<p>@scholarme: access to parental and graduate student loans have increased. Direct undergraduate loans have not.</p>
<p>At some point, people (borrowers) have to take responsibility for their actions.</p>
<p>Yup - I should have said student loans cosigned by parents.</p>
<p>College have raised prices because they can. The reason they can is because govt policies make student loans widely available to everyone regardless of credit. It’s just like the housing bubble. And taxpayers will be picking up the tab for the inevitable bail out. FYI, less than half of student loans are being repaid as scheduled.</p>
<p>Dial back student loans, college prices decrease. Dial up student loans, college prices increase. It is that simple. </p>
<p>“Colleges have raised prices because they can.”</p>
<p>This. So long as employers treat college degrees as a necessary credential, families will do whatever it takes to help their children get those degrees. They’ll max out student loans, co-sign on parent loans, tap their home equity and even raid their retirement accounts. When I was taking Econ 101, they used cigarettes as an example of inelastic demand. These days, they could just as easily use college education. </p>
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<p>Repeatedly saying that does not make it true. Only the relatively small amount of direct loans are available regardless of credit. Parentally cosigned loans and parent loans require parental creditworthiness.</p>
<p>Prices can be raised because students and parents are willing to pay, loans or no loans.</p>
<p>Colleges can raise prices primarily because of the aid provided by the government. If the govt did not provide this size-able aid, then the price of college would have to plummet. Federal student aid is the biggest source of revenue to colleges after direct family contributions. Middle class family incomes have been stagnant for a long time. So the money used to pay increasing college costs obviously is coming from somewhere else. Here’s the data.</p>
<p>2/3rds of all aid to students is federal loans, grants and tax credits. Private/non-governmental student loans accounts for only 15% of the total outstanding student debt as of 1/1/2012. Also, all private student loan lenders are regulated by multiple government agencies. If the government didn’t facilitate these private loans, they wouldn’t happen.</p>
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<p>Emphasis added. I.e. family money is the biggest source of money, with federal student aid being less (and a declining share of college costs over time).</p>
<p>Really, how much “plummeting” of college costs that can exceed $60,000 per year at list price can you expect if federal direct loans ($5,500 to $7,500 per year at most) and Pell grants for poor people ($5,550 per year) were eliminated?</p>
<p>Let’s assume the average cost of a year of college these days is $25k per year. Let’s assume that’s an average of publics and privates both, after scholarships and grants. So say $100k to graduate. The average college grad today graduates with $33k in loans. So that’s one third of the revenue going into the college industry. If the customers suddenly have one third less to spend on college, do you think the colleges will be able to keep charging the same price?</p>
<p>Since the $60k college sticker price exceeds the median U.S. family income of about $50k, the money has to be coming from somewhere else…</p>
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<p><a href=“http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064”>http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064</a> says that tuition and fees alone average “$30,094 at private colleges, $8,893 for state residents at public colleges, and $22,203 for out-of-state residents attending public universities.” Other costs are listed as $13,935 at public colleges and $14,663 at private colleges, for a total of $22,828 at public colleges and $44,757 at private colleges.</p>
<p>Average student loan debt was $29,400, taken by 71% of students, according to <a href=“http://projectonstudentdebt.org/state_by_state-data.php”>http://projectonstudentdebt.org/state_by_state-data.php</a> , so $20,874 considering all students, including the 29% with no debt. $20,874 is 11.6% of the four year cost of the average private and 22.9% of the four year cost of the average public, in both cases much lower than the 33% you claim.</p>
<p>Of course, the public colleges are state government subsidized, but cutting their state government subsidies will result in them increasing their prices.</p>
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<p>Yes, family contributions and financial aid or scholarships from the schools themselves, not the relatively small amounts of federal aid.</p>
<p>I’d like them to keep tuitions lower for every one but they wouldn’t. What do I do? As much as my actions might keep the status quo, my kids can’t wait to attend college till they lower the tuitions, so I will take the bait and try my best to provide the support.I think it’s worth the sacrifices I have to make (and fortunately afford to as well). How many of you are with me? :)</p>
