<p>"In the political battle over college student loans, where will the SMART MONEY go? Democrats and Republicans both say they want to keep the interest rate on subsidized loans at 3.4 percent, but remain at odds over where the money should come from. Of course, what makes the issue so volatile in the first place is that college costs have been skyrocketing, but why? Our Cover Story is reported now by Rebecca Jarvis:</p>
<p>It's as picture-perfect as a college can get. But this idyllic campus outside of New York City is also a portrait of what college is America has become. Really, really expensive.</p>
<p>In fact, Sarah Lawrence College has the dubious distinction of being perhaps the most expensive college in the nation.</p>
<p>The all-in costs to be a student there next year will top $60,000, for one year, said President Karen Lawrence.</p>
<p>She insists that her school, which provides an average of $31,000 in financial aid, is worth every penny." ...</p>
<p>Are we ready for the first $300,000 college degree? Coming soon, or will the bubble burst first?</p>
<p>So the real cost of attending Sarah Lawrence for the average student is not $60,000, it’s $29,000. And half the students pay less than that.</p>
<p>Much less impressive headline.</p>
<p>One thing we learned this year is that sticker prices at many schools (actually, all three of the privates where DD was admitted) are fantasy. DD did not have stats significantly above the norm for any of these three schools, yet was offered merit aid ranging from $13,000 to $18,000. And none of those schools are in the >$50K COA range.</p>
<p>I think this issue needs to be divided off into three separate tracks.</p>
<h1>1) Why do students attend schools like Sarah Lawrence and NYU which are very expensive and offer comparatively less aid than others if they can’t afford it out of pocket? The magnitude of debt involved in attending these schools has to include parent PLUS loans, unsubsidized loans and possibly private loans cosigned by the parent. The question here might be what went in to the decision making process and who was driving the bus? The standard example often used here is a kid who went 90k into debt - mostly unsubsidized, parent PLUS and private loans by definition - at “dream school” for a theater or comparative literature major.</h1>
<p>THIS HAS NOTHING TO DO WITH THE NEXT ISSUE </p>
<h1>2) The issue about the interest rate on subsidized student loans has nothing at all to do with the question above. They are sometimes conflated. Sometimes that merging is ignorance and, I think, sometimes it is intentional to make it seem as if the interest rate issue really revolves around spoiled children or elitist attitudes. And example: My D will be attending a private LAC which was less expensive for us than our in-state Universities after accounting for scholarships and grants. She will have the standard subsidized student loan only (no un-sub or parent) and that rate would double for her if legislation is not passed.</h1>
<p>THIS IS RELATED TO THE NEXT ISSUE</p>
<h1>3) Because in many states public support of higher education has been cut, tuition and public institutions, both 2 and 4 year, has been increasing dramatically. This means that more students are falling short in terms of costs that can be born through savings and current income alone and must use basic subsidized student loans to help finance their “no-frills” education. Their costs will go up both in the form of real tuition and financing if legislation is not passed.</h1>
<p>Saintfan, relatec to Item 3 is “hidden” increases in in-state tuition when state U’s raise admit standards for in-state kids above out of state to improve tuition flow. Its wrong, imho, and the state u’s will ultimately pay the price with even less taxpayer support and more demand of state control.</p>
<p>If that indeed is the “standard example,” then the standard example is based on a false assumption - because a parent PLUS loan is not an obligation of the student.</p>
<p>Interesting to see the average debt load of students when you add in parent loans. I hadn’t seen that figure before.</p>
<p>It seems to me that the principal amount should be of bigger concern than the interest rate unless the loan is going to run in perpetuity. I’d like to see less financial aid and more grants in an overall smaller pool. Expanding financial aid, keeping interest rates low, creating tax credits only allows the colleges and universities to soak that up in the form of price increases.</p>
<p>While it is “tempting” to point only to state participation in university system funding as the “reason” for higher costs and higher tuition, the truth is much more complicated: 1. The cost of administrations in these university systems is stratospheric and no tax payers should be asked to fund those salaries. 2. Pension costs and benfits are ridiculously high and represent yet another unreasonable cost. 3. Look at the rate of inflation and “real” COL increases in a state and look at the real dollar amount of taxpayer funding.</p>
