Student Loans

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College Costs Out of Control

by Emily Bonney

In an article from Forbes Magazine, contributor Steve Odland provides some cold, hard numbers concerning the rising costs of college. Odland reminds readers that a there is a correlation between the amount of education a person has received and their average income. People without any college education earn almost $18,000 a year less than the US average wage, and less than half of what someone with a four year degree makes. While it is said that everyone has the same opportunities to receive this education, it is obviously not the case. Only 17% of the US population has earned an undergraduate degree, but the costs of college may change this in the future. Accounting for inflation, Odland states that while the consumer price index has risen 115%, but college education inflation rate has risen nearly 500% since 1985. Even with government aid, private funding, and scholarships, many students in today’s education system still have to take out loans which accrue interest. Odland attributes this rise in costs to the tenure policies, and the rise in spending on administration for the institutions rather than on professors or other capital expansions that would benefit the colleges.

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The Burden of Higher Education

by Carly Wray

Today, one out of four students with loans cannot afford to pay them back. According to the Consumer Financial Protection Bureau, about 25% of graduates are in default with their college loans. The issue with these loans is there is no guarantee for financial prosperity and a way to pay for them out of college. Higher education does not have the same value as it once did in the economic world. The job market is weak and the average student owes more than their annual income straight out of college with an entry level position. However, Georgetown University’s Center on Education and the Workforce states that a bachelor’s degree pay is higher than a high school graduate’s by 84 percent. In this case, the price of college needs to be reasonable and it is not.

http://www.stltoday.com/business/columns/jim-gallagher/student-borrowers-are-going-broke/article_0d4a7c36-72e4-5f2a-9bcb-353f8614fbd5.html

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College or Retirement?

by Mike Acciavatti

A recent article in U.S. News contained some disconcerting news:  college costs cause some people to choose retirement over an education for their children. The main problem is that parents do not want their children to be saddled with debut upon graduation due to the rising costs of higher education.  The article stipulates however that no matter how appealing a suggestion this may be parents SHOULD NOT risk their retirement future on college for their children.

The author states that the best strategy for dealing with college costs is to start saving early in a child’s life. The author states that simply putting the money away in a savings account is not necessarily the best option because it does not earn interest, causing it to not keep pace with rising inflation and rising costs of college.  Rather, the best way to save is to look at your state’s and school’s 529 or other savings plans.  By taking advantage of these programs the cost of college can be considerably less intimidating.

Every parent wants to give their child the best, and some would risk their own well being in retirement to ensure that. However, saving and investing, combined with scholarship and merit based financial aid, will ensure that both parents and children will have a safe financial future.

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Limiting For-Profit Institutions from Circumventing the 90/10 Rule

As higher education becomes a necessary part of life, many new institutions are appealing to the less fortunate student. These schools are categorized as for-profit and market their programs to attract anyone willing to listen. They operate by cutting costs and by obtaining money given to students through federal financial aid. Because less fortunate students receive more financial aid for-profit schools attempt to attract this demographic group. The government has a law to limit the amount of money that a university can receive through federal financial aid. Called the 90/10 rule it “requires for-profit colleges to receive 10 percent of their revenue from nonfederal sources to be eligible to receive [up to 90% from] federal student aid.”

However, there are critical flaws to the 90/10 rule. Post 9-11 GI Bill benefits are not counted as federal revenue. As a result, many for-profit schools prey on military veterans. This gap in the law can cause some institutions to receive almost 100% of revenue from the federal government. Opponents argue that for-profit institutions increase tuition when Congress increases federal student aid funding in order to fulfill the rule.

Another loophole involves enrolling international students. Some top for-profit schools, such as EDMC, have Canadian campuses. The Canadian students are not qualified for US financial aid, consequently the tuition they pay is added into the  “10” percent, allow the schools to circumvent the law.

H.R. 340, Protecting Aid for Students and Taxpayers Act, would prevent for-profit institutions from using federal education assistance for advertising, marketing, and recruiting students. This would solve many of the problems with the 90/10 rule and close many of the loopholes.

The critical question then becomes the prioritization of funds: What’s more important, success and resources available to the students or the wad of cash that goes in the pocket of the institution? This may seem drastic, but it seems post-secondary institutions, especially those dedicated to the generation of profit, have become more of a business then a center of learning and growth. Although it’s not a perfect solution, reforming these policies will take our nation a step closer to providing students with more than a paper, a promise, and a plethora of debt when they graduate.