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<p>There are no federal student loans cosigned by parents. </p>
<p>@northwesty:</p>
<p>Yes, the money comes from a richer top 1% (they’ve done well over the past couple decades or so). Again, the Ivies have maintained roughly 50% of their student body as full-pay despite a rapid increase in their list price. That’s only possible with a rapid expansion of income/wealth at the very top.</p>
<p>There have been federally subsidized student loans for decades. In 1967, the most a freshman could borrow was $1500 with a four-year limit of $9,000; now it’s $5500 for freshmen and $31,000 total. That is well below the rate of inflation (according to one online calculator, $1500 in 1967 is the same as $10,700 today). In 1967, it cost $3420 for one year at the University of Pennsylvania; this year it cost $64,000. What those numbers tell me is that there is a lot more to increases in college costs than federally subsidized loans. </p>
<p>UCB – I was talking about the actual/net price of college, which is very different than sticker price. At Duke, for example, the sticker is in the 60s. The average net price for all students, though, is $43k. The average net price for those getting aid is $26k. So my $25k actual/net cost as an overall average is pretty good. </p>
<p>At that ACTUAL price point, $30k or so of loans on average is a big part of the mix. So is federal grant aid. It is no stretch to say that prices rise when a lot of govt money is directed at something. For example, health care, the Pentagon and higher ed.</p>
<p>There are a lot of other factors to consider when thinking about rising college costs:</p>
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<li>decline in state funding.<br></li>
</ol>
<p>2, the nature of teaching. Higher ed is labor intensive. For many products, industry has kept cost down through technology, eliminating human labor or moving to areas where labor costs are lower. But you just can’t do that with higher education. This is another reason why tuition is rising faster than inflation. In addition, the labor that is providing this service is highly educated, which costs.</p>
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<li>Higher education had to adopt new technology, but not in the same way as other industries. Think about how photography has changed over the years. So art departments don’t use the same kinds of equipment that they would have used in 1980. Same for labs in the sciences. And also, the use of ‘smart’ classrooms. The investment in new technology costs as well.<br></li>
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<p>And here’s another thing, not mentioned at all, which might be another reason for the rising costs, especially rising faster than inflation. Suppose that actually college tuition was actual too low in years past–that is was underpriced. I thought about this when I read the obituary of Earl Cheit. Here is what he said in 1970:</p>
<p>"Based on research Dr. Cheit (pronounced “chite”) directed, it found that 70 percent of these [college and universities] were either in financial difficulty or “headed for trouble.”
“The reason for alarm, Dr. Cheit wrote, was that costs faced by colleges were rising at a faster rate than income. He said that if the institutions were to prosper, federal and state governments would have to contribute substantially more funds. At the same time, the report said, colleges and universities needed to cut costs and raise tuition.”</p>
<p>So for all those arm chair economists out there, here’s something else that I’ve been thinking about, and maybe you could tell me the problems and strengths of my reasoning here.</p>
<p>So I think it’s true that federal grants and loans have increased the demand for higher education, which would increase price.</p>
<p>Now, let’s say there are no loans/grants. So demand would go down, because certainly some would not be able to go. But also, this would mean that some institutions would close as well, since they couldn’t attract enough tuition dollars to keep afloat.</p>
<p>So this would mean that supply would decrease as well. Wouldn’t that reduction is supply off-set some of the savings you would get from reduced demand?</p>
<p>Also, though the federal government might retreat from providing loans, you could imagine there would be a private source to step in. In fact, the Cato Institute (a libertarian think tank), which is advocating for Congress not to reauthorize the HEA, thinks that there would be additional private sector loans available. So now, some of that reduced demand would lessen. Of course, these private sector loans would not necessarily off-set federal assistance completely, so it’s not like demand would completely return. So again, some institutions would close. But since there is still a reduction in supply but not necessarily the same-sized reduction in demand, would we really see lower tuition?</p>
