Grab a chair and a cup, and let’s talk!
This strikes me as a sensible intervention into the typically un-nuanced conversation about the price of a four-year undergraduate degree. And what’d’ya know–it’s from a panel of admissions officers, the kind of people whose job it is to know their target audience and to recruit and retain students?
Steven Graff, senior director of admissions and enrollment services at the College Board, said it’s become “knee jerk” to say college is too costly.
“But,” he said, “what I think we have to do is move away from the monolithic assumption that the word ‘college,’ the word ‘price,’ the word ‘cost’ are the same for every student, every institution, for every situation we are dealing with.”
Instead, the panel argued, college prices and costs require a more nuanced view than the one offered by most in the media or perhaps even by President Obama, who last month went on a campaign-style tour to tout his plan to curb college costs.
Graff and two consultants from the enrollment management firm Art & Science Group argued that there is a significant difference between college cost and college price, in part because of financial aid, and there are also rather significant differences among prices at different kinds of institutions.
[M]ost commentary on college costs has been skewed by generalizations or by anecdotes of high sticker prices and debt that then get turned into generalizations.
Citing College Board data, Graff said even though college costs have risen, the shift has not been dramatic across the board.
Instead, high-priced for-profit colleges have enrolled an increasing numbers of students, and they charge more for degrees than do public colleges. According to College Board data, about 75 percent of public four-year students see tuition and fee price tags of $12,000 or less to attend college, while roughly two-thirds of for-profit students see price tags of $12,000 or more.
While public four-years have arguably been able to keep prices relatively low measured this way, the attention-grabbing price tags at private four-years are also notable for exaggerating actual cost. According to the College Board, published tuition and fees for private four-year colleges rose to $29,000 from $17,000 in the early-1990s in inflation-adjusted dollars, but the actual cost to families in 2012 dollars was about $13,000 in 2012, or just $3,000 more than it was in the early 1990s.
Graff also does not feel families are saving as much for college as they once did, part of a cultural shift that may be forcing students to take out loans, which is driving talk of a debt crisis for students.
“I don’t know that the family sees [itself] as being the primary source of funds for higher education — the assumption is somebody else will pay a good portion of it,” he said.
Of course, if federal and state governments won’t pay for higher education, and families won’t contribute to help their children through college, the bill will come directly to the students. That is some vicious buck-passing, friends, for the most part by people who already have had the luxury of a college education themselves! (I’m thinking of state legislators, governors, pols in the U.S. Congress, and the writers of opinion columns in elite newspapers, not necessarily the parents of our students, but that may also be the case.)
And here’s the beauty part: the more loans students take out, the more someone else stands to make on servicing those debts! Pssst: it’s a feature, not a bug!!! As I’ve written here before: someone’s taking a bath, and someone else stands to profit.
Historiann 
Most parents haven’t been fully funding their retirement (or lost a huge chunk of what was in it) and it makes a great deal more economic sense to fill that account to its proper amount before putting a penny away for college savings.
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Anyway, not all debt is bad debt – depends what kind of loan, what kind of education, what kind of ability to repay, what kind of student.
I wish that that the US News ranking types would break down and publicize default rate stats – e.g. http://www.educationsector.org/sites/default/files/publications/Defaults_CYCT-F_JULY.pdf
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We have been carefully saving for our daughters’ college since they were born. Now that the first one is a Junior and we are starting to look at schools in earnest we are realizing that our savings, and the fact we just paid off our house, will be held against us when schools calculate a tuition “package.” Maybe we should take exotic trips and buy a boat in the next two years. Sigh.
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I just got an apologetic e-notification from my DSL provider that my monthly rate “will increase from $37.95 to $36.99” in the coming months, so my head tends to swim around figures. I’m still eying the thing looking for what I don’t get about it, and wondering if the notice is contractual and enforceable in nature. My parents carried the whole undergraduate ball, with only the smallest work contribution by me for spending money. A college song said “it only cost my parents twelve thousand dollars,” and that referred to four years of tuition and room and board total. And I only borrowed a sliver of money for first year of grad school expenses. I think this approach has disappeared, perhaps for the reasons that Widgeon suggests. I’d tend to be distrustful of undocumented assertions by anyone associated with the College Board (but that’s just because I had to “put down [my] pencil” too many times on the [X]AT exams), or by consultants with an enrollment management firm. But I don’t doubt that there’s a lot of hysteria built into the assumptions about lifestyle and college affordability. What I hate is to see university-attached “cost centers” like the outsourced dining operations blithely encouraging students to think with a ten minute cost window. I’m the only one on my campus who whips out cash money for any transaction larger than coins in a vending machine.
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Widgeon is right. Every cent that you save for college by eating ramen noodles, skimping on retirement, and never taking a vacation disappears into the maw of “you don’t need a grant from us” when the colleges look at FAFSA and calculate their aid packages.
