Is the College Bubble Ready to Burst?

“The college bubble is going to burst!”  “You are going to have to pay so much for college!”  “You better begin saving for college soon.” These were statements that I heard growing up.  From a young age, I knew that if I wanted to go to college, I was going to have to pay a lot of money, and I would need to find some way to get that money.

For many college students, they use student loans to pay for college. With the enormous cost of college, this has led to more students relying on student loans to get through college, which has led to a student loan crisis.  Everyone knows that the student loan crisis is bad, but the student loan crisis is so much worse than many people think. Student loans have become part of society’s culture, causing the student loan crisis to get to its current point and to continue to worsen.  Many people do not realize the state of the student loan crisis, because they do not comprehend the intensity of how student loans are ingrained into our culture.

Some critics and personal finance influencers argue that the student loan crisis is building a college bubble and growing an epidemic in America. Collectively, there are upwards of 1.56 trillion dollars of student debt owed in America (source) as of December 2019. This issue is one that will eventually destroy the US economy. Additionally, people are living in fear and struggling to meet basic needs due to this epidemic. Change must take place. However, the change that needs to take place is highly debated.

Regardless of how you think the college bubble should be handled, student loans are a huge issue in America. Many ignore this crisis and consider it to be trivial and unimportant, because they believe it won’t apply to them. However, this is simply not the case. About 65% of college seniors who graduated from a non-profit university has student loan debt at the time of graduation (source). These debts average around $35,000 (source). Additionally, these statistics are concerning strictly those with a bachelor’s degree – they don’t include the huge amounts of money that those who receive graduate degrees owe. With most college graduates owing large amounts of money to universities, the economy will be hugely affected, therefore affecting every American’s life, whether they recognize it or not.

The Student Loan Debt Crisis

The student loan debt crisis is slowly destroying the American economy. With tens of millions of people in debt from student loans, the economy is weakened. We live in a world of scarcity, which simply means there are not enough resources, specifically money, to go around. When universities control huge amounts of wealth and the average citizen owes those universities money, the free-market hurts. Those crippled by debt cannot benefit the economy like it needs to be benefited. When one’s resources are continually going towards student loans, one cannot buy things from the average small business owner.

They must continually feed into the destructive cycle of corporations hoarding wealth while the typical businessperson struggles to make ends meet. Equilibrium is destroyed, prices are raised, the quality of goods and services is lowered, and the economy hurts. Everyone, whether a student-loan debtor or a retired veteran, is hurt by the harsh reality that is our student loan debt crisis.

According to Paul Glastris, whose Washington Monthly magazine does an honest annual assessment of college rankings, “we're on an unsustainable path that's increasingly burdensome for the middle class — and risky.”

Here are other reasons we think the college bubble is growing:

Tim Gouw | Unsplash

Colleges are in the Business to Make Money

The unexpected hidden costs of college increase the idea that student loans have become part of our culture.  College costs include many hidden costs, which we may not know what exactly they are, but have come to expect that they exist.

Coming into college, I knew there would be other costs besides the expected tuition, housing, food, and textbooks. But I had no clue how much they would be.

The other costs that I was required to pay include: “Activity, Services, Building & Recreation Fee”, “Health Facility Fee”, and “Technology Fee”, and “New Student Programs/Matriculation Fees”.  These costs alone added up to about $1,000 for one semester.

Taking away the new student fee for every other semester, if a student completes eight semesters of college, a college student will pay about $7,000 for these fees.

That adds up over time, contributing to a student’s need for a loan. Everyone knows that these fees exist and has come to expect these fees as they enter college. Before I came to college, my mom gave me several warnings explaining that I would run into these fees.  These extra hidden fees are not hidden anymore. They are expected.

They only increase the need for student loans, increasing the idea that student loans have become part of our culture. It shows that the student loan crisis has become a lot worse than people realize because we have come to expect it and we do not know anything different. The college bubble is growing.

Student's Getting Into Massive Debt is Now Normal

The college bubble has become a part of our culture because the high cost of college has become part of our culture.