<p>Also, how many merit scholarships would still be available at state universities? I doubt Alabama, for example, would be as generous with their merit aid. Wouldn’t that actually increase the amount many of those ‘doughnut hole’ families are paying for higher ed?</p>
<p>And finally, here’s another way to reduce college costs. I wonder what 20 dollars from the 70s/80s would be in today’s dollars?</p>
<p><a href=“Father Guido Sarducci's Five Minute University - YouTube”>Father Guido Sarducci's Five Minute University - YouTube;
<p>@skrlvr But consider this: Some states have increased taxes on residents over the years, so there isn’t always a decrease in funding. It’s a weird phenomenon. Privates have become more accessible for the poor. And state schools are becoming less and less affordable for the middle class.</p>
<p>“If everything is $25,000 or lower, wouldn’t that mean A LOT less on financial aid per person? That’s millions that a college saves because they aren’t spending their entire endowment on making their $60,000 tuition affordable. They can lower tuition and improve amenities for students.”</p>
<p>Colleges aren’t spending “their entire endowment” on making their $60K tuition affordable, though - just a relatively small portion of it. Most their endowment is already spoken for for other things - facilities, professorships, etc.</p>
<p>And anyway, your argument makes no sense. How do you simultaneously lower the price of something AND improve amenities for students? If that were the case, every directional state u which has a sticker price < $25,000 should have fabulous amenities - but they don’t. </p>
<p>@AnnieBeats </p>
<p>Almost all states have decreased their funding for higher education since the recession. Recently, some have started to come up, but it is still lower in terms of per student funding. The Delta Cost Project has found that “For the first time at four-year colleges and universities, students now pay half or more on average of the full institutional cost to provide their education—an 18- to 22-percentage point increase at public four-year institutions over the decade.”</p>
<p>In terms of privates becoming more accessible to the poor–and this is something that I think I have addressed before in this thread–most privates have small endowments so they give little need based aid. So it is just not true that privates are becoming more accessible for the poor, unless you mean that with Pell Grants and students loans they are. But those aren’t recent phenomena–the Higher Education Act was passed in 1965. The very elite schools with large endowments make it possible, but this are a tiny, tiny fraction of the students attending college. </p>
<p>With respect to state schools becoming less and less affordable for the middle class–again, state schools are becoming more expensive for everyone. Lots of state schools don’t give out need-based aid, so it’s not like the poor are able to get lots of need-based scholarships. Maybe 6K in federal grants, but the rest in loans and from their own pockets. I showed you in a previous post what is was like to have a family income of 20K at my state flagship. </p>
<p>Also, with respect to becoming less affordable for the middle class–many institutions–both at public and private schools- have a merit based system where you can get money based on grades and SAT/ACT test scores. Now, given that these test scores correlate strongly with family income level, it is more likely for these merit based scholarships to go to middle to upper class students. </p>
<p>“public and private colleges and universities are spending more of their financial-aid budgets trying to lure higher-income students, whose families earn much more than $30,000 a year, than on meeting the financial needs of low-income ones, according to a 2011 report from the U.S. Department of Education.”</p>
<p>“The result is that, since 1995, the proportion of students receiving merit aid has overtaken the proportion that gets need-based aid, nearly doubling from 24 percent to 44 percent at private institutions, and more than doubling at taxpayer-supported public universities, from eight percent to 18 percent, according to that 2011 U.S. Department of Education report.”</p>
<p>Also, kids from higher income families are better at getting outside scholarships:Higher-income families also appear to be shrewder at winning independent scholarships. </p>
<p>"students at Notre Dame whose families make under $48,000 a year collectively received $241,000 in outside scholarships, while about the same number of students from families that make more than $110,000 a year together reaped scholarships worth $1.7 million.</p>
<p>“Kids from lower incomes are not as active or skilled in finding those outside awards” as kids from higher-income families, said Bishop.</p>
<p><a href=“http://hechingerreport.org/content/data-show-poorer-families-bearing-brunt-college-price-hikes_14999/”>http://hechingerreport.org/content/data-show-poorer-families-bearing-brunt-college-price-hikes_14999/</a></p>