Revealed: How to Avoid Crazy Student Debt

The cost of getting a college degree is out of control.

Since the 1980s the price of college has risen much faster than inflation. Since 1985 overall inflation was 115% while the college education inflation rate was 550% over the same period!


For the 2012-13 school year, the average annual price for undergraduate tuition, fees, room and board was $15,022 at public institutions and $39,173 at private non-profit bastions of higher learning.

The benefits of higher education are clear. Nearly 2 million bachelor’s degrees will be awarded in the United States each year. An adult working full-time with a bachelor’s degree earns an average of $46,000 compared to $30,000 for those with a high school diploma. To many, attending university means improved job prospects and earning potential.

And people are willing to leverage their future to do it. The amount of student debt that students are taking on has increased 2x over the last twenty years. The total amount of student loan debt in the United States is over $1 trillion. That’s twice the gross domestic product of Belgium.

In fact, the class of 2014 is in the record books, being the most indebted class in history. The average graduate in the class of 2014 had student loan debt on the order of $33,000 – according to data by Edvisors, a group of web sites that talk about planning and paying for college.

There are various explanations as to why college is so expensive. Schools all over the country have added improved services like having mental health counselors on staff or emergency alert services. Some of the costs are due to increased spending on construction of buildings and equipment.

But that’s not really the whole story. The main culprit is labor costs. Between 1993 and 2007 administration costs rose 61%, nearly twice as much as total university costs. Enrollment in that same period increased by 15% but administrators employed increased by 40%. Finally there are government cuts to state funding. Think about how every time there is a recession the first cuts made are often to education budgets. These cuts add up over the decades, with the cumulative effect being felt in the bank accounts of college graduates.

What About Learning Online?

An explosion in online learning options means that attaining the knowledge that comes with going to a brick-and-mortar university is easier and cheaper than ever. Some of them are even offering college credit. The University of Phoenix has a student body of 250,000 – making it the largest university in the United States.

These days colleges themselves are starting to throw up their own online classrooms as evidenced by MIT OpenCourseWare – a web-based publication of virtually all MIT course content, open and available to the world. They are not alone. Harvard, Princeton and Berkeley have all embraced the online model, offering massive open online courses (MOOCs).


And it’s not just general education that is popping up online. There are very specialized options out there now. Learning to code is a niche e-learning segment that has absolutely blown up while websites like us at Wall Street Survivor focus on personal finance and investing.

The Death of the Classroom?

The argument for classroom learning is the mentor model: the idea that traditional college education will survive because, as an educational experience, it just cannot be replicated by online forums. George Mason University professor Peter Boettke says “online chat and social media do not compare to hands-on, face-to-face working through difficult issues that the physical clustering of learners provides.”

Online learning is here to stay but rather than killing off universities it is more likely that a hybrid model will win out. The demand for a quality educational experience will never go away. There is just something about online learning that doesn’t compare with classroom learning.

How Do We Solve the Student Debt Problem?

It’s hard to say. Demand for higher education is stronger than ever. The baby boom flooded colleges with willing students. College enrollment has risen by 138% over the last 40 years. This rising demand meant that increased costs had to be tolerated.

A lot of people consider community college as a way to keep their costs down. Especially when you consider that the average annual cost at a two-year college is $3,000.

No matter where you go to school or what you intend on studying, the first two years are typified by a focus on general education. Why not take those classes at a community college for a fraction of the cost at a private university?


The student loan problem is real. After all, early this year President Obama outlined a proposal to offer two years of free community college tuition to students saying that “two years of college should be as free and universal in America as high school is today.”

The take-away is clear. For those who are entering college today the decision is not as clear cut as it was for previous generations. In the past people entered university because they were supposed to, or because that was what they were told the path to success looked like. They were willing and eager to take on the debt needed to complete their education.

Now students need to think carefully about their options. Higher education is still important…but so is graduating without debt. The multitude of e-learning options out there means it’s easier than ever to get a world-class education – without breaking the bank.

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