College Affordability

Introduction

College is growing more unaffordable by the day, with student debt growing faster than the rates of inflation. Unfortunately colleges are not doing much to make themselves more affordable, but are rather appearing as if they are out to get all they can before the education bubble bursts. The rates of satisfaction with college continue to decline as the price grows, and this is all complicated by the stagnating job market. This perfect storm is causing more students to opt out of culture all together, staying at home with their parents and riding out life rather than participating. 

College- A Right or a Privilege? 

Tuition for college has grown totally out of proportion to the ability of people to pay for it. This has created debt structures which have changed the nature of how people work and live. Even giving the rates of inflation a run for their money, college tuition growth rates give new meaning to the word “growth”. From 1995 to 2015:

• The average tuition and fees at private National Universities jumped 179 percent.

• Out-of-state tuition and fees at public universities rose 226 percent since 1995.

• In-state tuition and fees at public National Universities grew the most, increasing a staggering 296 percent. [However] Despite experiencing the biggest increase, attending a public university as an in-state student is still the most affordable four-year college option, on average. (Mitchell)

As a result of these unreasonable jumps in cost many students are forced to take on increasing amounts of debt to get the education they are led to believe is essential for their the job market. This is due in part to the fact that, median family income in the United States rose at an average rate of 0.7% per year between 1985 and 1995 and 0.8% per year between 1995 and 2005. Between 2005 and 2014, median family income declined at an average rate of 0.2% per year, after adjusting for inflation. (College Board)

Since wages do not increase, student loan debt continues to grow every year, and since the job market does not more and more graduates are simply moving back in with their parents after they graduate. The results of this hyper-inflation:

• $1.26 trillion in total U.S. student loan debt

• 43.3 million Americans with student loan debt

• Student loan delinquency rate of 11.6%

• Average monthly student loan payment (for borrower aged 20 to 30 years): $351

• Median monthly student loan payment (for borrower aged 20 to 30 years): $203 (Student Loan Hero)

Families are doing all they can to help send their children to college, and this is resulting in debt being held by many in families. The Federal Reserve recently reported:

• 23% of adults currently have some education debt

o In that group, about 15% had such debt for their own education;

o 6% had education debt for a spouse or partner;

o and 6% had college debt for their child's or grandchild's education. (Tompor)

These rates are being complicated by the fact that increasing numbers of students leave college without a degree, but with debt. This is a double-bind in that these people the added challenge of finding work without a degree and with the challenge of paying back thousands of dollars. Research has found, “Students who took on debt but didn't complete any degree are more likely to end up behind on student loan payments” (Tompor). This situation is encountered most by first-generation college goers and those who attend for-profit schools. This emphasizes that many who succeed in college do so with support from their extended social network (Tompor). The facts support this observation in that:

• Nearly 38% of the respondents who dropped out said they did so because of family troubles.

• About 43% of women who started college but left gave family duties as the reason.

• About 27% said they did not complete a degree because they wanted to work.

• About 24% said college was too expensive so they did not complete a degree.

• One in four, or 25%, said they were simply not interested in college or continuing college and did not complete a degree. (Tompor)

These statistics reveal that many who graduate from high school are simply unprepared for the realities of college life. These students may take on the challenge of college simply because they know that a degree earns you more money. However, without knowing ones’ own limits is key for knowing how to maximize them. Out of desire for tuition money many colleges are accepting students who are unprepared only to put them through remediation which is an expensive way to spend debt dollars. 

Solutions

Many possible solutions to college unaffordability have been presented, but so far no real takers. President Obama has suggested making the first two years of college free, which would likely take a lot of stress of students and increase the graduation rates. Bernie Sanders has advocated for free college, but was summarily dismissed by his “liberal” party. Students and families are left on their own to navigate the challenges moving into the work pool. Experts offer a few suggestions:

• Plan for the total cost of your education.

• Start at a community college and then transfer to a four-year program.

• Explore all funding options. 

• Take Advanced Placement to get the first year of college free.

• Try Online courses. (Sorrentino)

Increasingly, a new solution is gaining ground in the affordability debate-tuition deferment. In this scenario, “Colleges should offer an alternative to traditional loan programs by allowing students to defer up to 75 percent of the cost of attending school-tuition, room, board and fees-and pay it back over 20 years” (Cohen). The key aspect to this affordability plan is the lower interest rate, which will deal with the fact that current student loan rates are sometimes as high as four times a car loan. The brilliance of this plan is:

In a tuition-deferment plan, it is the college that is borrowing capital to offset its cash-flow needs because of the deferred tuition, not the student or parent. The college’s borrowing cost would be substantially lower than what individuals have to pay for current loan programs because colleges have collateral: endowments, physical assets and future cash flow The resulting interest rate passed along to student participants could be as low as car loans (around 3 percent) or home mortgages (around 3.5 percent). (Cohen)

In this plan there is also the real possibility that if colleges were the debtors they would find creative ways to cut costs for their own benefit. After all, college administrators understand that the tuition inflation is out of control, and are looking for ways to make college affordable. Colleges are facing plummeting approval rates as their approaches do not meet the needs of the students increasingly, and parents support for college is waning (Cohen).

Conclusion

College affordability may seem like a bitter play on words, but the reality of the needs of students are beginning to weigh on colleges. With tuition rates increasing faster than wages, inflation, and even the rising cost of health care something/s is clearly wrong with the structure. The cost/benefit ratio is sinking as more and more students graduate without marketable skills. If this disconnect continues trade schools may begin to overtake colleges as students look other places to get their needs met.

Notes

1: Chart retrieved from: http://www.usnews.com/education/best-colleges/paying-for-college/articles/2015/07/29/chart-see-20-years-of-tuition-growth-at-national-universities

2: Chart retrieved from: http://comptroller.texas.gov/specialrpt/student_loan/

Works Cited

Camera, Lauren. “A Right, Not a Luxury.” U.S. News, 6 Nov. 2015. Retrieved from: http://www.usnews.com/news/the-report/articles/2015/11/06/college-affordability-is-still-an-issue-today

Cohen, Steve. “How to Make College Cheaper.” The New York Times, 25 Feb. 2015. Retrieved from: http://www.nytimes.com/2015/02/25/opinion/how-to-make-college-cheaper.html?_r=0

College Board. “Average Rates of Growth of Published Charges by Decade.” Collegeboard.org, 2016. Retrieved from: https://trends.collegeboard.org/content/average-rates-growth-published-charges-decade-0

Mitchell, Davis. “Chart: See 20 Years of Tuition Growth at National Universities.” U.S. News, 29 Jul. 2015. Retrieved from: http://www.usnews.com/education/best-colleges/paying-for-college/articles/2015/07/29/chart-see-20-years-of-tuition-growth-at-national-universities

Sorrentino, Johanna. “5 ways students can make college more affordable.” USA Today, 15 Dec. 2015. Retrieved from: http://college.usatoday.com/2015/12/15/5-ways-students-can-make-college-more-affordable/

Student Loan Hero. “A Look at the Shocking Student Loan Debt Statistics for 2016.” Studentloanhero.com, 2016. Retrieved from: https://studentloanhero.com/student-loan-debt-statistics-2016/

Tompor, Susan. “College student's nightmare: Loan debt and no degree.” USA Today, 7 Jun. 2015. Retrieved from: http://www.usatoday.com/story/money/columnist/tompor/tompor/2015/06/07/student-loans-repay-delinquency-federal-reserve/28562447/