How College Debt Creates Indentured Servants

Debtor for life


It’s no secret that college debt is a significant factor preventing millions of grads from paying down on a house.  It’s also no secret that college debt is at its highest levels than at any other time in U.S. history.

The surprise is that high housing debts impact a student borrower’s ability to build a retirement account, distort the housing market, and create a permanent underclass of renters in certain American cities.

According to a new study by Credible, the average student loan debt load among those who borrow is $37,173, and the average monthly student loan payment is $655. This money could be used to fund an average monthly housing payment of $1,231, according to the study. 

Which cities are the most affordable for college grads?

Dallas, Jacksonville, and Houston rank at the top, while San Jose, Fort Worth, and Boston are the least affordable. More than 30% of borrowers’ average monthly income is dedicated to loan and housing payments.


The percentage of monthly income that should be dedicated to housing expenses is about 25%, and the study shows that cities have a range of 31% (San Jose) to a low of 26% (Dallas). The tradeoffs in choosing a city to live in depend on cultural accessibility, climate, locations, living amenities, location of friends and family, and job market opportunities, so deciding where to live is not only based on the percentage of monthly income devoted to housing.

What is essential is that college expenses have far exceeded the inflation rate for the last decade. According to The College Board, the average 2014-2015 tuition increase was 3.7% at private colleges and 2.9% at public universities. However, looking back at the last decade, the 10-year historical rate of increase is approximately 5%. Tuition inflation has often happened as colleges have become big business, accompanied by a rise in for-profit schools that often fail to deliver on their job-boasting promises.

Compared to the Consumer Price Index (CPI), college costs tend to increase, on average, by about twice the consumer inflation rate. This chart shows tuition inflation is about 3.5% to 4.0% higher than CPI-U. A 2012 Forbes article found that college costs have been rising roughly at a rate of 7% annually for decades. Since 1985, the overall consumer price index has risen 115%, while the college education inflation rate has increased nearly 500%. 

Why has college become so expensive?

It’s a complicated answer, but it hinges on increases and decreases in federal and state subsidies, accompanied by an increase in bloated college administrative positions that don’t actually directly benefit students.

Then, there is the issue of socialized vs. for-profit nations.  In countries with free or near-free medical care, colleges are free or charge minimal tuition.  This applies to France, the Czech Republic, Germany, Sweden, Norway, Finland, Iceland and Estonia. New York also became the nation’s first state to offer free tuition to undergraduates who attend a two- or four-year public college if their families make less than $100,000 a year.

Ironically, despite the need for more advanced education in advanced democracies, a recent study found that an astounding 58% of Republicans said a college education was not necessary or bad for the country. Amazing, but true, and a great commentary on why the Republican Congress and president are pushing America back many decades on all fronts.

So, what’s wrong with college grads becoming indentured servants?  To the Republicans, it’s good practice to be indebted for the rest of your life. It also dovetails with the Republican mantra: “If you’re not rich, blame yourself.”

However, homeownership is one of the very few ways to build wealth. Without it, many people will lose out on a significant opportunity to make money for retirement. Despite what the Republicans say,  America did not become rich as a nation of renters. College debt is preventing millions from owning a home, changing how we view the country.

Don’t Forget Credit Card Debt

Students also use their credit cards, and unpaid balances significantly drain resources. As this graphic shows, American Express, for instance, charges almost 30% APR, but they can borrow at 3%. That interest rate gap comes at the expense of average consumers and is another reason for financial servitude.

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site,, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


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