Money and Corruption Research Essay

Sam Hewitt – 2022

More People Affected than the Population of Japan

In a research study that correlated wellbeing with income, Daniel Kahneman and Angus Deaton found that above an income threshold of approximately $75,000, more income didn’t correlate with increased emotional well-being. Both tuition and student loan debt has skyrocketed in the past century especially since 2000 with real after-inflation price per student rising 48% between 2003 and 2017. While lending institutions have made a lot of money off interest rates that trap students in student loan debt, student loan payments have pushed many people under the income threshold of wellbeing as defined by Kahneman and Deaton. Is the increase in tuition necessary, how many people are affected, and who is to blame? This issue is extremely important because of how many people it is affecting. Student loan debt in the past decade has become the second largest form of household debt after real-estate and for many who still don’t find employment or are under employed, this debt is crippling. It is first important to understand just how many people are impacted. 

While it is generally known that total student loan debt in the U.S. is currently around 1.59 trillion dollars, this doesn’t easily translate to people affected. From 2000 to 2022, there have been 436.43 million students in the United States attending college as an undergraduate in both private and public institutions. Each year between 30 and 40 percent of students take out loans, so from 2000 to 2022 between 130.93 and 174.57 million people have gone into debt by taking out student loans. This number is greater than the population of Japan, the eleventh most populous country in the world. While debt generally isn’t desirable, what exactly is its impact? 

It takes an average of 20 years to pay off student loans, and student debt has been linked with lower rates of home ownership, diminished retirement savings, lower credit ratings, negative net worth, and reduced marriage rates. On top of all these impacts the student loan debt burden becomes a defining part of many people’s lives. One important aspect of Deaton and Kahneman’s research is that while more money doesn’t necessarily buy more happiness, less money is associated with emotional pain. When first entering the workforce from college 45.8 percent make less than $75,000 a year. For this group, student debt will directly detract from their emotional well-being. 

Average student loan debt from 2000 to 2022 sits around $30,000 and on average amounts to $460 a month ($5520 a year) in bills. Furthermore, student loans take an average of 20 years to pay off. In 2020, 16.5% of the U.S. population was in the income bracket right below $75,000 a year, so the percentage of that bracket that attained an undergraduate degree are directly affected from student loans. What is clear is that student debt in the U.S. is impacting more people than most countries in a negative way. 

Between 1999-2000 and 2019-20, tuition at the average 4-year institution increased 136.5%, an annual rate of 6.8%. The default rate for student loans is supposed to reach 40% by 2023—that is, people not paying their student loans in a year. Since 2000, the presidential education budget has been generally rising, and while there can be reallocation of funds within different aspects of education in the country, this doesn’t account for the large increases in tuition. While one likely explanation can be the creation of new “bullshit jobs” which stands for the epidemic of middle management and other jobs that don’t need to exist, I think it is very unlikely that this accounts for the entire 136.5% increase in tuition. In 2019 all colleges in the United States spent $401 billion dollars. The same year the defense budget was $686 billion dollars. While student loan debt is clearly and issue impacting more people than the population of all countries except for the 8 most populous, it obviously isn’t a priority for the U.S. president who could either forgive most student loans or helps students pay for their tuition be reallocating funds from military to education. This isn’t likely though because of the fear of upsetting constituents. Because between 130,929,000 and 174,572,000 people have taken out loans since the year 2000, and because the default rate on student loans is around 40%, around 52,371,6000 to 69,828,800 people have not been able to pay their student loans since 2000. The burden is too large to bare and while the U.S. continues excessive military spending, millions are crushed with debt, taking away from their emotional wellbeing. The president and those with control of the budget need to address this as soon as possible. 

Word Count: 900 

Sources

Kahneman, Daniel, and Angus Deaton. “High Income Improves Evaluation of Life but Not Emotional Well-Being.” Proceedings of the National Academy of Sciences of the United States of America 107, no. 38 (2010): 16489–93. http://www.jstor.org/stable/20779694.

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“Understanding College Affordability.” Understanding College Affordability – Urban Institute. Accessed May 11, 2022. http://collegeaffordability.urban.org/covering-expenses/borrowing/.

Scott-Clayton, Judith. “The Looming Student Loan Default Crisis Is Worse than We Thought.” Brookings. Brookings, March 9, 2022. https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/?source=post_page

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Published by Statista Research Department, and Sep 21. “U.S. Income Distribution 2019.” Statista, September 21, 2021. https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/.

“U.S. Department of Education Budget History.” Home. US Department of Education (ED), March 29, 2021. https://www2.ed.gov/about/overview/budget/history/index.html.

 Hanson, Melanie, and Fact Checked. “Average Cost of College over Time: Yearly Tuition since 1970.” Education Data Initiative, January 9, 2022. https://educationdata.org/average-cost-of-college-by-year#:~:text=Between%201999%2D2000%20and%202019,an%20annual%20rate%20of%206.8%25.

“Legacy Homepage.” Budget 2019. Accessed May 12, 2022. https://dod.defense.gov/News/SpecialReports/Budget2019.aspx.

Published by Erin Duffin, Statista, and Sep 10. “College Enrollment in the United States from 1965 to 2019 and Projections up to 2029 for Public and Private Colleges.” Statista, September 10, 2021. https://www.statista.com/statistics/183995/us-college-enrollment-and-projections-in-public-and-private-institutions/.