Left a Loan

How increasing college costs are driving students to weigh pursuit of passions with financial risks.

Illustration by Tyler Brown

by Rowan Forsythe

Walter Gregg, a veteran paratrooper, was lucky to have escaped the horrors of World War II alive. The sounds of heavy artillery had faded into memory and the woods behind his South Carolina home echoed with nothing but the happy burbles of children’s laughter. Gregg’s two daughters frolicked in the yard. A quaint playhouse stood a few hundred feet away. It was March 11, 1958.

Moments later, an inert Mark Six nuclear bomb razed the small structure. Its impact and conventional explosion left a 70-foot crater, destroying Gregg’s home and injuring his family.

Terrible as it must have been, the explosion was analogous to the destructive future that 1958 had in store for America. Student debt was soon to be born, and it would destroy more American dreams than Gregg’s flattened home ever contained.

Fidel Castro began his conquest of Cuba in 1958. The South Carolina “broken arrow” incident made national news. But today, Castro is dead and America has forgotten Gregg’s story.

In the end, neither unleashed a monster so terrifying or destructive as the National Defense Act of 1958.

As the nuclear bomb became destroyer of worlds, this act birthed the first official student debt in America, a destroyer of dreams for generations of college students to come. It just needed time to rear its ugly head.

Time was on its side.

Today, American students are grappling with the ramifications of the monster’s murderous rampage. They face the same challenging questions: Why does college cost so much? How do you afford to follow a dream? What does one do if society doesn’t value your passions?

A focus on bad financial literacy and poor decision making falsely implies that ignorance was the sole deliverer of America’s $1.7 trillion college debt problem — the stresses of which are discouraging some students from pursuing a degree, let alone their passion.

Between 2001 and 2014, the average value of a dollar — a simple way of understanding inflation — fell by 34%. Though this number seems shocking, the cost of college in a state like Virginia rose an astronomical 106% over the same period.

The answer to the question of basic finance and affordability lies somewhere in the quagmire of college finance. Free Application for Federal Student Aid , College Scholarship Service Profile , Expected Family Contribution , Student Aid Index , Parent Loans for Undergraduate Students — it is no small wonder that American families are daunted by such an alphabet onslaught.

In a society where college bumper stickers are status symbols, Americans buy degrees like the cars they adorn: with a reckless misunderstanding of debt. A critical lack of financial literacy has only abetted the beastly burden of student debt.

“If you have clueless parents, you’ll be clueless too,” Paula Bishop, Certified Public Accountant and expert independent financial aid counselor, said. She explained that most of the families she works with struggle to manage their money effectively, turning to her once they realize the colossal nature of college costs.

“The people that come to me are the ones that are worried because their kids are smart. They’re looking at Pomona, Claremont McKenna, Santa Clara, all of those,” Bishop said. That cadre of colleges boast sticker prices that are north of $80,000 a year.

While 70% of American college students attend public universities with substantially lower tuition than private four-year universities, Bishop’s clients trend towards the upper end of the grade point average bell curve. With this level of academic achievement comes a desire for prestigious schools and maximizing a smart student’s potential.

College counselors do what they can, encouraging families to fill out the FAFSA and explore scholarship options, but the college conversation in America is often dominated by fit, not finance.

“If you can’t afford it, it’s not the right school!” Bishop’s words were stern and adamant.

Whether its prestige, passion or pressure, she has seen many parents feel obligated to facilitate expensive college tracks once their kids are admitted. Less expensive options exist. In Seattle, graduates of public high school are now entitled to two free years of community college.

“They feel like they have no choice, but to me they didn’t look into […]some way to lower the cost,” Bishop said. These decisions get some families in trouble. A few hundred thousand in student debt will bring even the loftiest dreams down to earth.

Federally issued Parent PLUS loans and private student loans allow families to borrow the entire cost of attending college. At a four-year private university, this amount could reach as high as $280,000. The repayment numbers on such a sum are enough to induce immediate cardiac arrest.

$3,222.25 per month, for ten years.

While an extreme, suffocating circumstance, reality is hot on its heels. The average student debt for a degree at a private college is $54,880. That carries a monthly payment of over $630 for ten years.

In context, such numbers seem absurd. $630 a month is more than enough to fully finance a luxury car purchase. In some American states, it would buy half of a home.

The loaded gun of student debt has shot American dreams in the foot.

Financial literacy is a limiting factor for students seeking a sensible approach to a degree in a lower-paying passion, but the elephant in the room is the cost of college itself. Ever-increasing numbers have grown, entangled with student loans, in a punishing duel of cause and effect.

The answer to this chicken-or-egg argument may be darker than expected. From afar, loan-based financial aid looks like a stopgap. Up close, the beast can be seen pouring inflationary fuel on a fiscal fire.

