One of the key underpinnings of the broad support for the Occupy Wall Movement is the massive amount of student debt many people have incurred–and unlike other debt, this debt can’t be discharged in bankruptcy (as far as I can tell, death is about the only way to do so). While the collegiate model really hasn’t changed in half a century, the price of a college education has:

Here’s what college, including all expenses, fees, and so on, cost in 1960:

The median household income in 1960 was $5620 (pdf). Housing was cheaper, thanks to suburban settlement policies. Scholarships, especially the GI Bill, could cover most or all of these costs. Importantly, the minimum wage was $1.00 and rose to $1.15 in 1961. That’s key: if we rescale the cost of college in terms of minimum wage hours, we notice something critical. Someone who worked after school and during the summer in high school, and, once in college, during the summer and maybe a few hours a week could pay for college–at least a state school–without incurring debt. With a median household income of $5620 (and half made more than this), many families could also help out too.

Which brings me to this photo from We Are the 99 Percent (transcript also below):


(from here)
Transcript:

I am a college professor increasingly frustrated by the incredible debt I see my students taking on.

Rather than spending their time learning how to creatively solve the problems of the future, their debt forces them to think of education narrowly in terms of “what they can do with it after they graduate.”

Education was once considered a public good and not a private investment.

Education was once considered to be for the 99%.

And there’s a very straightforward reason why prices have increased so much, especially at private institutions (which gives cover to state schools to increase their costs)–a huge segment of the student body can afford it. Here’s what that means:

But why college costs so much is an important question. In the ultimate sense, colleges charge what the market will bear (even if that market is massively subsidized and distorted): when you hear a private institution crowing about how fifty percent of its students receive aid (i.e., it’s socioeconomically diverse), remember this means that half of the students come from families that can pay $40,000 to $50,000 per year in cash. When you account for families with more than one child–and children often overlap–we’re talking about families that can plunk down $80,000 to $100,000 for a couple of years in a row, with some $50,000 years in the front and back to boot.

To put that in perspective, the nominal (not inflation-adjusted) median household income was a little under $50,000 in 2010.

So what can we do to fix this? First, we must recognize that this is a result of a surge in income inequality: taxing the wealthy at higher marginal tax rates (and not just millionaires), along with capital gains tax increases and removing the payroll tax cap* will make the percentage of customers students who can afford to pay in cash much lower. The converse of this is that we need to cap student loans, both private and federal. Fourth, states need to fund public colleges at much higher levels–and the federal government should help with this. Again, when the pool of customers dries up, colleges will be forced to lower their prices–and cut back on administration and amenities**.

It won’t be pretty, but it will happen at some point. Because this is not a politically sustainable future:

*Payroll taxes are capped–for a married couple, only the first $106,000 of income is taxed.

**Grumpy old man time: some of these new dorms are nicer than many of the apartments I’ve rented. Compared to my dorm rooms, they are extravagant and palatial. Despite that privation, somehow I managed to receive an education….