The Hidden Debt Buried Under Student Loans — How Much Do You Have?
Written by
Andrew Lisa
Edited by
Joe Evans
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Anyone with student debt is familiar with the high cost of higher education. But an ever-growing chunk of America’s outsized college loans pay not for what students learn, but for where they live and what they eat while they learn it.
A new Business Insider report found that room and board at many public universities have outpaced the cost of tuition over the last 10 years. These hidden secondary costs are forcing more students to rack up enormous debt or drop out of the college dream.
“The disclosure of educational costs by higher education institutions, media, and other sources focuses 99% of the time on tuition and fees,” said Tom O’Hare, an independent education advisor at Get College Going and a partner and contributor at Pivotal College Years. “The lack of transparency on housing and additional charges puts families at a disadvantage in properly creating sound college funding plans. Reducing the escalating cost of higher education means addressing both direct expenses — tuition and fees — and indirect expenses like housing and meals, which continue to prevent many students and families from obtaining an undergraduate degree in four years.”
Funding-Starved Public Schools Have To Pay the Bills
The report found that college room and board expenses have outpaced inflation in part because public universities have been starved of state support. Tuition increases are consistently unpopular among voters even when they’re necessary, so schools compensate by raising the cost of auxiliary services like housing and meals.
“In most states, revenue collected from tuition and fees reverts to the state treasury to offset allocated legislative funding,” O’Hare said. “Housing costs and other sources of income like athletics and on-campus services are direct revenue sources for the individual campus — a significant factor in the escalated increase in private education loan borrowing and family debt.”
Rising Internal Expenses Play a Role, Too
Scott Winstead, a higher education expert and founder of My eLearning World, agrees that funding is drying up at many colleges. But in his experience, institutions often shoulder some of the blame by overspending on administrative salaries and perks.
“Public colleges and universities are spending millions of dollars on salaries for administrators and executives, many of whom have no direct impact on the quality of education or student outcomes,” he said. “This spending is often at the expense of other areas, such as scholarships or financial aid, which could help make college more affordable for students.”
Then, There’s the Housing Itself
In at least some cases, housing costs have risen because the spartan cinder block dorm rooms of old have given way to luxury living.
“Public colleges and universities are building more luxurious dormitories with amenities like private bathrooms and flat-screen televisions, which are driving up costs,” Winstead said. “Moreover, many colleges and universities are contracting with private companies to manage their housing facilities, and these companies are charging students exorbitant fees for services like cleaning and laundry.”
The Disappearing Off-Campus Apartment
Many colleges allow students to pursue more affordable off-campus housing — but that’s getting harder to come by.
“Apartments can often be cheaper than dorms because they tend to come with fewer integrated services and amenities,” said Troy Portillo, director of operations of the online learning platform Studypool. “The problem here is that housing costs are especially high right now, and have been for a couple of years. This is forcing more students into comparatively cheaper, but still unaffordable, dorms.”
As cheaper off-campus housing options dwindle, so, too, does the incentive for colleges to make dorm life more affordable.
“Increasing costs of housing generally mean that student housing has less competition,” said Antonio Cruz, a mentor with the college consulting company Ivy Scholars. “Even if students move out of college-provided housing, they will not see major cost savings.”
The Federal Loan System Incentivizes High Prices and Extreme Borrowing
According to the Education Data Initiative, more than 93% of all student debt is from federal loans, which Winstead believes is the root of the problem.
“When the federal government guarantees student loans, it essentially ensures that lenders will be repaid even if students default on their loans,” he said. “This has led to a situation where students can easily obtain loans to pay for college, regardless of whether they can afford it. As a result, more students are taking out loans to pay for room and board, which can drive up the cost of these services.”
Winstead believes the free-flowing tap of federally guaranteed money disincentivizes colleges to keep costs down.
“This is because students can pay for these costs with loans, even if they are not affordable,” he said. “As a result, colleges and universities can continue to raise the cost of room and board without fear of losing students to more affordable options. As a result, colleges and universities may be more likely to invest in more luxurious and expensive housing options, even if they are not necessary or affordable for most students.”
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