Education: That was then, but this is now
Americans owed more than $1.7 trillion in student loan debt as of December 2020. The debate over whether the federal government should forgive student loans and how to make college more affordable for future generations is heavily influenced by this startling statistic.
Senator Elizabeth Warren, one of the leading proponents of student loan forgiveness, frequently discusses how she was able to pay for her degree from a public university in 1970 by working part-time.
Let's go back 50 years. The math doesn't add up for today's college students the way it did for Warren's generation because of decades of stagnant wages and rising tuition costs. A recent study from Intelligent.com shows that it's frequently impossible for diligent students to pay for their education through summer and part-time jobs instead of loans.
Today's cost of living is significantly higher than it was even 20 years ago. Inflation also cannot be the cause of the price increase.
The average American home was worth $2,938 in 1940. It was $119,600 in 2000, and as of this writing, it is just over $200,000. The median home price in 1940 would have only been $30,600 in 2000 dollars, even after accounting for inflation.
For today's youth, housing costs aren't the only rising expense. Additionally, the price of education has been rising alarmingly. Understanding how much tuition has increased since the 1970s is crucial when discussing how and if current students can work their way through college.
The average annual in-state tuition and fees at a public, non-profit university for the 1970–1971 academic year were $394, according to the National Center for Education Statistics. By the 2020–21 academic year, that sum had increased by 2,580% to $10,560.
Private school tuition and fees increased by a similarly staggering 2,107% over the same time frame, from $1,706 in 1970 to $37,650 in 2020. The dollar experienced an average annual inflation rate of 3.87% from 1970 to 2020, translating into a total price increase of about 567% over the previous 50 years.
The issue is that the increase in income, especially the minimum wage, hasn't even begun to keep up with the rise in college tuition. The federal minimum wage increased from $1.60 per hour to $7.25 per hour between 1970 and 2020, a more moderate increase of 353%.
So what can we make of this. Everything is increasing. We can not count on the education fees to go down, so we might just plan for the future in advance. Like Winston Churchill said, “Plans are of little importance, but planning is essential”. So reach out to Kotini & Kotini and we can help you strategize your children's future.
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