In the past decade, even before the recession, the average increase in the cost of living has seldom risen above 3%, but private and state post-secondary educational costs have generated average annual cost increases that are flying upward well beyond these rates: 4.5% for private schools and 7.9% for state institutions. The last year was particularly brutal for American families with kids in school, as budget-impaired states shift college costs to students and their families: “Student loans are the No. 2 source of household debt... [A] new report on tuition costs from the College Board... showed that average in-state tuition and fees at four-year public colleges rose $631 this fall, or 8.3 percent, compared with a year ago. Nationally, the cost of a full credit load has passed $8,000, an all-time high.” Huffington Post, October 26th. Ouch!
If you want to see where this is taking us, look at the following projections by savingforcollege.com:
The Real Cost of Higher Education
An excellent education for your child does not necessarily require that you spend $40,000 in today’s dollars for one year of tuition at an Ivy League school. There are many well-regarded, reasonably-priced private colleges. The average public college or university tuition is lower yet, especially for residents of the state where the school is located.
| Type of Institution | Projected 4-Year Tuition and Fees | |
| Today | In 18 Years | |
| Private College | $119,400 | $340,800 |
| Public/University (in-state resident) | $33,300 | $95,000 |
| 2 Years Community College & 2 Years Private College | $68,800 | $196,300 |
(Based on average tuition and fees for 2010-2011 as reported by The College Board® and assumed to increase 6% annually.)
According to The College Board®, the average 2010-2011 tuition increase was 4.5 percent at private colleges, and 7.9 percent at public universities. The ten-year historical rate of increase is approximately 6 percent. These figures are substantially higher than the general inflation rate. They are also higher than the average increase in personal incomes.
To make matters worse, financial aid is falling, and most of the revenues for state-funded colleges and universities are now coming from tuition payments: “[In] 2011: For the first time, colleges took in more in tuition than they received in state funding… Even state schools aren’t a haven from high tuition anymore, as budget cuts have left many with no choice but to raise it in order to compensate. For the first time in history, public colleges brought in more income in tuition than they got from state and federal support — a trend that’s unlikely to change anytime soon.” Bestcollegesonline.com. This pressure on educational costs in turn places a much greater emphasis on borrowings to finance educations, all the while traditional “take a second mortgage on the house” financing appears to be fatally if not permanently blocked.
“Few students can afford to pay for college without some form of education financing. Two-thirds (65.6%) of 4-year undergraduate students graduated with a Bachelor's degree and some debt in 2007-08, and the average student loan debt among graduating seniors was $23,186 (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans). Among graduating 4-year undergraduate students who applied for federal student aid, 86.3% borrowed to pay for their education and the average cumulative debt was $24,651. (For just federal student loan debt, excluding PLUS Loans, the figures are 61.6% and $17,878.) Average cumulative debt increased by 5.6% or $1,139 a year since 2003-04. When one includes PLUS loans in the total, 66.0% of 4-year undergraduate students graduated with some debt in 2007-08, and the average cumulative debt incurred was $27,803. (About two in fifteen (13.5%) of parents borrow PLUS loans for their children's college education, with a cumulative PLUS loan debt of $23,298.).” FinAid.org. Post-recession tuition hikes have pushed those numbers up to $27K in average undergraduate debt.
While undergrads are stuck with fairly modest loan amounts – still hard to pay back in a world where unemployment and underemployment reign supreme amount younger entrants to the workforce – the pain for those in professional and graduate school can be crushing and take more than a decade after graduating to repay (the standard 10-year note can often be extended to up to a total 25-years for larger loan amounts!!!): “In a recent study by the Association of American Medical Colleges the cost of private medical schools has risen 165% and the cost of public medical schools has gone up 312% over the last 20 years. A similar study by the AMA found that medical school costs have increased substantially more than the Consumer Price Index (inflation). The average medical student graduates with nearly $100,000 in student loan debt. Oh, and they may have some undergraduate debt on top of that.
“Compound this with slow physician salary growth, young physicians are faced with increasing difficulty in paying their college student loans and medical student loans.” Studentdoc.com, October 26th. Current numbers are moving that same average debt load upwards by as much as 100%. With half of all students taking out loans and student loan debt surpassing America’s aggregated credit card debt, the system is crumbling.
Law and business graduates, many facing serious unemployment risks, have proportionately high repayment obligations but lack the probable job placement available to most doctors. The pre-recession 2005bankruptcy reform legislation that removed most protections that consumers have under personal bankruptcy as it relates to student debt only threw gasoline on the raging fire. Kids are saturated in debt, unable to repay their obligations, and starting life in a place where deep psychological depression lives.
“Last year, Congress passed a law that lowered the repayment cap and moved student loans to direct lending by eliminating banks as the middlemen.” Huffington Post. But it was hardly enough to help the stranded millions as much as they really needed. Enter the Obama administration with a plan, seriously opposed by Republicans in the House and Senate, that is intended to trickle a little relief in the break landscape of student debt: “Obama's plan will accelerate [the above noted] measure passed by Congress that reduces the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. He will put it into effect in 2012, instead of 2014. In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. About 1.6 million borrowers could be affected.
“He will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one. The consolidated loan would carry an interest rate of up to a half percentage point less than before. This could affect 5.8 million borrowers.” Huffington Post. Frankly, we need to find a way to get the next generation educated and trained to give all those other nations in the world, from China and India to Germany and Korea, a solid taste of good old American competition!
I’m Peter Dekom, and I am wondering exactly when we decided to betray our children and shift the burden of our profligate ways onto their backs?
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