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Buyer Beware: Lower Tuition Doesn’t Mean Lower Prices

by Michael Pacitti

When you’re out shopping and you see something on sale for 40 % off, the first thought that comes to mind is, “Wow! What a great deal!” However, when you look closer you can find that the original sticker price was exorbitantly high and the discount actually made it an average priced item. This method of pricing is deceptive, tricking buyers into thinking they’re saving money when actually they’re paying full price. Unfortunately this scheme doesn’t end at your local strip mall.

Private colleges are now using the traditionally high sticker price of tuition to their advantage. With some schools cutting their tuition price as much as 43%, prospective students can get lured into thinking that means a 43% savings in out-of-pocket costs. For example, Converse College has cut their tuition from $29,000 to $16,500 (43% discount), but the average student paid just over $17,000 in 2012. Rather than saving money, students actually end up paying the same price as before (and in Converse’s case, paid more than the sticker price of tuition).

Our next logical question is, “how does that happen?” With a lower sticker price, schools do not have to give out as much financial aid because families can “afford” the lower price. Take Converse for example. Before cuts, tuition was $29,000 but that price was mitigated by financial aid to an actual out-of-pocket cost of around $17,000. However, with a new price of $16,500, Converse no longer has to offer financial aid because it’s considered a “true cost”.

This pricing method in theory sounds honest. It tells the student exactly what they will be paying for college rather than an inflated price. However, when the true cost doesn’t change even after a price cut of nearly 43%, what’s the point? It seems as though these schools are trying to lure students into attending simply because the sticker price is lower.

The next time you go shopping and see a great discount, make sure you check the price tag and see what you’re actually paying.

 

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The Higher the Price Tag, The Higher the Debt

by Nathan Nodolski

People think that colleges with higher price tags result in more debt after graduation. Consequently many high prestige schools miss out on many applications from students because they believe it will not be worth it. According to a US News and World Report college survey, the high priced prestigious schools with large endowments often graduate students with LESS college debt than less prestigious, lower price tag schools.

Students graduating from Harvard and Yale on average owed about a quarter of the sticker price. So if tuition alone would be $200,000 after 4 years, the average student who graduated from there only owed about $50,000; which is less than the less prestigious schools. With the ivy league name on your resume as well, it may not be that difficult to pay that back.

According the survey a Princeton graduate’s average debt after 4 years is $5,096, while a student from the less prestigious Massachusetts Wheelock College has around $50,000 debt after graduation. All Ivy League schools however have endowments of over $1 billion. The more money – the more prestige. 59% of Harvard’s annual endowment payments goes to student financial aid.

So if you are smart enough to get into those high prestige colleges, go for it. Their billion dollar endowment will help you end up in less debt and with more success after college.

 

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Three Views on President Obama’s Higher Education Reform Proposals

Obama’s Plan Aims to Lower Cost of College

by Marie Herb

As colleges across the nation begin another new school year, President Obama recently proposed to help students make college more affordable. He suggested that by the beginning of the 2015-2016 school year colleges will be “ranked” according to a few different principles including: the costs to attend the school, the percentage of students from lower-income families, the percentage of students who graduate, the amount that students accrue in debt after graduation, and students’ the post-graduation income. All of these factors will be used to “rate” the colleges and apply it to financial aid for students across the country by the year 2018. It is anticipated that this will make school more affordable for many students and their parents. In the current system, the government disperses aid based on the size of the school rather than other factors. Under this plan, the schools with the highest ratings – regardless of private or public – would receive the most financial aid from the federal government.

In general, this proposal has a concrete purpose and goal. If Congress approves this proposal, it will be interesting to see the execution of this idea. While this system of “rating” colleges could be useful, there would need to be different factors regarding the type of school which the student attends and the significance of each of the criteria. If Congress is able to agree on an improved system of financial aid, students across the United States will ultimately benefit, and thus, the rest of the nation.

To view the original article in the New York Times Click Here!

