Exponential College Tuition Inflation

by Eric Guzy

 Tuition for college is commonly described as being overpriced and far from payable on the salary of a student working part time at your local diner. However, how come it seemed that the prior generation, with an abundance of hard work and resilience were able to pay for school with a part time commitment? 

In 1980 the minimum wage in our nation was $3.10. However, the cost for four years of university study (plus room and board) was $64,572. In 2015 Minimum wage was $7.25 on average and the average cost of tuition (plus room and board) is $175,684 for four years. The average work week hours logged per capita for a part time job is 30 hours. In 1980, if you worked thirty hours a week for your 8 semesters of college (15 weeks a semester) you would make about $11,160, which is about 17% of total tuition. However in 2015 with the same formula you would make $26,000. This is only about 14.5% percent of total tuition. 

This difference may not seem drastic, but the rate of inflation is rising faster than employee salary can pace. With college becoming such an important nexus between today’s work force and the current generation many people have to choose between whether to suffer uneducated or to suffer constantly in the unremitting circle of getting an education to get paid, to pay off the education people took out loans to pay for because they felt they needed to make more money to change the world. 

This alone is astonishing, but once you calculate for interest rates in today’s world it almost seems as though college should be formally recognized as a debt collection monopoly.

Data Sources:

http://www.alternet.org/education/how-did-college-education-become-so-ridiculously-expensive

http://www.dol.gov/whd/minwage/chart.htm

http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years

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

Ohio Works to Make College More Affordable

John Carey, the Chancellor of the Ohio Department of Higher Education, has written a guest column outlining the steps that the Buckeye State has taken to make college more affordable.

Ohio has increased spending on higher education by 8.5% and frozen tuition and fees at state supported schools for two years. Additional money has been appropriated to help underprivileged and under-represented students pay for tuition at community and four year colleges.

One of the biggest sources of increased debt for college students is not graduating on time. Ohio has tried to address this by devoting resources to helping students get college credit in high school and to creating guidelines for more skilled counselors to keep students on track for a four year graduation once they are in college.

For more details on the Ohio plan please see the article.

 

SCOTUS Asked to Hear Student Loan Fees Case

Inside Higher Education published this piece about fees related to delinquent student loans:

The loan guarantor USA Funds plans to file a petition with the U.S. Supreme Court today seeking to overturn a federal appeals court ruling that barred the agency from collecting fees from a borrower who had defaulted on her student loan but started repaying it. The court’s decision was backed by the Obama administration and cheered by consumer advocates. But USA Funds believes the Supreme Court is poised to overturn an earlier ruling, in a case known as Auer v. Robbins, on which the appeals court largely based its decision in the USA Funds case.

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 Colleges!

The Federal government has released new data on American colleges in an effort to help students choose where they want to study. According to Inside Higher Education

These new data show publicly, for the first time, the share of a college’s former students who make some progress in paying down their federal loans within the first three years after leaving college. And they provide the first comprehensive look at how much students who receive federal loans and Pell Grants end up earning after they leave a specific college, both in the short term and long term.

The College Scorecard is available at https://collegescorecard.ed.gov/

 

 

 

 

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