B (3:16)

After World War II, there was the GI Bill that allowed People coming back to get a university education.

A (3:26)

The gates flew open. By the late 1940s, over 2 million veterans had enrolled in college using the GI Bill. For the first time in American history, higher education was more mainstream, not just for preachers or the wealthy, but for plumbers, sons, returning soldiers, and first generation students. It was a revolution of access, and it was only just beginning. One president in particular picked up the baton. President Lyndon B. Johnson. He grew up poor and taught school before entering politics. And Johnson believed fiercely that college shouldn't just be for the lucky few.

B (4:03)

President Johnson made a very moving speech about how making federal loans available to students was going to open the doors of opportunity. Because if you're 18 years old, you've never had any credit and your parents don't have money. Since the 1970s, the federal government and state governments have participated in providing financial aid to people who can't afford to go. One of the things that they developed was grant aid, but they also provided loans.

A (4:34)

With President Johnson's Higher Education act of 1965, the government would guarantee loans to students, making it possible for millions of teenagers to do something their parents never could. Enrollment in US colleges ballooned from just 1.5 million students to over 19 million over the next 50 years. Women enrolled, immigrants enrolled, adults returned to school mid career. Entire sectors of the economy began requiring college degrees for the first time. But with more access came more cost.

B (5:05)

And the reality is the amount of loans has grown significantly over time, both as more people go to college and as the price of college has gone up. Then it becomes controversial because some students borrow so much more than they can pay back.

A (5:21)

So let's follow the money. Who's actually paying the price of college? Why do so many Americans feel like the system is broken? And is it maybe not as broken as it seems to make sense of it? Let's start with my own story. I went to the University of Illinois for college, a large public university funded in part by the state. Then I did grad school at Northwestern, a private institution with a very different financial model. At the time, I understood the difference mostly in reputation and feel, but I didn't really grasp what I was paying for or how those two systems actually worked. And it turns out understanding how public and private colleges are funded is the key to understanding the whole story behind college costs in America. Here's economist Sandy Baum.

B (6:15)

Again, the example of your two institutions, Northwestern and University of Illinois. That's a really good example because the University of Illinois gets money, some money from the state of Illinois. So people in Illinois pay state taxes. Some of those tax revenues go to subsidize the public universities. Not as much as they would like, maybe just not enough. But still, the tuition at the University of Illinois doesn't have to cover all their expenses.

A (6:44)

Translation. If you're an in state student at the University of Illinois, the sticker price for tuition and fees is around $17,000 a year. Add room and board and you're looking at $33,000 total. And then there's Northwestern.

B (6:58)

Northwestern doesn't get that money. They spend much more per student than the University of Illinois. Now they have a big endowment and they use some of that money to help supplement tuition revenues.

A (7:11)

Northwestern's sticker price is about $67,000 a year just for tuition. Once you add housing, meals, books and fees, you're looking at $90,000 a year. That's more than the median household income in the U.S. but what are you paying for at a place like Northwestern or any elite private university? You're paying for world class faculty, cutting edge research, small classes, and yes, plush amenities. To be fair, plenty of public universities have these too. Over the past 20 years, both public and private universities have invested heavily in gyms, dorms, and student centers to compete for students. But here's the thing. Amenities are the most visible part of the price tag, not the biggest driver of it. Economists like Sandy point to deeper structural forces that have pushed sticker prices up faster than inflation. First, universities are labor intensive, teaching can't really be automated, and salaries for faculty and staff rise with the broader economy. Second, campuses now provide far more services than they did a generation ago. Mental health care, disability support, tech security, compliance offices, and advising. Third, healthcare costs for university employees have grown dramatically. And because universities tend to have older, longer tenured employees and offer generous benefits, those increases hit their budgets especially hard. And fourth, for public universities, many states have reduced per student funding over several decades. All of this adds up to a simple truth. Tuition didn't rise just because colleges suddenly got luxurious. It rose because they were trying to cover rising labor and health costs, and in many cases, replace shrinking state support. So what do most people do when the price tag is this high? You guessed it. They take out loans. And that brings us back to those federal loan programs we mentioned earlier. Launched under President Lyndon B. Johnson, they've quietly become the backbone of the whole system. Today, over 43 million Americans carry a total balance of around $1.7 trillion. The average borrower owes about $37,000, but graduate degrees often push that further, far higher. Meanwhile, the price of college has climbed steadily since 2000. Average tuition at public universities has risen nearly 180%. And at private colleges, it's up over 120%, even after inflation. So here we are, two systems, two different price points, and one federal loan program holding much of it together. But before we spiral into what some refer to as sticker shock, what if we're missing part of the picture? Stay with us.

