Student-loan borrowers are taking on more debt, and it's not all tuition — blame skyrocketing housing costs

• College and graduate students aren't just facing rising tuition as they take on mountains of debt.
• Housing and other living expenses are a crisis for many in hot real estate markets.
• Universities need to be transparent about costs, while local governments need to facilitate construction.

When Katie Ibsen got into her dream school, the University of California, Berkeley, she knew she'd do whatever she could to make it work on a tight budget.

It was 2020 and COVID-19 had shut down most in-person education, so she lived at home with her family in Davis, California, and took her classes remotely for the first several months. Eventually, Ibsen made the move 90 minutes east to the notoriously pricy college town and found a pandemic-era deal on a studio apartment with a monthly rent of $1,500.

While Ibsen got generous financial aid from the university as a community college transfer student, she still had to work two jobs and take out a federal student loan to help cover rent and other living expenses. When Berkeley went back to in-person classes, her landlord raised the rent by $250 a month. But Ibsen considers herself lucky. Without pandemic discounts, she isn't sure she could've ever afforded Berkeley.

The Bay Area has one of the most severe housing crises in the country, and Berkeley has become a national flash point. The university fought legal battles against local residents for years over its plan to build student housing in a green space on campus known as People's Park. The fight attracted so much attention, Gov. Gavin Newsom ultimately intervened, signing a bill last September to allow construction to move forward.

Rigel Robinson, chair of the Land Use, Housing, and Economic Development Committee on the Berkeley City Council, said "the student housing crisis has become the defining characteristic of the student experience at UC Berkeley."

But skyrocketing home costs are increasingly putting pressure on student budgets across the country. The housing crisis has become a "five-alarm fire" for students struggling to make ends meet in hot real estate markets, said Robert Kelchen, head of the Department of Educational Leadership at the University of Tennessee, Knoxville.

College towns from coastal California to rural Montana are feeling the squeeze, and as a result, some students are turning to federal student loans to finance the high costs of living in their school's area. Experts said the housing crisis is making the already high student-debt load in the country worse.

In Knoxville, Kelchen said, the housing market has "gone nuts" as school enrollment has jumped.

"The university is trying to respond by building more undergraduate housing — they're nowhere near keeping up," he said. "And they increased the stipends for graduate students to help cover living costs."

Marcella Bombardieri, a higher education policy expert at the Center for American Progress, recently reported that Salish Kootenai College, a tribal college on the Flathead Reservation in Montana, is forced to turn away hundreds of students a year due to a lack of housing. The school is also having trouble attracting faculty because it lacks affordable housing.

With the sharp rise in mortgage rates and a deep housing shortage, home costs have soared since the pandemic struck. Now a graduate student in fashion studies at Parsons School of Design in New York City, Ibsen is taking out about $40,000 in loans and lives across the Hudson River in Jersey City with her husband to make ends meet.

With over 40 million Americans owing $1.7 trillion in student debt, many associate the huge debt burden with tuition increases. But with housing costs spiking, living expenses are a big part of the story for many. Nearly half of college students don't have stable housing and 14% experienced homelessness in the previous year, according to a recent survey by the Hope Center at Temple University.

"College students today are not the image that we have of someone who is living in a dorm, and eating in a dining hall, and supported by their parents," Bombardieri said. They're increasingly older, many are parents, and many work full-time while attending school, she added.

The costs of higher education are at the top of many students' minds as they decide whether taking on thousands of dollars in student debt is worth it in the long run. The typical borrower holds about $35,000 in student debt, but spiraling interest rates can lengthen the repayment timeline by years — or decades.

Needed policy solutions

When it comes to helping students afford their degree, there are a slew of federal policy changes — from boosting funding for Pell Grants to making community colleges free — that would go a long way.

But in the short term, colleges and universities need to be more transparent about what it costs to live in their communities, Kelchen said. Schools often underestimate housing and living expenses — they don't update their numbers regularly enough, and in some cases they intentionally lowball them to appear more attractive.

"There's pressure to keep the cost of attendance numbers low because one of the key affordability metrics is the net price," Kelchen said. "There are cases that I've heard from colleges where university leadership stepped in and said, 'This number is too high, we look too expensive.'"

Darrell Owens, a policy analyst at California YIMBY — an advocacy organization working to end California's housing crisis — noted that the student housing crisis exacerbates the broader housing crisis.

"When students can't find affordable places to live, they go to the private market, and the private market is supply-limited," he said. "Then what ends up happening is that they spike housing costs for other people."

Robinson noted that Berkeley's lack of student housing is "driving the gentrifying force of the university."

"The shortage of student housing has ripple effects on the regional housing crisis as students are forced to look further and further from campus to find housing that they can afford," he said.

The central answer to the housing shortage is to build more housing, both affordable and market-rate — but of course, it's not that simple. Zoning laws and other land-use regulations often need to change to allow new and denser housing.

Robinson worked to address the issue in Berkeley, and the council recently approved a rezoning project that'll allow over 2,000 units of additional housing next to the college campus "in a city notorious for its resistance to new growth as a birthplace of single-family zoning," he said.

While colleges and universities often need to step up their efforts to build student housing, they also need the government and local residents to welcome new construction.

"I think it is easy for cities to push the blame and point fingers and argue that it is only and solely the university's responsibility to respond to the housing needs of their staff and faculty and students," Robinson said. "And I believe that's a huge mistake."

He pointed to the jobs and economic opportunities generated through a college, and that ensuring students can afford to attend — and live there — should be a top priority.