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Wow–what a drag. I think I understand the logic of the FAFSA, but it seems like there should be some reward for virtue.
(But then, I’m what’s known to credit card companies as a “deadbeat,” that is, someone who pays off her bills every month & never pays interest. Clearly, boats and fancy trips on credit are not in my future, either.)
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I paid twice tuition and board for kids in very expensive colleges. Even the youngest cost me around $250,000 almost a decade ago. Mr. Graff numbers are touching, but I am not buying.
The cost discussion may be in black and white, but nuances will not make the cost disappear. Most people can’t save enough to pay $50,000 tuition or even $25,000.
There are cheaper options, but state colleges cost way too much from the perspective of a typical salaried parent.
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It’s not every cent– just a fraction of every cent. And if you stash money in different places, it’s treated differently on the FAFSA (retirement is a good place). The *students* savings have a much higher implicit tax rate in terms of financial aid. But the parents’ are nowhere near treated that way. (And 529s are treated like parental savings, not student savings.)
My parents scrimped and saved for college but still made little enough that I got hella financial aid, so they ended up with a nice windfall from the difference between what they thought they’d have to pay and what they actually paid.
We put away money every single month for each kid in a 529 plan. We currently have enough saved that our oldest could go to a 4-year public school right now if he were old enough (thank you stock market and early saving). We’re hoping to be at an income level where we’ll be paying full-freight, at which point we will be able to afford it because high incomes mean high saving so long as you make education more of a priority than fancy vacations, cars, and staff. We should be on track to do that for both kids, though if DH remains unemployed, we’ll instead be getting financial aid.
I understand that most people who don’t make a lot of money don’t want to make the kind of sacrifices my parents made when I was growing up, but they’re going to be getting a ton of financial aid and the kids should come out with reasonable debt loads (so long as they don’t go to bad private schools with no endowments). It’s the kids whose parents make a lot of money and don’t save and put all the debt on their kids that really irritate me, although I suppose they get something from the vacations and cars and connections, so I shouldn’t feel too sorry for the kids’ debt loads.
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The more administrators there are, the more they increase administrative work to “justify” their salaries. For instance, at the community colleges, we used to have to go through an arduous and madly picky accreditation process every 6 years. It’s been upped now to every 4 years.
More administrative work, more administrators, more ridiculously high salaries paid to people who don’t teach anyone or make anything.
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Nicholeandmaggie, thanks for weighing in on this. It sounds like you’re saying that 1) putting money away for retirement, and 2) NOT giving your children the cash money for college is a good strategy. A 529 is the way to go.
Can you give us a few more details on the advice that “if you stash money in different places, it’s treated differently on the FAFSA?” (Examples of stashing strategies so as to maximize both savings power and the potential for financial aid?) IOW, must virtue be its own reward, or can we save our money and eat it, too?
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First: saving for retirement is pretty darned virtuous and so is saving for emergencies, especially in a flat wage environment, and saving for college isn’t any more virtuous than either retirement or emergencies…so even though you’re joking around, I think I’d drop that implication, Historiann. Anyway, if “virtue” means “ascetic-type saving with a careful eye toward the future,” funding a 529 at a net loss just because it feels virtuous actually makes it less virtuous than the other options.
Second: if you google college savings vs retirement savings, you’ll get plenty of articles explaining the merits of one vs another (usually depends on amount of home equity whether this makes much of a difference). If you’re of an income where properly pigeonholing assets on a FAFSA is an actual strategy, you should probably get a financial planner, though there are plenty of websites offering asset-shielding advice as well.
here’s an easy description of the current way of calculating EFC: http://www.cbsnews.com/8301-505145_162-57562859/a-common-myth-about-college-financial-aid/
and a list of common minimization tactics: http://www.finaid.org/fafsa/maximize.phtml
Third: Nicoleandmaggie, the children of people whose parents don’t make a lot of money are not “getting a ton of financial aid.” Not in this country. Or, by “a ton of financial aid” do you mean what universities mean by that phrase: “a ton of loans.” Or, are your remarks just about the infinitesimal number of low-income kids who attend well-endowed privates. Because yeah, lots of lower-income kids don’t have to pay tuition, but when you don’t have money the huge cost of attending college isn’t actually about the tuition, and precious few financial aid packages pay full freight on living expenses. Which, by the way, severely undercalculate how much it costs to be borderline normal in college. Forget beer money, we’re talking budgeted living expenses (for student loan purposes) of off-campus rent + utilities in the $600/mo range.
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http://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php has more info.
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Note that paying off your (home) mortgage is generally a good way to stash money as well since it isn’t included. I’m not sure why Widgeon thinks it’s bad to have paid off the house– maybe I’m missing something. My knowledge of this stuff is mostly academic as my oldest kid is still in elementary school.
