Surging college costs price out middle class

Parents Forum
1

<p>"What do you get when college costs skyrocket but incomes barely budge? Yet another blow to the middle class.</p>

<p>‘As the out-of-pocket costs of a college education go up faster than incomes, it’s pricing low and medium income families out of a college education,’ said Mark Kantrowitz, publisher of financial aid sites FinAid.org and FastWeb.com.</p>

<p>The numbers confirm what most middle class families already know – college is becoming so expensive, it’s starting to hold them back.</p>

<p>The crux of the problem: Tuition and fees at public universities, according to the College Board, have surged almost 130% over the last 20 years – while middle class incomes have stagnated.</p>

<p>Tuition: In 1988, the average tuition and fees for a four-year public university rang in at about $2,800, adjusted for inflation. By 2008, that number had climbed about 130% to roughly $6,500 a year – and that doesn’t include books or room and board.</p>

<p>Income: If incomes had kept up with surging college costs, the typical American would be earning $77,000 a year. But in reality, it’s nowhere near that.</p>

<p>In 2008 – the latest data available – the median income was $33,000. That means if you adjust for inflation, Americans in the middle actually earned $400 less than they did in 1988…"</p>

<p>Seemingly old news but quantification adds an exclamations point.</p>

<p>[Rising</a> college costs price out middle class - Jun. 13, 2011](<a href=“Rising college costs price out middle class - Jun. 13, 2011”>Rising college costs price out middle class - Jun. 13, 2011)</p>

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<p>Yes, old news, but still rather depressing! Tuition won’t go down, taxes won’t go down, health care costs won’t go down, our groceries & gasoline have gone up!</p>

3

<p>I guess it helps to determine how you define middle-class. If you’re going by the median, then the middle-class is a lot lower than how the middle-class is defined in politics and the media today (middle-class going up to $200K/year).</p>

<p>At my son’s school, they’ve been raising tuition/fees but only the full-pay students and out-of-state students actually pay that. Those making under a certain amount (say, $85K) get aid in the form of grants and loans. The annual sticker-price increases cover cuts in state aid and cover more aid for lower-income (under $85K) students. So there is a redistribution effect going on at his public university.</p>

<p>I imagine that there are other states that do this. They don’t have a lot of choice if they want to educate those without the ability to pay.</p>

<p>The article appears to me to be strongly one-sided in making its case that college is unaffordable. They present the worst case for all of their points and don’t provide any counterpoints. I think that most here can think of the counterpoints while reading through the article.</p>

4

<p>Tuition at most public universities is still quite a bargain. Think of the amazing education you can get at many great universities, for a fraction of the price of a private. People are just used to paying almost nothing for it, getting what is practically a freebie courtesy of their neighbors.</p>

5

<p>These facts about tuition and student loans are constantly being reported, but rarely do they report about how the delivery of education and the expectations of middle class students have changed since the 1980s, which may also account for the rise. The media like to focus on what they consider frivolous expenses–such as beautiful rec centers and dorms, special food in the cafeteria, etc–as though the money isn’t being used appropriately, but at the same time, there have been substantial changes in expectations and services for students.</p>

<p>Here is an example. This year, I can go into a smart classroom to upload my powerpoint presentation on the computer in the classroom, which is also linked to the internet. The computer is also linked to a projector.</p>

<p>Money needs to be invested into getting this type of equipment, and people need to be hired to maintain it. </p>

<p>In 1988, I could go into a classroom and there was probably a blackboard. I doubt there was an IT office to maintain all the computers, etc.</p>

<p>How many colleges in 1988 had a Study Abroad Option and have one now? Service Learning Coordinator? And some universities have seen a growth in their honors programs, or the creation of more honors programs, and consequently more people to administer these programs, etc. </p>

<p>I just wish that, accompanying these articles about the rise in tuition would come also a discussion about others changes that are happening in the classroom and support for students in the classroom, as well as a discussion of the growth in programs that middle class students have come to expect (honors, study abroad, internships, service learning, paid summer research experiences in laboratories).</p>

<p>Many want universities to act more like businesses, and its employees (faculty) to act more like a labor force (so no tenure), but when universities do things to attract students (i.e. ‘customers’), they are then chastized for doing so.</p>

6

<p>Higher education is a scam just like the housing bubble that burst in 2008. The underlying causes of tuition hyperinflation are systemic and the result of nothing more than pure unadulterated greed. The middle class never got walloped like this until we idiotically deregulated the banking industry in 1999 and 2000 and allowed lending banks to merge with investing institutions. Sallie Mae, the largest issuer of student loans, now has a huge division dedicated to selling student loan assest backed securities (SLABS) on wall street. Investors are all the more eager to buy up SLABS since they are government backed and are guaranteed to pay out even if students go into default. The ease with which companies like Sallie Mae can dump SLABS onto the market then allow them to go out and make even more loans to make even more profit. Sallie Mae doesn’t care if it is handing out $100,000k to a sociology major that in all likihood will never be able to pay it back, it can derivatize that students debt and sell it on wall street. The never ending flow of easy money (all backed by the govt) and the insatiable appetite of investors then allows colleges and universities to continue to raise the price of their tuitions at hyperinflation rates. It also explains why the banking industry spent millions lobbying to get student loans nondischargable through bankruptcy. Don’t allow students to discharge their debt and you can cut down even further on the risk of SLABS to make them even easier to sell.</p>

