As many College institutions were being founded in the early 1800’s, the costs were affordable.  For example, an Ivy League University’s annual tuition from Harvard or Columbia was in the range of $50 – $75 per year.   The tuition costs more or less remained the same until the early 1900’s, rising slowly until the end of WWII.  Culturally, College was also not perceived as necessary for everyone to have a successful career.  If they chose this path, it was very common even up into the 1970’s, for students to work hard at a part time or summer job to pay for their annual college costs. 

By 1947, Ivy League annual tuition costs rose to about $500, however, shortly thereafter, the rate of tuition increases began to accelerate and the culture of higher education began to change.  After WWII, the GI Bill was passed, which kicked off a major shift in how education was paid for.  The benefits offered a path to higher education paid for by the federal government.  The numbers of students enrolling in Colleges increased dramatically.  Colleges seized the opportunity to further raise tuition, knowing that the costs were being funded.  By 1975, an Ivy League tuition rose to about $5,000.

In 1965, the federal government also began guaranteeing student loans.  The intent of the program began with the idea as why work so hard during the summer to pay for your education because after you graduate you can easily pay off the loan.  The need for the loans to be guaranteed by the federal government was required as no bank would be willing to make a loan to a student without some form of debt guarantee.  Loaning money to students prior to this program was not a good business as we all know a student has no collateral.  However, for the program to pass, congress required that the loans could not be forgiven.  The student loan trap was set!

Colleges understood that students would have access to more money to fund their tuition.  They quickly began to increase their tuition rates.  By 2020, the cost of tuition and room and board at an Ivy League school has risen to $70,000 per year.  Costs at all Colleges across the nation rose in a similar way.  Today the average private College tuition, room and board amounts to $50,000 per year.  Students today expect to graduate with a four year degree from a private institution with over $200,000 of student debt.  If they chose to continue for another two years to complete an MBA program, they will tack on another $100,000 in loans. 

The students graduate and enter a job market where they are often unable to find a position that will cover living expenses.  In a weak job market, they may struggle in a low wage position as well as remain unemployed for periods of time.  The interest on the debt compounds even if they are not working.   In many cases as they cannot declare bankruptcy, they carry this debt for the next 20 to 30 years, with the amount owed increasing year over year.  Trapped!