<p>States may be participating at a “lower” percentage of cost, but are they really participating at a lower percentage of COL indexes for the area?</p>
<p>When examples of total college indebtedness are given in the media and by elected representatives they often include loan amounts which are far in excess of the amount that could be represents by the maximum subsidized loan. This is an issue separate from the rate on subsidized loans, but they seem to get rolled together more often than not and are, indeed, rolled together in the opening post.</p>
<p>Agree, and I would add, “and often present extreme, pathological examples that are the results of bad decisions by students and parents, all of whom certainly had much saner and more affordable alternatives.”</p>
<p>Averages are always deceiving…The school may provide an average of $31K in financial aid, but 40-48% of the incoming freshmen don’t get any aid at all (looking at CDS data for 2010-2011).</p>
<p>For that 40-48%, we’re talking about $60K (plus at least a 5% rise in costs every year). Wowsers…</p>
<p>My D was accepted to Sarah Lawrence this year. According to FAFSA, our EFC was $11,000. Sarah Lawrence offered my D $16,000 in merit aid and $2000 in work-study and the rest in loans…COA is $63,000 per year = $45,000 EFC FOR JUST ONE YEAR x 4 years, with tuition no doubt going up every year, and that meant we were easily looking at $150,000 debt for a B.A. in Liberal Arts.</p>
<p>Sooooooo. Since Sarah Lawrence posts the following on its FAQ about financial aid, we appealed the aid package:</p>
<p>
</p>
<p>We pointed out our FAFSA-determined EFC and that Sarah Lawrence claims average debt of students after four years is $23,000. We said if our D’s award could be revised to near average, she would love to enroll, but that we could not afford six figure debt, as was clearly demonstrated in our financial records.</p>
<p>Sarah Lawrence’s Financial Aid Committee reviewed our appeal and replied by offering us $2000 more in grant aid. No zero missing there. They revised merit aid to $18,000 total. We declined this generous offer.</p>
<p>For the top 5% of the population economically that attends Sarah Lawrence and pays full-freight, based on their assets, these colleges haven’t been this inexpensive in 30 years. Assets have risen faster than college costs for those in this economic class. What has changed is that many families who used to send their kids to state schools now think they should be attending prestige privates.</p>
<p>This may be true. But in some states, and I’m thinking of California or Virginia, for prime examples, there seems to be a lessening number of spots available in their state schools, and a rising number of students who wish to attend. Add that to the rocketing costs of administrative salaries in these systems and the unfunded pension liabilities, and the students from these states are both priced out of the market and rejected at increasing levels.</p>
<p>What can be done about that, I do not know. But, it is an issue in some, if not most, states.</p>
<p>Over the past 30 years, the number of places in state schools has rocketed up. I’m sure that is true in California (though may not be true currently). But they did grow more slowly (generally speaking) in the state flagships, which is as it should be. </p>
<p>The prestige privates sold a bill of goods that they were available/affordable for everyone. But the reality is that the percentage of full-pay students has remained essentially unchanged over the past 30 years (except, in some cases, for the little $5k “need” scholarships intended to entice “almost full-pay” students away from Vanderbilt. The percentage of Pell Grantees has remained essentially unchanged from 20 years ago. The number of internationals has grown steadily. What that means is that for lower middle, middle, and upper middle income students, the prestige privates are actually less available than they used to be. (But that’s not the spin that creates prestige.)</p>
<p>I actually think the number of pell grantees attending “prestige” privates is substantially lower than most people understand. This is one of the myths of higher ed. The number of kids at this level who gain admittance and attend is vanishingly low, single digits, at most top 50’s. It’s a bad number.</p>
<p>The tippy top prestige offer all sorts of middle class finaid which allows them to say they offer aid to a high percentage of students, but it’s not really needy kids.</p>
<p>What is more alarming, at least to me, is the rocketing COA of state schools in light of how little the pell now buys. Pell needs to go way up, imho, to achieve any kind of real dent in this.</p>
<p>But, I think this might be slightly off-topic.</p>
<p>Actually, not many middle income ones either (except for athletes); mostly top 20% in income. The easiest way to jiggle the numbers is to keep raising the list price, then offer piddling aid to upper middle income folks (most of whom would like attend anyway, but it helps yield.)</p>
<p>I think there is something to the argument that the Pell grants have been used as an excuse for state schools to rachet up their COAs.</p>