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Curmudgeon,
For high achieving low-income kids at elite schools, college is free or nearly free– Carolyn Hoxby has several recent papers on that topic (and it was also my experience– and my financial aid included living expenses which included mandatory dorm + meal plan, something common with elite schools). The conclusion is that high achieving kids need to be applying to elite schools in order to minimize their college expenses, and she has an intervention with Sarah Turner that helps them to do just that.
For lower achieving but still college-eligible low-income kids, two years of community college is free or nearly free (under the Pell grant, and I know this because we’re keeping an eye on some of DH’s relatives as they go through this) and two-three years of state school with Pell grants and subsidized loans leaves a reasonable debt load (in most states– my cousins in CA are going to school in NV because it’s cheaper).
And yes, the main costs are living expenses and opportunity costs of lost wages. And yes, it would be fantastic if the government were more civilized about supporting public education. But the fact is that a lot of kids who would do well to go to college don’t even apply because they think it’s going to be too expensive–they see the sticker price and don’t realize that their bottom-line price is going to be much lower. They’re making a decision based on wrong information. On top of that, elite schools with big endowments can be much less expensive than state schools for high-achievers.
The families who are actually hit the worst are middle class families who don’t save. They don’t get the pell grants, they’re not eligible for as much in subsidized loans, and their kids end up having to pay more without as many resources. (This phenomenon is mentioned in the Hoxby papers as well.) The kids who are hit the worst are the ones whose parents are wealthy so they get no financial aid and only unsubsidized loans but refuse to pay for college. But they probably end up just fine anyway, assuming their parents haven’t disowned them (for being lesbian or leaving the family religion).
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On living expenses: wouldn’t potential students have these anyway, whether they’re in or out of college? Sure, it’s more expensive to go out of state and have to live in a dorm than it is to go to a local CC or state uni and live at home, but that’s a choice, not a necessity.
A lot of our students at Baa Ram U. live at home, no doubt because it’s cheaper for everyone (although maybe not easier!) Other students have a very adult lifestyle, with their own apartments, cars, and commitments. Again: it’s a choice.
Personally, I would counsel a student to get by with a bike/bus pass, a dorm room/roommates, and take out fewer loans. And as a parent, I would never subsidize a lavish college lifestyle, but other people have different priorities. For a number of parents today, college is more about a lifestyle than an education. I don’t get that, especially if it’s on borrowed money.
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My children graduated from college in 2009 and 2013 and our experience was what Nicholeandmaggie described. Because their parents are self employed and not earning a lot, they got almost full financial aid (tuition and expenses). (I must say if your business is going to have a really, really bad year, schedule it for the year before your eldest starts college.) Both attended private colleges with good endowments, and it cost less than any state school.
Income, not savings, is the primary consideration. Parents are expected to spend anything above what the schools (or government) estimates a family of whatever size can live on. The rest is available for college. For example if a family of 5 has income of $120,00 and the standard says they could live on $75,00, there’s $45,00 for tuition. The problem is most people are living up to their income. If they had been living on 100,000 and putting $20,000 aside each year, they’d be fine.
For savings, about 20-25% of parents’ may be considered; 100% in the student’s name is considered. For us retirement money and the equity in a building used for business weren’t counted at all.
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Thanks for this intel, Esskatie. This is really helpful.
I don’t want to put words in your mouth, but I think you and Nicoleandmaggie both implicitly suggest that a student’s academic standing is important in calculating the real price of a college education. (Your children both had to be eligible for admission to private colleges with good endowments, which means that they must have cleared a pretty decent academic bar for admission.)
This is an important point, in that the best thing an ambitious student can do is to make sure that ze works hard in high school and has a record of achievement. It seems to me that a lot of institutions compete to attract students like your children & have merit-based scholarships and fellowships available for these purposes. I still think parents who had the luxury of college educations themselves should save for their children’s educations, but they’re not the only ones who should be working hard towards their children’s futures. The children themselves must prepare themselves to take advantage of their parents’ (and their future colleges’ or unis’) generosity.
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*shrug* I think parents who had the luxury of college educations themselves should save enough money to ensure they’re financially independent of their children from the ages of 75-95.
The population of people who can have that nailed down before saving for kids’ college is as tiny, in my opinion, as the population of low-income high-achievers without college-educated parents who now attend high-endowment schools on scholarship.
They exist. But that’s about all that really can be said about them. They’re not populations from which to generalize.
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There are a lot of benefits for kids who are not quite college ready to do a community college for a couple years first. Smaller class sizes, more dedicated teachers, and the ability to knock out those gen-eds that may be difficult to get into at the regional state school they end up at (though some states have better community college situations than others– I’m getting used to realizing that the Midwest is a lot better than the South in terms of education at all levels). Also an associates degree can be useful on its own. My DH’s cousin’s kids haven’t had to pay much of anything for community college because almost everything (including fees and textbooks) is covered by the Pell grant. I’ll be interested to see what the damage is when the oldest transfers to a regional state school.