NCLB for Higher Ed?

by Jessica Dembeck

President Obama recently spoke about the need for reform, as the cost of college tuition continues to rise. What’s his solution? The President proposed to tie federal funding to students’ performance and to create a ranking system for universities that rates them according to affordability, graduation rates, successful loan repayment, etc. That sounds incredibly familiar…

The No Child Left Behind Act (2005) did exactly the same thing at the elementary level, linking funding to students’ performances on the state assessment and whether or not they attain adequate yearly progress. As a future teacher, I’ve observed the results of this policy in full effect. Teachers are now only teaching their students how to pass the state assessment, and now, subject areas like science and social studies are being put to the side and barely addressed in the classroom. Of course, this isn’t happening everywhere, but the fact is that it’s still happening.

Similar to NCLB, Obama’s proposal seems like a great idea in theory, but the actual execution of the proposed policy doesn’t sit too well with me. The rating system doesn’t take into consideration all of the qualitative information that is crucial to education, just like NCLB. A university can have all of the right quantitative information, but if the quality of instruction is poor, then what? With how many colleges and universities there are in the United States, how can the government ever know exactly what they are funding?

The Cost of College

Leyette Moll

President Obama stated that “…if a higher education is still the best ticket to upward mobility in America — and it is — then we’ve got to make sure it’s within reach.”  While the president has supported initiatives to ease the pains of college costs such as the “Pay as you Earn” program, a program that caps loans at 10 percent of what a student’s income is and which few people are eligible for, he has also stated that he is planning to install 3 governmental changes to increase college accessibility to the middle and lower class American: “[1] Increasing value, making sure that young people and their parents know what they’re getting when they go to college; [2] encouraging innovation so that more colleges are giving better value; [3] and then helping people responsibly manage their debt” are the keys to accessible higher education, says President Obama.

All of the president’s ideas appear to be magical solutions to a growing problem, but are they fast acting solutions? Unfortunately these changes, even if they were ready to be enacted tomorrow, would have little affect for those attending college at the moment. Going to a school that has better bang for its buck and changing a school’s innovative tactics are ideas lost on those already attending a 4 year institution. Managing debt is also a great idea, but what if manageable debt was exceeded after one year of college for those who are now sophomores or further along in their college years? Good luck next time? There is not a next time or a re-do for those who have already begun college, and where preventative measures should not be discouraged, perhaps more immediate results would be welcome in regards to putting a dent on college costs.

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Financial Aid for the Neediest Students is Down at State Universities

A story co-published in ProPublica and The Chronicle of Higher Education shows that poor students are receiving less financial aid from public universities at the same time that wealthier students are given larger scholarship packages. This chart shows how these trends have developed since 1996:

Grants_to_Low_Income_Students

There are several reasons for why this shift has taken place.

“For some schools, they’re trying to climb to the top of the rankings. For other schools, it’s more about revenue generation,” said Don Hossler, a professor of educational leadership and policy studies at Indiana University at Bloomington.

To achieve these goals, schools use their aid to draw wealthier students — especially those from out of state, who will pay more in tuition — or higher-achieving students, whose scores will give the colleges a boost in the rankings.

Private colleges have been using such tactics aggressively for some time. But in recent years, many public colleges have sought to catch up, doing what the industry calls “financial-aid leveraging.”

The math can work like this: Instead of offering, say, $12,000 to an especially needy student, a school might choose to leverage its aid by giving $3,000 discounts to four students with less need, each of whom scored high on the SAT, who together will bring in more tuition dollars than the needier student.

According to the article this trend may escalate as state universities are held more accountable for graduation rates.

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US Department of Education & For-Profit Higher Ed Rules

The US Department of Education has released a list of potential regulations aimed at student debt at for-profit universities. According to Politico:

The regulation would cut off federal aid to programs at for-profit colleges and vocational programs at all colleges whose graduates’ debt is more than 30 percent of their discretionary income and 12 percent of their annual income for two out of three years.

And the regulation would create a new warning zone for programs whose graduates’ debt exceeds 8 percent of discretionary income or 20 percent of annual income. Those programs would have to warn prospective students and limit their enrollment. After four years in the warning zone, the programs would lose federal financial aid.

Negotiations between the Department of Education and affected higher education programs began on September 9.  Another Politico article claims that the debates will be contentious and take place against a politicized backdrop pitting President Obama against Congressional Republicans who oppose the regulations.