The rising cost of education in the US has been a hot button topic for ages. We recently made investments in a couple of companies broadly in the education category, and there are countless other startups trying to solve various pain points in the industry. I thought I'd post some of the interesting data that I've come across to help highlight some of the key issues.
First up, there's no avoiding the core issue - the sticker price to attend college, private or public, has grown faster than inflation for decades. The chart below shows the tuition trends using current dollars. Another way to look at it via the lens of inflation is to use 1980 dollars. In 1980, a meal that cost $5 would cost just over $11 today, a little over two times more. But a year's college tuition costing $800 in 1980 would today cost a student over $9,000. That's an 11x increase!
And if you do end up going to college, you will be saddled up with plenty of debt. The average debt per borrowing student in 2015 was over $35k, up from just under $10k in 1993.
The above chart actually doesn't tell the whole story about student debt. Yes, the average amount borrowed has gone up, but in addition there are significantly more people borrowing. In 1993, about 45% borrowed, compared to over 70% today.
Rolling it up to aggregate debt levels tells the whole story. Total debt for the 2015 graduating class was nearly $70B, a 10x increase from the early 90s.
So where do students get money from? The below chart shows the myriad of sources available. In the 2012-2013 school year there were $47B in federal grants, $101B in federal loans, $10B in state grants, $44B in institutional grants, $15B in private and employer grants, for a grand total of $238B in total aid. Note that the total aid has doubled in the last decade, but the mix shift of loans is not necessarily great (less Perkins and subsidized loans, more unsubsidized higher interest loans).
As the cost of post-secondary education continues to rise, a plethora of startups are jumping in with their own solutions. Bootcamps, coding schooIs, and other "digital trade schools" provide significantly higher ROI on education dollars. Programs such as Hack Reactor and General Assembly might cost $10k-15k for a 3-month course, but they have 90%+ placement rates for six-figure salaries. Other startups are trying to work within the existing system by more efficiently allocating scholarship dollars and available funding sources, or tapping into new sources such as employer dollars in order to lower the burden for students. Other companies are trying to bypass the degree entirely, either by creating micro-credentials (Udacity), creating new types of schools (Make School), or democratizing content (Coursera).
Regardless of what the winning solutions are in the long run, the skyrocketing costs of education in this country are unsustainable and are a huge damper on our economy.