William Bennet, secretary of education under President Ronald Regan, authored this statement in 1987, well before college costs had climbed to today’s heights.

“If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,” wrote Bennet.

“Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”

Economists call this the “Bennett Hypothesis,” and it holds that financial aid is a student’s enemy, not their friend.

According to the theory, an increase in available financial aid encourages increases in tuition. In the past, Bennet’s argument relied on a mix of conjecture and extrapolation — after all, a similar phenomenon had occurred when low interest rates and high inflation helped housing prices double between the mid 1960s and 1970s. Today, the Bennett Hypothesis has meat on its beastly bones, especially in regard to private universities and graduate programs.

In 2015, David Lucca, Taylor Nadauld and Karen Shen — economists at the Federal Reserve Bank of New York — published a report examining the connection between aid and cost.

The results were shocking: For every dollar of additional subsidized loan money, colleges had increased tuition by 65 cents. Subsequent revisions of Bennet’s model have yielded a near dollar-for-dollar correlation.

Facts on the ground support this conclusion — but also point a finger at the expectations of students. Al Lord, former CEO of student lender Sallie Mae, had an epiphany after joining the board of Penn State. Somehow, somewhere, gasoline was substituted for water. Rather than quenching the thirst of college students chasing their passions, increasing the accessibility of debt set those dreams on fire.

“Colleges were incredibly inefficient businesses, and the student loan program enabled them,” Lord said. Lord joined the board in 2014 and watched Penn State’s budget balloon from $5 billion to over $7.7 billion by 2021. Such a monstrous increase shocked the former financial sector CEO.

Amid tuition bloat, college campuses have become more extravagant than ever before, boasting a myriad of dining options, technological resources, recreational opportunities and capital expansion projects — arguably in the name of attracting prospective students. Indeed, campus budgets have risen along with expectations, feeding the fires of rising costs.

Such considerations are theoretical, based on economic models and droll statistics. Pure economics is not the sole detractor for students who desire passion over future pay. Societal trends also play an influential role.

According to David Montesano, a nationally renowned independent college counselor and founder of Seattle-based College Match, priorities have shifted from intellectual and personal development to pre-professional training.

“We’re not in the 1960s, 70’s or even early 80’s. My biggest takeaway is just how absolutely pre-professional and practical everyone is becoming — how unlikely they are to major in the humanities. That’s the bottom line,” Montesano said. He was matter-of-fact about it, but his tone belied a bit of sadness.

While this trend explains the steep decline of liberal arts colleges, a segment which Montesano characterized as “languishing.” In today’s career-driven college market, it offers little in the way of an origin story for such a shift. According to Montesano, the focus on practicality may have originated among his client base — the upper echelons of the socioeconomic spectrum.

Contrary to popular belief, Montesano’s experience shows that this well-off segment of Americana rarely utilized their excess capital to send their children to pursue low-paying degrees in fields like fine arts or fashion. Instead, they emphasize networking, credentials and positioning.

Montesano described it as a trickle-down of ideology, “If the top 10% are thinking this way, it’s just going to filter down to the other 90%…[the rich] say they want return on investment, but in reality, it’s more the sense of ROI.”

For students seeking or depending upon a well-paying career, reality actually contradicts this practical sentiment.

“They’re not thinking long-term,” Montesano said. “If they understood that all things being equal, you make more money the more education that you have, they would always do liberal arts over pre-professional because that’s where the money is — but they just think short-term.”

In the world of 1% earners, our “value” understanding of undergraduate majors is flipped on its head. An art history major is more likely to be in this exclusive club than an accountant. English, economics and political science majors account for 14% of America’s top earners. International relations majors outperform molecular biology graduates. It seems nonsensical.

If, as Montesano sees it, freedom to find your passion in college is a myth bought and sold by the middle class, then the middle class may be using practicality to delude itself out of a plan which has historically seen success.

There may be no silver bullet for rising college costs, but bombing your ambitions and family background into the ground in pursuit of perceived payoff isn’t even a proper prototype.

“I guess I don’t believe in freedom. I don’t see the freedom,” Montesano said, in reference to aimlessly dabbling for a passion in college. “You’re not stuck — that’s your power source, an advantage that other people don’t have. You can do things that other people can’t do without that knowledge. Just put your own spin on it. That’s what’s great about life.”

Today, American students pit passions against paychecks in a tragic duel to the fiscal death. When Milton Freidman pushed for the creation of student debt, he unwittingly unleashed a $1.7 trillion destroyer of American dreams. Instead of flattening a home, it inadvertently threatened the futures of millions of Americans hoping to find passion in their college pursuits.

1958 is not a year America will soon forget.

Watch Forsythe’s video about student debt here