A Brief History of Student Loans

Student Loans

(Photo Credit: BET)

Modern universities that require a sizable investment of resources have only recently become the norm for higher education.  A glance at the archives of University of Pennsylvania from the 1950s suggests generations of yesteryear paid a fraction of what students do today.  When did filling out a loan application become a requirement for completing a college application?

In The Beginning

American higher education systems take their model from European universities.  Some of the oldest universities, such as Oxford University in England, charged nothing for students to live and study behind their walls, since many students who went into a university intended to take up a religious order afterward.  Instead, they required these pupils to perform a range of diverse services, including food preparation and laundry, for instructors.

Financial Shifts

For several centuries, universities only accepted students with the intention of going into religious orders.  During the Renaissance, however, increasingly more universities competed with one another to attract the best teachers and students.  The Italian city of Bologna spent about 20,000 ducats on its university, which amounted to nearly half the city’s expenditures, according to Melissa Snell, About.com’s Higher Education Guide.  The increase in teachers’ salaries resulted in higher tuition for students.  Banks and lending institutions sprung up during the Renaissance to give financial backing for all types of investments, including education. These banks competed just as universities did, trying to entice better mathematical minds and to offer lower interest rates to customers.

American Universities

The first Ivy League schools founded in the U.S., such as Harvard and Yale, charged only a fraction of what they do today.  According to the Yale University Undergraduate Admissions offices, the university charges $60,000 a year for a four-year degree (although the university also takes great lengths to provide financial aid).  However, a few hundred years ago the cost of admission to an Ivy League school would have been only a few British pounds per year, back when an American colonist earned about 20 to 30 pounds per year.

Federal Loans

After World War II, the American government threw its weight behind the GI Bill in order to provide comprehensive education for soldiers returning home from fighting in Europe and the Pacific.  Federal involvement in student loans intensified with the National Defense Education Act of 1958, the Higher Education Act of 1965 and the 1972 Student Loan Marketing Association, according to The Huffington Post.  While these government-approved funds made it easier to get a loan, it also increased the money supply going into universities.

Today’s Students

Universities in the U.S. have elevated their tuition rates nearly every year for the past decade. This does not mean, however, that degrees are not worth the investment.  The degrees awarded by music production schools in California allow students to pursue a career in music production or management, giving them the technical and business tools needed for success.  Higher education is an investment that still has a payoff.  According to a recent report from the U.S. Census Bureau, the lifetime earnings of college graduates are still greater than non-college graduates.

Antonio Maurice Daniels

University of Wisconsin-Madison


  1. I don’t believe a degree is worth it anymore. You can get a job in your specialized field that makes as much as someone who works in the industrial field and all you need is a HS diploma. You might make more money then a non grad, but you also have HIGH loan payments that a non college grad wouldn’t have. So technically does it even out??

    1. Although we are in economic times when it’s difficult for anyone to find meaningful employment, a degree, especially an advanced degree, still gives a person more bargaining power than no degree and/or a high school diploma. The loan money people receive is often important to helping them to just make it through life. I, therefore, think having a degree does more than just “even out” things; it’s essential for being competitive in the marketplace.

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