 (Cambridge, Mass.: National Bureau of Economic Research, September 2009). 17 Feb. 2016.


Bowen, William G., Matthew M. Chingos and Michael S. McPherson. 2009. “Crossing the Finish Line: Completing College at America’s Public Universities”. Princeton University Press. 17 Feb. 2016.


Buchmann, Claudia, and Thomas A. DiPrete. 2006. “The Growing Female Advantage in College Completion: The Role of Parental Resources and Academic Achievement.” American Sociological Review 1 1 (4) : 5 1 5-4 1. 17 Feb. 2016.


Carnevale, Anthony P., Rose, Stephen J.,  and Cheah, Ban, “The College Payoff: Education, Occupations, Lifetime Earnings, report prepared for the Center on Education and the Workforce” (Georgetown University, 2011). 23 Feb. 2016.


Dwyer, R. E., L. Mccloud, and R. Hodson. “Debt and Graduation from American Universities.” Social Forces 90.4 (2012): 1133-155. JSTOR [JSTOR]. Web. 21 Feb. 2016.


Dynarski, Susan, and Judith Scott-Clayton. “Financial Aid Policy: Lessons from Research.” NBER. futureofchildren.org, Apr. 2013. Web. 22 Feb. 2016.


Heller, Donald E. 2008. “The Impact of Student Loans on College Access,” Pp. 39-67. The Effectiveness of Student Aid Policies: What the Research Tells Us. Sandy Baum, Michael McPherson and Patricia Steele, editors. New York, NY: The College Board. 3 Mar. 2016.


Hemelt, Steven W., and Dave E. Marcotte. “The Impact of Tuition Increases on Enrollment at Public Colleges and Universities.”JSTOR. American Education Research Association, Dec. 2011. Web. 23 Feb. 2016.


King, Tracey, and Ellynne Bannon. “The Burden of Borrowing.” (n.d.): n. pag.PIRG. PIRG, Mar. 2002. Web. 3 Mar. 2016.


O’Leary, K. (2009, July 18). California’s crisis hits its prized universities. Time. Available at http:// http://www.time.com/time/nation/article/0,8599, 191 1455, 00.html. 19 Feb. 2016.
Oreopoulos, Philip, and Uros Petronijevic. “Making College Worth It: A Review of Research on the Returns to Higher Education.” (2013): n. pag. JSTOR [JSTOR]. Web. 28 Feb. 2016.