<p>Oh, the higher education industry is very much a business. It’s heavily subsidized by federal and state governments, but it is a business nonetheless. And the number of people seeking its product (credentials) has increased quite markedly in the last few decades. Easy credit has fueled a bubble in higher ed costs. Don’t blame the politicians. They’re only giving us what we want.</p>
<p>College was cheaper when 15% of the population pursued a degree. Now, half of all high school seniors enroll in some form of higher ed (although far fewer finish). I have seen an argument that the student exemption from the draft during the Vietnam war (an immoral and tragic policy) was the initial factor driving large numbers of kids into college for the first time.</p>
<p>Beth’s mom: in 1980 $3200 was the real tuition and room and board charge. COA now includeds a lot more than those direct costs. And, to top that off, virtually NO ONE actually pays that “suggested retail price”. It’s a game. In 2013, COA isn’t really the “real” price. </p>
<p>And, “easy money” might be the simple answer, but at most, it is a VERY small part of the real answer.</p>
<p>^^ Sadly, my family would likely be full pay, paying retail. And you’re right - there were additional costs even then. $20 for the Greyhound, books (which weren’t all that much) and toiletries. Little else. I never spent anywhere near $100 on top of tuition, room and board for the entire year. But I was a starving student.</p>
<p>I do think that the fact that they can keep dishing out more and more in student loans allows them to just keep charging more. And once one place charges more, the next has to, and then the next, and so on. If schools knew that they could not give out these loans, regardless, they would lower their tuition so people could afford them.</p>
<p>Beth’s mom: don’t you think any of your kids will earn a scholarship at those schools? </p>
<p>NJ Sue: 80% of the students in this country go to public schools. So, 20% of them are going to private schools. A lot (most?) students at private schools are getting some kind of merit aid. We are talking about a very very limited number of students who are attending privates and are full pay. The tuition those very few full pay those students are paying is not reprentative of the real cost to attend private colleges.</p>
<p>The report indicates that expenditures have actually risen very little–an average of 1.5%/year and that tuition increases have not matched subsidy cuts which means that the actual costs have decreased, right?</p>
<p>Those private colleges that do offer merit aid to entice better students often do sticker-price themselves for prestige reasons, to signal membership in a group of peer institutions, etc. Personally I find this practice repellent, but their enrollment management staff has told them they should do it for marketing purposes. There must be evidence to suggest that prestige pricing works, at least in the private sector of higher ed.</p>
<p>It’s possible that the college in Beth’s mom’s example is one of those schools that does not offer merit scholarship, but only need-based aid, in which case a family with a high EFC of 50K or above will not get any money no matter how outstanding the student is.</p>
<p>Ditto the supply and demand - although the boomers were a big generation, not a large percentage were college bound, during Gen X a bigger percentage of the students sought college, but they are a small generation, the millennials are not only a huge generation, but a large percentage of them are college bound.</p>
<p>Also ditto the cuts to government funding - people don’t want to pay higher taxes for ANYTHING, therefore the users of the service are accountable for higher costs.</p>
<p>Add to that increased costs - research universities need to be on the cutting edge in every field. They need access to top faculty, top technology, top resources, that comes at a steep cost. Add to that the costs of running a large facility - increased utility costs, increase construction costs, increased food, fuel costs, etc.</p>
<p>Add to that the economic turmoil of late - many colleges have large endowments or investments which have lost significant value during the recession.</p>
<p>As for loans - the govt backed loans haven’t increased significantly in a LONG time. Private loans evolved to fill a need - tuition had already increased to a point at which people were struggling to pay. Tuition didn’t rise to meet the availability of money. Money was made available to cover the rising costs.</p>
<p>I think supply and demand and availability of loans do have an affect on college costs. If loans were not available only the very best students and those from upper class families could afford college at current prices. Costs have also risen due to the increase in the number of administrators and the move by many colleges to upgrade non education facilities to attract the increasing number of students. These upgrades were directly and indirectly financed through loans. Directly by borrowing by the college and indirectly by students borrowing to pay for the increased tuition resulting from the purchases. I think the stock market crash of 08-09 had an affect denuding the endowments of many institutions. </p>