D (10:04)

I'm Shankar Vedantam, here to tell you about a great mystery. That mystery is you. As the host of a podcast called Hidden Brain, I explore big questions about what it means to be human. Questions like, where do our emotions come from? Why do so many of us feel overwhelmed by modern life? How can we better understand the people around us? Discover your hidden brain. Find us wherever you get your podcasts.

A (10:37)

So the sticker price of college is just that, a sticker. It grabs attention, but it doesn't always tell the full story.

B (10:44)

Well, we know that people think college is more extensive than it actually is. Every time they do a survey, they find that out. First of all, you read headlines like this college is charging more than $100,000. And then you think every college charges more than $100,000 when only a couple of them do.

A (11:03)

But that headline number isn't the one that decides what families actually pay.

B (11:08)

Most students don't pay the full sticker price. One part of that is that they get this aid from federal and state governments that we've already talked about. But for many students, the college doesn't charge them as much as that sticker price. So that is basically they're getting a discount.

A (11:28)

The number that Sandy says really matters is the net price. Tuition and fees after grants, scholarships, and institutional aid. And that's where the picture changes. At private colleges, the average student pays about a third of the sticker price. And at public universities, it's less than half. Here's the crucial thing economists like Sandy point out. Since the early 1990s, sticker prices at four year colleges have jumped by well over 150% after inflation. But over that same period, the average net price has risen much more slowly. That's because financial aid expanded almost in lockstep with tuition. So when you plot the two lines on a graph, the sticker price shoots upward, while the net price slopes upward far more gently and barely moves at all. For the lowest income students, the takeaway is the headline number exploded, but the real price most families pay didn't. So if the real price is lower, why does college still feel unaffordable Sandy says the answer is simple.

B (12:35)

People don't understand about financial aid. You know, financial aid is very complicated. It's not simple. So they don't understand how much help there is out there for them to go to college. And sometimes people don't even bother to apply because they think they can't afford it. But they would be able to afford it if only they knew that.

A (12:54)

Sandy is referring here to a few things like Pell Grants, federal aid for low income students. Roughly 6 million students receive Pell Grants each year. The maximum grant today is around $7,000. There's also state level grants. States like California, New York and Texas offer major tuition support programs. And then another source of financial help is institutional aid, meaning money that comes from the college itself. This isn't just for top test takers or athletes. Colleges use it to compete for all kinds of students, and most offer it to the majority of their applicants. In fact, over 80% of undergraduates at private nonprofit colleges receive some form of institutional aid. So now you may be thinking, who actually pays that full number you see on the college website? Does anyone? The answer is yes. Less than a quarter of students at private colleges do. These tend to be students from families with very high incomes, families who don't apply for aid at all, many international students, and a small group at ultra selective institutions where aid thresholds are strict. And colleges depend on this. Those full pay students are effectively the financial backbone of the model. Their tuition is what allows institutions to offer such deep discounts to middle and low income students. Okay, so now we know most students don't pay the sticker price. But here's where the story takes another unexpected turn. Because when you look at who's actually carrying the biggest student loan balances, the picture flips.

B (14:32)

The vast majority of the high debts are held by people who make a lot of money.

A (14:39)

Turns out the largest debts, the six figure balances, are mostly held by people who went to graduate school. Lawyers, doctors, MBA grads. And those borrowers are overwhelmingly in the top income brackets. In other words, the size of a loan doesn't always signal distress. Sometimes it signals the exact opposite, meaning opportunity and access to a high earning degree. But even if that's all true, there's still an uglier side to the story.

B (15:11)

The people who struggle the most to repay their student loans are actually people who borrowed small amounts. They're people who went to college and didn't complete a credential. There are some people who borrowed $5,000, went to college for half a year and dropped out. And now, you know, they're working through minimum wage and they really can't make payments. It's really a hardship no matter how small those payments are.

