I find it scary how USA reached here - the student loan phenomenon. Is it as common as I think it is or the Internet makes it looks like "everybody going to close is in huge debt"? Was it always like this? What happened when it changed? Isn't education is something that should not even be the last thing to be sold/given at such costs? I think it's same for public and private universities, right? I find it really disturbing.
If you want to understand the student debt bubble, you need to understand financial bubbles. Take any commodity that "everyone knows is valuable", figure out how to turn it into a financial instrument and re-sell it to a third party investor who has no relationship with either consumer or lender and knows nothing about the product, and then you can create a speculative bubble because everyone starts trading in derivatives of the commodity without knowing anything about it, the level of risk involved, or even who ows them money. This happened with Tulips, it happened with Mortgages, and now its happening with Education. There are a lot of good books on bubbles if you dig for them. All the Devils are Here is a good one. The Big Short is good too - once you realize some of those people who got rich betting against housing bubble, are now betting against the education bubble, and have been for 8 years but nobody listened to them (again).
It is reasonably common, but there are a lot of factors behind it, as well as mitigating circumstances.
- College costs have risen much faster than inflation.
- At the same time, state subsidies funding universities have declined fairly dramatically since the recession, further increasing out of pocket costs.
- For many students, prestige and amenities are much more important than cost. When you see someone paying six figures for a university education, they're not picking the high-quality, cheap option. They're picking the (hopefully) high-quality, prestigious option.
- In the USA, anyone can go to a university. Anyone. Academic ability is almost irrelevant. Unfortunately, the least academically qualified students are often persuaded into attending very expensive for-profit universities.
- Student loans are very readily available.
- Academically excellent students in many, maybe even most, states almost always get a free ride to an in-state public university.
- Two year community colleges are very cheap, and generally offer an Associate's degree and easy transfer to the closest four-year university.
It is still very possible to go to school and graduate with no debt. I did it in 2011.
