<p>"The Obama administration acknowledges that student loans could be behind skyrocketing tuition. But the real link between college costs and aid is complicated.</p>
<p>... Meet the 'Bennett hypothesis,' the dismal notion named for Reagan Education Secretary William Bennett, who suggested it in a 1987 New York Times op-ed diplomatically titled 'Our Greedy Colleges.' Generous student-aid policies had 'enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,' he wrote at the time. 'Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.' ...</p>
<p>... True enough. Subsidizing skyrocketing tuition sounds like a supremely poor idea. If only it were clear what the link between student aid and college costs actually was." ...</p>
<p>I fail to see how $5500 worth of loans can push tuition up so high. I believe the loan amount was $2625 in the late 80’s. Tuition has climbed much higher than the increase in the available loan amount in that time.</p>
<p>As long as students and parents will pay for the tuition hikes … be it from basic aid sources, borrowing from other sources, or paying out of pocket … schools will continue to push tuition as high as the market will bear.</p>
<p>I wonder what would happen if congress would change the law to allow private college loans to be reduced or discharged in bankruptcy? It would increase the interest rate and make it much harder to obtain private student loans. However, would that be that bad? It may make students make more intelligent choices in going into debt. It also would greatly reduce the number of students attending expensive fourth-tier law schools, many of which should disappear.</p>
<p>The average undergraduate student is eligible for about $24,000 of federally subsidized loans over 4 years.</p>
<p>I can’t believe financial aid has increased nearly as much as tuitions and fees and the colleges are about to price themselves out of the market.</p>
<p>In the go-go 90’s, investments were going gangbusters so tuition increases could be covered by savings interest and earnings. Then for a while, home prices were increasing and home equity lines could be tapped for extra cash. Then student and parent loans skyrocketed to cover college costs.</p>
<p>Now investments are flat, the real estate bubble has burst, and there is insecurity about future employment making college loans a riskier proposition. The well is running dry. The better endowed schools are increasing financial aid, but what about everyone else?</p>
<p>I bet many schools are seeing significantly more kids dropping out of college for financial reasons. I know kids that have transferred from private to state schools to save money. Just this week, my son said a friend had to drop out because he didn’t have the money for tuition and he claims that many others have done so.</p>
<p>I appreciate that Obama points out that there is a problem. But the stronger motivator for change will be the market itself.</p>
<p>I can’t believe financial aid has increased nearly as much as tuitions and fees – and the colleges are about to price themselves out of the market.</p>
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<p>I think the term “financial aid” is being used rather loosely here to include all sorts of funding methods…including Plus loans, Sallie Mae, etc. If the issue was simply that schools are giving too much away in grants and costs are going up, then FA wouldn’t be a problem at all. The issue is that these “non-free-money aids” are driving up costs.</p>
<p>The University of Charleston lowered tuition by 22%, and lowered the amount of institutional financial aid given out by 1/3.</p>
<p>The tuition cut isn’t only funded by FA cuts, but it seems to be a large chunk of it.</p>
<p>Deposits are up 40%, so it seems there is a good amount of price sensitivity. Or perhaps a sense of a better value when you know 20% of your tuition isn’t going to subsidize others.</p>
<p>I think financial aid - mostly loans - coupled with lack of financial literacy has contributed because there has not been much resistance to tuition increases. For a long time, tuition has increased, applicants still apply and students still show up, albeit sometimes after signing multiple loan forms. Our generation as parents has done a disservice to our kids by wanting them to have “the best” of everything. I half- laughingly tell my husband that, for just about everything we’ve encountered that has a price tag affixed to it, we never seem to find exactly what we want, when we want it, for the price we want to pay for it. And we seem to be the few who refuse to compromise on the last part. I think that mantra being out of fashion for a few decades corresponds with the spike in tuition levels because many people could not abide by not having what they wanted, when they wanted it (ie “dream school or prestigious school”) and were willing to pay for it with money they didn’t have. Like the McMansion or the Lexus.</p>
<p>D1 is waiting for acceptances now. Some are for pricey and/or prestigious schools and some from academic safeties. We won’t get much need based FA. So without merit aid, she will not go to these pricey schools. But if she gets accepted and can’t go, she can at least say she got accepted.</p>
<p>I think this market will correct itself because people are either getting wiser about debt or just can’t borrow any more but until and unless people say “no we won’t pay that” not much will change on its own.</p>
<p>***I think this market will correct itself because people are either getting wiser about debt or just can’t borrow any more but until and unless people say “no we won’t pay that” not much will change on its own. ***</p>
<p>Yes, I’ve been anticipating that for a long, long time … but bubbles always seem to grow incredibly large before they pop.</p>
<p>I recently found a transcript of some Congressional hearings debating this same issue…30 years ago! I was wondering as I read it what the participants would have/could have/should have done then if they’d been able to see into the future! </p>