I was going to say that again it’s probably the middle kids that have the biggest problems, just like with parental income, but those kids would probably benefit from a year or two of community college too. Depending on the quality of the community college compared to the quality of the school they’d be eligible for otherwise.
And Curmudgeon, just because people *don’t* save for retirement doesn’t mean that they can’t. The folks who truly can’t save for retirement because of income will have a large percentage of their income replaced by social security and their kids will be eligible for good need-based aid if they decide to go to college. I’m not going to cry for families who prefer big houses, vacations, and fancy cars to long-term security or their children’s futures (though I may feel sorry for their kids). Obviously you should save for retirement before saving for college, but you should also save some for kids’ college before spending every penny on luxury items.
p.s. Even kids who are mediocre academically can get good sports scholarships. That’s what a lot of my classmates were aiming for. And there are a lot of good regional SLACs with good endowments that are willing to pay quite a bit for a good female volleyball player, for example. Personally I preferred to go the academic route.
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This is an aspect of the college cost question I hadn’t even considered, and in hindsight it seems obvious. I’m 37 and a full-time faculty member with health care, and I can’t fathom the cost of having a child, let alone putting away for its college years – I can’t even afford to put into my 401(k) now. In my case it’s mostly credit card debt that is the problem, although I have some small loans from grad school. And if I were going to have a kid, I’d want to get started soon.
The number of people my age and younger I know who don’t have savings accounts (forget health care benefits or retirement accounts) is alarming. We’re off the generation that benefited from our parents’ saving habits, but not from low tuition prices. Of course, most of us are a quite a few years away from sending our children off to college.
To whatever extent today’s applicants aren’t approaching colleges with savings, it’s only going to get worse.
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Do you mean to imply, Turducken, that you’re not simply refusing to save because of big houses, vacations, and fancy cars?
Nicoleandmaggie, I’m not sure what economy you live in. Here in America, people earn less than they did in 1989. Since then, college costs have risen; percentage of available support for college students has fallen; social security has fallen. This isn’t an issue of luxury items vs. belt-tightening. Those middle-class and working-class people who have “a large percentage of their income replaced by social security” won’t be helped much if their income was insufficient to begin with.
We’re coming out of the biggest economic depression since the gilded age and we’re doing it very slowly and without wage increases. There is no New Deal. People are insecure in a way they haven’t been in a long time, whether they’re in denial about that or not.
It would be nice to recognize that fact if you’re going to claim that college-bound children in low-six-figure households have it the worst when it comes to college funding.
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The talk I went tothismorning said that the not enough financial aid for income starts at83K. That is well above median family income.
I’m as bleeding heart liberal as the next person,but the big problem in this literature is how to get poor kids to apply to college and to get their parents to fill out thefafsa. This misinformation on college being unaffordable to poor kids is widespread and very harmful.
If you’re interested in reading more on this topic, not only are there the recent articles by hoxby on poor high achievers, but you will also want to look up the h and r block experiment for average poor kids on the margin of attendance. They greatly underestimate the aid they receive. There are a bunch of other papers, includingthree that I saw at the conference I wasat this weekend, but these mentioned are the most prominent. Stop trying to keep poor kids out of college.
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I don’t think anyone here is “trying to keep poor kids out of college” (or has the power to do so), but I agree with you, Nicoleandmaggie, that “misinformation on college being unaffordable to poor kids is widespread and very harmful.”
I’ve been writing about the stupid meme on the so-called “high cost of higher education” for years now, which appears to be pushed only by people who earned their college degrees 30 years ago (or more) and who would KILL for the honor of paying $50,000-$70,000 to send their little darlings off to Stanford, Yale, etc. They’re clearly mounting an assault on the ambitions of the proles, even as they work ever harder to de-fund public higher ed and to discourage the poor and struggling middle-class from even trying.
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This misinformation *is* keeping poor kids out of college though! And spreading that misinformation has powerful effects. Even by seemingly well-intentioned folks like Curmudgeon here. It’s one of those unintended consequences that well-meaning people often make when they talk about these things without actually taking the time to learn about what’s really going on.
These kinds of issues are one of the reasons I teach public finance– to keep well-meaning liberals from hurting the people they’re trying to help. (Also to keep libertarians from creating more government intervention later on with penny-wise pound-foolish strategies that, for example, hurt children.)
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Hmm. I feel oddly certain that even if I weren’t seemingly well-intentioned, I wouldn’t be keeping any real-life poor kids out of college by taking exception to your hypothesis that middle-class kids have it the worst.
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