College is very expensive.

At Iowa State, the in-state costs per semester are around $4,000, but out of state students and international students pay over $11,000 and $12,000!  That is a lot of money!

Many of my classmates in high school questioned whether to go to college simply because of its enormous costs. This gigantic cost has only gotten bigger, and if this trend continues, the cost will continue to skyrocket.  My parents tell me stories about how college was so much cheaper when they were in college compared to its price for me now. They say how one year of college for me will cost more than all four years costed them.

Because of this high cost, it is assumed that people are more likely to be still paying off their student loans into their twenties than to have all of their loans already paid off.  This huge cost of college has become part of our culture. With the large cost of college, this increases the number of students taking out student loans, which worsens the student loan crisis and further ingrains it into our culture.

As the costs of college increases, it will cause the student loan crisis to continue being ingrained further into our culture, which will continue to make the college bubble worse than people realize.

Burdening College Debt is Now a Joke

The student loan crisis is shown to be a part of our culture through its presence on social media.  Go to Google, search “student loan memes”, and you will be greeted with thousands of images poking fun at the student loan crisis.  The same thing will happen if you try googling “student loan graduation caps”. Whether it be a meme or by putting a joke on their graduation cap, the idea is the same: it has become so bad that it seems that the only way people can cope with it is by making fun of it.

These memes or jokes have become normal, but the fact that they have become so normal distracts from the real problem: the fact that because these memes and jokes have become so normal has caused them to become part of our culture. This distraction stops people from noticing the true problem, and it stops them from understanding that the student loan crisis is a lot worse than they realize.

The Effects on the Economy

college bubble
Markus Spiske | Unsplash

More importantly than how the economy is affected by this epidemic, we must look at how individuals are affected.

When tuition is astonishingly high and students are continually having to take out loans and go further into debt, it creates a culture that is limited to looking only one step ahead. Students now have to use side hustles on top of their post-grad job (if they are lucky to find one) to help pay down debt.

This inhibits creativity. When one’s vision is blocked by a seemingly insurmountable pile of debt, one cannot dream. They are simply stuck, living in a culture of fear. Fear of living an exciting life, fear of taking chances, fear of creating new things. Not only will America’s growth be inhibited by this culture of fear, but individuals will live their lives scared and bored.

Furthermore, society accepts this debt-mindset. When one begins their adult life in debt, they often choose to continue in this socially accepted cycle of debt, driving themselves deeper into blindness.

Without sight, there is no vision, and without vision, one lives their life trapped in a structure that allows nothing beyond scavenging the ground for loose change. This is not living. This is not human potential.

The Bubble Isn't Bursting Yet

The debt crisis must be solved. Universities must collectively lower their tuition costs, it’s truly the only way to move towards student debt liberation in America.

While this idea seems far-fetched and unattainable, it can practically happen. Most universities hugely overcharge, tuition does not need to be as high as it is today.

Government grants and debt forgiveness are expressions of compassion and hope, but simply not enough. Consumers facing financial challenges can reach a credit card settlement with their credit card company but student loans cannot be forgiven. There is no statute of limitations on student loans.

The college bubble is simply a band-aid over a deep gash, created by a greedy corporation mindset. Tuition price ceilings are not practical, all universities are not the same. Universities must evaluate their own spending. They must cut needless expenses and lower tuition to benefit the economy. Change must take place.

In sum, when the student debt crisis begins to chip away, we will see progression. The economy will boom, technology will advance, and entrepreneurs will take bold leaps. People will find themselves with a vision that is no longer hindered. They will dream again and look to the future, creating a thriving America and ultimately, a healthier world.

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of Gabcast, formerly SavingExpert, a personal finance site helping you make your money work for you. He helps readers bring in passive income in order to increase their saving potential and start building wealth for the future. He regularly writes about saving, budgeting, investing, and general personal finance topics aimed to help anyone save more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Insider, Yahoo! Finance, NASDAQ, Discover, MSN Money and more.