<p>Wake up people,it is a giant scam and is a bubble that is about to burst. There are huge multibillion dollar entities soaking the middle class because most people in the middle class are too stupid to figure out what is going on or simply don’t care.</p>

<p>-break up banks separately into lending and investing institutions like our grandparents were smart enough to do after the great depression.</p>

<p>-allow students to discharge debt more easily in bankruptcy</p>

<p>-get the government out of guaranteeing loans</p>

<p>Do all those things and I guarantee you the flow of easy money comes to a grinding halt and universities will be forced to drop the cost of their overpriced and hyperinflated product overnight. </p>

<p>The most insidious part is that nothing (from what I’ve gathered so far on this issue) stops a university from investing in SLABS. In other words universities could make money 2x off a student and their family–once up front on the tuition and fees, a second time by investing in that student’s securitized debt. In other words universities would have strong incentives to constantly raise tuitions. The more indebted their students become, the more money in profits they can make. I would love for a media invesitgator to look into university investment in SLABS. I suspect it is rampant.</p>

7

<p>Oh, give me a break! Yes, there are student loan scams and/or bad deals out there, but how does that extend to the blanket statement that, “Higher education is a scam…”? Are public universities scamming students when they offer their residents taxpayer-subsidized tuition? Some may argue that expensive private liberal arts colleges do not offer students sufficient value, but it is still not a ‘scam’.</p>

<p>Why are public universities raising tuition? Because they want to ‘scam’ their students? Of course not. Tuition is skyrocketing because states are decreasing the amount of funding to their higher-ed institutions. Universities are raising tuition to partially make up the difference. How is that a scam?</p>

8

<p>…and I am so sick and tired of hearing higher education equated with the real estate bubble. How are these equivalent? Are students somehow ‘speculating’ by paying tuition? The only similarity is that individuals end up with loans for a product that may or may not have as much value as they had hoped. But, you can’t “sell” your diploma like you can a real asset, such as a home. </p>

<p>Does anyone think that public universities or private non-profits are reaping huge profits from their students? Think again. Some colleges are financially healthy because of fundraising and grants, not tuition/room/board.</p>

9

<p>Tuitions are rising because of the never ending flow of easy credit with no risk because of government backing, almost 100% guaranteed profits to investors in student loan derivatives, and universities’ willingness to raise their prices. If you don’t think universities are in cahoots with banks, think again. Do a quick google search on university kickbacks from banks.</p>

<p>The forces behind this giant bubble are almost identical to the bubble that caused the housing crisis.</p>

10

<p>Higher educating is NOT a scam! I am sick of hearing that. If it were a scam I would not be a Registered Nurse who makes decent money and can afford to spend $500 on her daughters’ cheer outfits! Lol.</p>

<p>My cousin wouldn’t be about ready to graduate with a double major that will enable her to teach special ed kids from kindergarten on up. My Uncle wouldn’t have been able to retire in his early 50’s after teaching 30 years. So many good jobs require a higher degree. Could you imagine a world where health care professionals and teachers were not educated? It would be a pretty scary place.</p>

<p>I do agree it is too expensive.$55,000 a year for a college is ridiculous and people that finance those costs through loans are foolish imo. But it is not a scam.</p>

11

<p>Universities aren’t there to scam students. Any student who took out a lot of loans- I feel sorry for you and would advise against this- but you have to take responsibility.</p>

<p>Yes, graveneworld, tuitions and fees are increasing way past what’s reasonable because they can, partly because of credit. </p>

<p>Skrlvr, colleges do offer a lot of new programs and technology is expensive. But, colleges should have to set tuition increases according to their budgetary needs, not because they are guessing that their competitors will have an X% increase. And they need to think thrifty. Programs like study abroad, honors etc. were available in the '80’s if a student pursued them. Are offices of [everything] really necessary? There was a recent study that concluded tuition could be reduced if staff taught more courses. Can professors teach an extra class to help with costs? Colleges need to figure out how to make it less expensive. This doesn’t mean on-line classes or increasing class size necessarily. These are probably the worst alternatives.</p>

<p>The main thing is that the cost trend is unsustainable. Colleges cling to the magic EFC number. But it’s not reasonable. It is also an eye-opener to hear again and again that ‘cost shouldn’t be an impediment to attending our university because of our great financial aid’ and then to be disappointed about what the results really are.</p>

12

<p>When folks stop taking out loans and start pursuing the more affordable options, it will force some of the colleges to reduce their prices. It hasn’t reach that point yet. We’ve gone the route though we are not classified as middle income. We could easily borrow and send our kids to any school, but we are limiting our loans to what is financially wise (well sort of, but not up in the stratosphere foolish). Why should college lower there prices when there is a market out there that will pay them? When the middle class and others who are having to endanger there financial stability to pay some college prices, stop sending their kids to those top priced colleges, that is when those colleges affected will lower prices or go out of business.</p>

13

<p>cpt- You are right. It’s foolish to think that universities would altruistically lower prices/stop hefty increases unless it were somehow in their best interest. I think we have already started to see consumer behavior begin to change. Some LACs (not tippy top) were relieved to enroll a class without having to lower their standards (much). Some schools known for great merit aid are over their target enrollment. Some very nice universities are using wait lists pretty heavily.</p>