<p>The baby echo has now worked its way through and we are just now seeing the beginning of a time when fewer US citizens are applying to college. My senior D graduating class '13 was 734 my freshman D class '16 is around 690. I don’t think the more prestigous institutions will feel the affect anytime soon, however, the small local LACs I believe are already feeling it. They are most likely the ones that can absorb it the least. I believe state flagships will do fine. Smaller state institutions might be squeezed. There are a few state universities in my state that are seeing declining enrollment. They reacted by freezing tuition and are looking at ways to operate more efficiently. It remains to be seen how affective they will be.</p>
<p>@scubasue, in scanning the report you reference, I don’t see a 1.5% increase per year; I’ll just quote a few sentences:</p>
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<p>The key word here is “inflation adjusted” - tuition and fees has significantly outpaced inflation - which I thought was a pretty well-accepted fact.</p>
<p>^You’re referencing tuition/fees. That is a VERY different thing than total cost which includes the state subsidies. Of course tuition has skyrocketed. I’m not disputing that. </p>
<p>I haven’t found the College Board report that directly states the 1.5% average increase, but this report, and others, do show the surprisingly small dollar increase in expenditures. See Figure 15A</p>
<p>Edit: Clearly I don’t know how to copy/paste the whole link for a document that opens directly into a PDF. If you google College Board “Trends in College Pricing” 2012 Full Report, you’ll find it.</p>
<p>The reasons, no doubt, are numerous and complicated. All I can do is share my own personal anecdote. When I matriculated to the University of Pennsylvania in 1978, undergraduate fees were as follows:</p>
<p>Tuition: $4,420
General Fee: $405
Room and Board: $2,475
TOTAL: $7,300</p>
<p>Contrast that with undergraduate fees for 2012-13:</p>
<p>Tuition: $39,088
General Fee: $3,646
Technology Fee: $692
Recreation Fee: $312
Average room rate in the University’s residence halls: $7,952
Average meal plan: $4,416
TOTAL: $56,106</p>
<p>A dollar in 1978 is worth ~$3.63 in 2012, so if everything were identical (which clearly it’s not–just look at all those additional fees), the total cost should have been $26,499 in 2012 (based on annual inflation of 3.87% over that period). In reality, the charges were double that. </p>
<p>Perhaps some of the economists on CC can explain why. All I can do is shake my head and cringe.</p>
<p>Lucie,
The private schools are trickier to compare. In 1978, virtually everyone paid that $7300, either out of pocket, or with the help of student loans.</p>
<p>In 2012, very few students (only a handful maybe) paid that intentionally artificially inflated sticker price. To compare, you have to know what the average net price at UPenn was–the amount students actually paid after scholarships and grants are awarded. They report that it was $20,592. According to your own stats then, the price, in 1978 dollars is significantly lower. </p>
<p>Essentially that $56K is the MSRP, not the actual price. It’s all part of the private school tuition game, which has evolved as a recruiting tool–i.e., they raise the tuition $10K and then give everyone a $10K scholarship or university grant to compensate.</p>
<p>scubasue, if you take a look at p. 21 of Penn’s common data set for 2011-12, you’ll see that out of 2370 full-time freshmen, 1,590 applied for need-based financial aid; of those, 1,126 were determined to have need. That leaves 1,244 who paid full freight. Yes, the average net price is relatively low, but only for that population who received FA.</p>
<p>In 2011, a family at $80,000 in annual income had a net cost of $17,845; a family at $120,000 paid $33,666. At $160,000 a year in earned income, you were paying in full. I have to believe that prices a lot of families out of a Penn education, and Penn is one of the more generous school out there.</p>
<p>Lucie, i totally agree with you. If you make over $100k with no way to shelter it (ie W2 wages), your EFC basically goes up $ for $ more than your take home pay–the expecation is 40%-56% of your gross income, but after you pay federal, state, fica and fund your retirement (since most of us are over 50 and won’t get social security), the top end schools are really a drain on your resources. Of course this is primarily true for those in this range and especially tough on the ones making $160k since anything over that you should start to recoupe those earnings. So obviously it is easier for someone making over $200k to pay $55k/year than the full pay person making $160k. And as mentioned earlier, many of these are “need only” so you do end being full pay.</p>