A (15:42)

That's the part of the story you rarely hear about the millions of Americans who do everything they were told. Go to college, take out a manageable loan, work hard. But something derailed the plan. Life got in the way. Maybe they had to take care of a family member or lost a job, and they left without a degree.

B (16:01)

And a lot of those people default. They feel like they didn't get any benefit, and they didn't get much benefit.

A (16:07)

Among those who drop out, default rates are nearly four times higher than among graduates, even though many of them borrowed less than $10,000, it's still too much when you're making $30,000 a year or less. So the paradox is this. The people who owe the most often have the tools to pay it back, and the people who owe the least are the ones most likely to drown. Sandy spent part of the conversation tamping down the more dramatic headlines, but she was clear about not brushing off the people dealing with very real consequences.

B (16:46)

There are people who are really struggling with student debt. For some former students, student debt is a crisis. So you never want to say there's no problem. There are huge problems for some people. That said, we need to make it clearer how you can pay it back.

A (17:04)

This was a sobering part of the conversation, one that prompted me, as many do, to ask, well, why don't we just do what Europe does, make college free. But here, too, Sandy had some nuance to throw our way. Free isn't really free. It's actually a choice, a choice about who pays, who gets in, and what kind of college experience a society decides to offer.

B (17:29)

Well, in the places where it's free, one, people are more willing to pay taxes, and two, in general, fewer people go to college. Or in some places where public education is free, there's not enough space in the public institutions that take only the best and the brightest. In some countries, it's totally the norm. You just live at home while you're in college. Right? Many students do live at home in this country, but many don't. And that's a huge part of the extent of being in college. Like, if you live in a household where you don't have to pay rent, you're going to save a lot and you're going to borrow less money. So that's another thing that we could do, but we really believe in this sort of norm of, you know, you're going to leave home when you're 18, you're going to go off to college and it's going to be this whole life experience. And it is. That's a really important experience. It costs money.

A (18:16)

So the European model isn't just cheaper college, it's a different philosophy. More selective public universities, far less campus life, higher taxes, less mobility. At 18, America pays more, partly because we choose a system built around access, campus life and scale. And as Sandy reminds us, every design comes with trade offs. As we kept talking, I raised another idea. I hear that student loans have allowed colleges to qualify quietly inflate prices over time. But Sandy says economists find little evidence of that, with rising labor and healthcare costs playing a much bigger role. As I went to wrap up our conversation with Sandy, there was one last thing that was bugging me. If most students don't actually pay the sticker price, why don't schools do more to explain this to the public? The short answer is they have almost no incentive to. The sticker price signals prestige. And in the world of higher education, that matters. A higher number can imply higher quality. And underneath that number is a pricing system so complicated it's almost impossible to explain simply. One student's offer might look totally different from others. Which is the point. Colleges want pricing flexibility. They want to shape their class, and they want to use financial aid as a recruiting tool. If they published one number like an average cost, they'd risk turning off full pay families. They'd invite scrutiny. So instead, the higher price anchors expectations, and colleges swoop in later with aid that feels like a deal. So where does that leave us? College in America is expensive, that's true. But the story isn't as simple as the sticker price. Most students pay far less than the headline number. The biggest, scariest loans mostly belong to high earners. Doctors, lawyers, MBA grads, and the people in real trouble. They're often the ones with the smallest balances and sometimes no degree at all. We've built a system that's confusing, uneven and full of trade offs. But it's also a system that reflects some very American priorities. Broad access, massive scale, and independence at 18. Which might help explain the cost, but doesn't make it easy to understand. College looks like a luxury item, but it's priced like a discount flight. Unpredictable and designed to feel different for everyone. And once you see that, it's hard not to wonder who does the system work for and who does it leave behind? Many thanks to Sandy Baum for being our guide in this episode. And thank you for listening to 1440 explores. I'm Sony Kasim. Make sure to follow the show and leave a review on Spotify, Apple or wherever you listen to your podcasts and let us know what you think@podcastsoin140.com 1440explorers is a production of Rhyme Media for 1440 Media. This episode was produced by Nicolo Minoni and edited by Dan Bobkoff. Our fact checker is Meher Kazlebash and our sound designer is Jake Howitt. The executive producer at Rime is Dan Bobkoff and the executive producers at Fortun 40 are me and Drew Steigerwald. See you next time.

B (21:59)

Sa.