<p>Why is it that FA is always the scapegoat and there is never any discussion of the HEPI? Clearly, education is a labor and capital-intensive business and we may as well point to the huge increases in medical insurance, fuel, and other costs, but I suspect that it is a combination of everything, including some less than transparent policies on the part of many colleges with regard to enrollment management/preferential packaging.</p>
<p>I’ve often weondered how many parents feel pressured to take out big loans once they find out they aren’t getting the aid that they thought. I imagine that when spring comes and they realize that there child has no affordable choices, they feel they have to borrow to make it happen. At that point many may not feel like a cc is the answer…especially after Junior got accepted to a few nice schools.</p>
<p>Private loans are NOT financial aid. They are not included in a financial aid package, nor are they subsidized in any way by the government or by schools. Any private loans borrowed by students are not a factor in the discussion of “aid” in the article.</p>
<p>Kelsmom…we’re you responding to me? I wasn’t referring to private loans. I was talking about Plus loans. I think they’re too easy to get and income doesn’t matter. This leads to low and modest income families borrowing too much.</p>
<p>No, I was responding to a couple posts in which private loans and loans are referenced as contributors to high college costs. </p>
<p>Plus loans are a whole 'nother discussion. If grown ups who have raised children want to borrow to pay for college, then I guess they get what they want … and whatever else comes with their decision, including perhaps higher tuition (because the market charges what folks are willing to pay). But Plus loans are not “financial aid,” either. They are a federally-supported option to help parents pay for what financial aid does not cover. They are included in financial aid packages only because they are a valuable option to help parents pay for college costs.</p>
<p>I do think that some people feel pressured to make their kids dreams come true. A dad on another thread just tonight said that he would really try to make his kids dreams come true. Now, I have no idea of his circumstances, but the trend for this generation of parents is to give our kids everything. </p>
<p>I have a friend who said to me that if my DD got into ( fill in top school here) that we should eat peanut butter for four years so she could go. People still make bad financial decisions to make the dream happen.</p>
<p>Loans are a factor in the price increase, whether they’re private or not. The availability of the money increases pressure from the demand side.</p>
<h1>Plus loans are a whole 'nother discussion. If grown ups who have raised children want to borrow to pay for college, then I guess they get what they want … and whatever else comes with their decision, including perhaps higher tuition (because the market charges what folks are willing to pay). But Plus loans are not “financial aid,” either. They are a federally-supported option to help parents pay for what financial aid does not cover. They are included in financial aid packages only because they are a valuable option to help parents pay for college costs.</h1>
<p>Well, I think for the discussion, Plus Loans are part of the issue in regards to financial aid. If it’s easily obtained and a family feels desperate once the spring acceptances/FA pkgs have come in and they realize they didn’t get the aid they need…and it’s too late for a “do-over”…then many parents feel a huge pressure to resort to Plus (or other loans)…and that could be influencing school prices. </p>
<p>I realize that if adults want to make these decisions, then they have that right, but if that decision is often made under duress: “it’s the beginning of April and all of Junior’s schools expect us to pay $35k per year and we can only pay $15k…Ugh…he’s worked tooooo hard for his grades and spent hours and hours and hours on apps and essays, we don’t have the heart to now say…go to a CC just because we didn’t understand the process…so, where do we sign a Plus loan?” </p>
<p>The above scenario happens every year…and schools are COUNTING on the fact that a number of parents will resort to Plus/private loans so that their (the schools) enrollment numbers won’t falter. Again, it doesn’t take many to influence that enrollment number…if the 10% that use those loans didn’t do it, schools would be more influenced to watch costs to have better enrollment outcomes.</p>
<p>It rarely takes a large percent of people to influence price or whatever. It can be as little as 10% who resort to Plus Loans, co-signed loans, or whatever</p>
<p>Many people don’t understand FA, they have NO IDEA that a school will expect them to pay 25-35% (or more!) of their income for college. They don’t get real FAFSA numbers (or CSS influenced numbers) til after the app season is essentially over. </p>
<p>The concept of NPCs is supposed to remedy this a bit, but the “jury is still out” as to whether those are going to be accurate for many. </p>
<p>Great point, and I’m not convinced that NPCs are going to help that much. We’re new to all this (only child is a high school senior) and I was shocked by our FAFSA EFC (40K), especially as H had checked out a few NPCs which suggested we’d have to pay around 15K, which we could manage. D is a top student and did apply RD to a few Ivies and near-Ivies, but I suspect she’ll end up at the Honors College at our state flagship, which fortunately seems to have a lot to recommend it.</p>
<p>When trying to come to grips with the application process, I did rule out OOS public universities. There wasn’t any reason, in my mind, to prefer them over our state flagship unless they were academically a lot stronger. Those in that camp are few, and there just wouldn’t be enough aid. I don’t know if there’s something I’m missing here, but I really don’t get why people apply to OOS publics, by and large.</p>
<p>I’m now suspecting that even if D is accepted by any of Vanderbilt et al., they likely won’t offer enough aid to make it affordable. But we’ll have to wait and see.</p>
<p>Weatherga, we went for some of the OOS publics because they do do some cherry picking of the very best kids. My daughter really wanted to get out of our state. She ended up with full tuition from one and half tuition from another.</p>