Students are paying (and borrowing) a lot to attend college. In 2015-16, full-time equivalent (FTE) undergraduate students received an average of $14,460 in financial aid, including $4,720 in federal loans. Once the bills add up after graduation, the effects of high tuition (which comprise one-third of a student's overall budget) can significantly impact a student's financial stability and mental well-being.
The Price Tag
According to the College Board, the average tuition and fee price for a full-time student enrolled at a private nonprofit college in 2015-16 was $32,330, compared to a $24,070 tuition and fee price tag at an out-of-state public college and a $9,420 price tag at an in-state public college. To ease the burden, a total of $184.1 billion in undergraduate student aid was provided by federal, state, institutional and private institutions in the same year. One-third of all aid delivered to undergraduate students came in the form of a federal loan ($60 billion in 2015-16). Consequently, 10 percent of undergraduate student borrowers accrued $40,000 or more in outstanding student debt in 2015.
Although this might seem like a foolhardy pursuit, think about the outcome. According to the College Board, bachelor's degree recipients' median earnings were $24,600 (67%) higher than those of high school graduates in 2015. In the same year, more than eight in ten bachelor's degree recipients were employed, compared to 68 percent of high school graduates. Correspondingly, unemployment rate for bachelor's degree recipients (2.6%) was about half the unemployment rate for high school graduates (5.4%). As a result, many students decide to "bite the bullet" and accept that their education is an investment in their future.
The Social Impact
In 2015, more than half of student borrowers with outstanding student debt owed $10,000 or more; nearly 40 percent owed $20,000 or more. According to Mitch Daniels, President of Purdue University, this increased financial burden has led many post-graduates to postpone marriage, home buying and entrepreneurial pursuits, among others. In fact, three out of four graduates cited that their student loan debt impacted their ability to purchase a home, according to a survey conducted by American Student Assistance (ASA). Six out of ten respondents in the survey said that their debt affected their ability to make large purchases and more than seven in ten stated that their debt forced them to delay retirements and other investments. Nearly half (47 percent) stated that their debt impacted their ability to start a business and more than four in ten affirmed that their debt delayed their decision to start a family.
The Mental Impact
Dealing with the high costs of tuition and student debt can impact the mental health of college students and graduates. For instance, student loans have been found to be associated with poorer psychological functioning and increased stress among borrowers. A study published in Social Science & Medicine revealed that increased stress levels and perceptions of poorer/depleted health can arise when student loan debt accumulates. In addition, the study found that student loans were significantly inversely associated with better mental functioning. Overall, student loan debt can be a major force behind financial strain and emotional stress.
A Lasting Impact
Higher tuition costs (leading to larger student debt) can have a lasting impact on borrowers. Not only can they be damaging to graduates wishing to buy a home or start a business, they can also increase stress levels and financial strain. As the cost of college continues to escalate, students' financial stability and mental well-being will continue to hang in the balance.
- CNBC: 71% of Those With Student Debt Say It Delays Homeownership: Survey
- College Board: Trends in Student Aid 2016
- College Board: Trends in College Pricing 2016
- CNBC: The High Economic and Social Costs of Student Loan Debt
- Social Science & Medicine: Sick of Our Loans: Student Borrowing and the Mental Health of Young Adults in the United States
- SALT: Life Delayed: The Impact of Student Debt on the Daily Lives of Young Americans
- The Atlantic: The Mental and Physical Toll of Student Loans
- College Board: Education Pays 2016
Tim Zimmer is an Associate Consultant at Manhattan Strategy Group (MSG), a management and social services consulting firm that works with Federal, State, and local government agencies.