College tuition is too high, but why?

By Mason Tracewell

It is clear that college tuition has increased drastically and many students are taking on a substantial amount of debt to go to college. The real question is: Why are tuition prices still rising? A recent study has tried to answer this question and the National Bureau of Economic Research’s (NBER) findings suggest that faculty salaries and state cutbacks don’t drive prices higher, but student aid availability drives prices higher. The argument is that the availability of more student aid allows for the schools to charge more tuition, because the students can pay for it. Also the study suggests with more state funding the schools can offer lower scholarships, so that the students pay the same amount, but the college pays out less money.

My problem with the study is that the study includes both private and public college data. I feel you would have to judge the two separately based on the vast differences between them in regards to funding, scholarships, and tuition cost. The researchers used data only from non-profit schools and this may have skewed the data and therefore the conclusions should not be stretched out to all colleges. I agree with the study that faculty salaries are not what drive tuition prices higher. Colleges are relying heavily on part-time faculty and these members get paid low wages with no benefits. Also the model college in the study combated increased faculty costs with increased student enrollment and this also suggests that faculty wages are not the reason for increased tuition.

https://www.insidehighered.com/news/2016/02/09/study-increased-student-aid-not-faculty-salaries-drives-tuition

Community Colleges, Debt & Default: New Data

The Association of Community College Trustees has released a new study analyzing student debt and default rates at Iowa Community Colleges. The report is especially important given that students at community colleges are more likely to default on student loan debt than at other types of higher educational institutions.

Community College Default Rates Compared to Other Types of Higher Ed

One of the major findings was that students were more likely to default if they were not making progress toward the completion of an Associates Degree or other types of diplomas/certifications. According to the report

Sixty percent of defaulters earned less than 15 credits and nearly 90 percent of defaulters did not
earn a credential.
Students with the least amount of credits completed were the most likely to default on their loans.
Community College Default Rates by Credits

New Data on the Real Costs of College

Parents often suffer sticker shock as they look at the prices of college. However, a new study shows the cost of higher education is similar to purchasing a new car: few people pay list price. This is because most students receive grants from “federal, state, institutional or private sources” according to data from the National Center for Education Statistics.

The study breaks down costs into three categories. First, the average total price of attending the institution. This includes tuition, room and board, fees and transportation costs. Second, the average net price after grants. Finally, the average out of pocket price for students. This is calculated by subtracting student loans from the average net price after grants. Here’s the break down of costs:

Chart - Undergraduate Education Prices

Cost of College

by Justin Clatworthy

The value of a college education is undeniable. However, the cost to attend college has been steadily increasing over the last few decades. The cost has increased more than four times faster than inflation in that same period of time. Some university’s tuition has risen to over $60,000 a year for a four year degree.

 The returns on the large cost of attending college vary depending on the degree that someone earns. A person that graduates with a degree in computer science is likely to make more than $1.7 million more than someone with no degree over the course of 20 years. The opposite of this is that a person with a degree in humanities and English will be more than $132,000 behind someone with no degree over that same span of time. It is believed that if universities had a greater incentive in the success of their students after graduation they would push them to more financially satisfying degrees. This discrepancy would possibly begin to correct itself if the job market were to improve.

 Another way to improve this discrepancy is to lower the overall cost of college. One of the main reasons that the price has increased so much is that tuition is going to things other than education. These include new dormitories, athletics, and numerous administrators. Another method that is starting to be used to lower the cost of college is online classes. The downside to online courses is that many American universities do not give respectable degrees to those students that took online courses.

“Making College Cost Less.” The Economist. The Economist Newspaper, 05 Apr. 2014. Web. <http://www.economist.com/news/leaders/21600120-many-american-universities-offer-lousy-value-money-government-can-help-change>.

College Savings Enhancement Act

Derek Harzinski

Over the past several decades the cost of college education has rose to 13 times the cost that it used to be, that’s a 1,225% increase. An increase that is much more than the rate of inflation and food costs over the same amount of time. 

Representative Robert Hurt of Virginia came to the realization that families need some type of program to have access to financial planning for the increasing costs of college education. There are already programs called “529 Plans”, that are set up to help families learn how to properly save and invest for college. Thus his creation was the “College Savings Enhancement Act” which would allow the state-run prepaid college savings plans the freedom to invest more broadly, allowing them to be able to meet their obligations to the families purchasing their plans. Not only does Virginia offer college savings plans but so do several other states, including Pennsylvania. 

This act is currently moving through congress, and if it is passed it will solve the problem that the “529 plans” are experiencing. These plans also include the prepaid plans, and it also provides tax-advantaged options. The problem is that because of these plan’s classification, they are unable to invest in ways to maximize returns and meet the obligations to their customers. 

If this act passes through congress it will make higher education more accessible for all states that have adopted the “529 Plans” and also convince other states who do not have it to follow suit. 

References: https://beta.congress.gov/bill/113th-congress/house-bill/3029  

                           http://hurt.house.gov/index.cfm/press-releases?ID=72f892bd-98cb-4c8e-9ae3-4f32cc3d6b89

http://insurancenewsnet.com/oarticle/2014/09/14/roberts-round-up-helping-american-families-save-for-higher-education-a-555096.html#.VBjz4y5dXWo

State Higher Ed and Reduced Funding

by Maria McLaughlin

When students today are enrolling in colleges and universities across the United States the costs as well as the funding is much different than it was a few decades ago. It is interesting to note that 48 out of 50 states are spending less money to finance student educations than they were prior to the ‘Great Recession.’ This means that only 2 out of 50 states are spending the same or more money on financing student educations. Many states are even continuing the trend of reducing funding, which seems to be a problem for students who are collecting boatloads of debt as they continue through college.

States contribute greater than 50% of the financial support that public institutions need. The reduction in public educational spending has detrimental effects directly on the students of these universities. This results in the increase of tuition and decrease in educational services. It was reported in CBPP that since the 2007-2008 academic year, tuition has risen on average 28% (~$1,936 inflation adjusted). Some states have increased by double that rate, and upwards of 80% increases. These factors don’t even represent the increases in tuition for private colleges and universities.

Higher amounts of tuition are spiraling students into debt by the second. This is alarming also because there are high levels of interest that can accompany a student’s finances, depending on the lender. It is disappointing to note that states are continuing to reduce funding for students, and it is a serious issue to be loading on debt to our nation’s future.

Reference: “States are Still Cutting Funding for Higher Education.” 1 May 2014. Huffington Post