Ridiculous College Tuition Costs is our Next Mortgage Meltdown
Have you ever heard of a college announcing that its tuition cost will be declining? It’s possible, but I doubt it happens. The price to attend college continues to go up year after year, almost as if college tuition prices run in a completely independent financial line that completely ignores the financial realities of our markets and lives. Many small and unheard of private universities now charge close to what Ivy League schools do and they have no problem attracting students. How can an unheard of school in the middle of nowhere charge close to $40,000/year and not be the most expensive school in its area? Why would students even consider spending that kind of money a four year degree that is worth the same as a state school, but at a significant discount?
The problem, in my opinion, lies in the system of private and federal student loan origination. Specifically, the private student loan industry is looked at as a blessing to aspiring students looking to reach their dreams. In some aspects this is true, however, their involvement has help push costs out of control and why would they complain? The higher the price of tuition, the more interest they are bound to make. The Federal Government is in a similar position, their actions help those with less money attend College with grants, low cost loans, etc., but the unintended consequence of this is also higher tuition costs.
I really don’t buy into the notion that some people can’t afford to go to college. In fact, it seems that the less a person/family has, the cheaper tuition is. Because parents are “expected” to contribute a certain amount towards their child’s college tuition costs and depending on the wealth of the parent the amount of Federal money going toward a child is minimized—regardless if the child actually receives a penny from his/her parents. So in reality, a child of a moderately wealthy family that doesn’t receive any money from his/her parents to attend college, actually ends up paying a much larger sum than a lower income family member. The merits behind the idea make sense, the both reality is far from the intended conclusion.
How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising costs are attributed to mainly to an ease of credit availability. Just like with the mortgage mess, people could easily get loans for houses they had no right being approved for, which of course we all know now, ended and is ending badly. The same scenario plays out in the private student loan market; kids are easily getting approved for loans their parents wouldn’t even dream of getting. If you think about it, an 18 year old college graduate may have a difficult time qualifying for a loan for a $7,000 used car, but this same student could easily get a $20,000 loan to attend college and not just once, but four years in a row. This easy flow of credit to high school graduates makes college affordable at any costs and the victim eventually becomes the student and the winner is clearly the banks and the universities. If we really want to make college affordable, the answer is not in securing credit for potential students, it’s simply reducing the cost to attend college. How do we do this? I have no idea. $
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Comments
If an unemployed person said to a lender, “Lend me $7,000 for a used car so that I can find a job and get to work everyday and I will pay you back using the money I will get for working,” the lender would laugh at him.
But when a student says, “Lend me $20,000 a year for four years and I will pay you back using the money from the job I will get with my degree,” no one laughs.
Because much more often than not, the graduate does pay back the loans. Even with default rates ’skyrocketing’, over 90% of student loan borrowers pay them. Students are a good risk and despite the economy, there will always be someone willing to lend them money.
So true. I know so many people that are is HUGE amounts of debt because of college, is it really worth it to be saddled with debt for much of your young adult life just to get an education?
I think I’d think twice about going to college now. I’d learn a few skills and start my own business. Mr Chiots and I have our own business and neither of us is using our college degree, we always joke that we spend a hundred grand on each other.
I only skimmed the post b/c the whole topic fascinates and depresses me. Basically, families are expected to make a contribution based on income/assets. It’s the same whether you go to private or public school. If your family income is below about $100,000, you will get a hefty dose of need aid (maybe $80,000). That is why my daughter’s friend with the flaky parents is going to Vanderbilt (for free), while my kids are going to state schools (because we are at the low end of the no need aid continuum). That is also why many kids of seemingly affluent parents get huge need aid–the parents are self-employed and stated income is low. We also know a psychologist who lowered her income (not working by choice) so that her child could get scholarships equal to her lost income.
Of course, there are many genuinely needy people, but the system can be manipulated to some extent.
I agree that college tuition is way too high, and that if something isn’t done about it sooner that a sort of collapse could happen. This is why I encourage students to attend their state college when that is a feasible option over high-priced private universities.
You say the answer is not to increase credit but to decrease tuition, and you ask how that can be achieved. SIMPLE: decrease credit. College prices will then be busted, just like housing prices.
[...] Ridiculous College Tuition Costs is our Next Mortgage Meltdown .May 29, 2009 How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising [...]
[...] Ridiculous College Tuition Costs is our Next Mortgage Meltdown .May 29, 2009 How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising [...]
[...] Ridiculous College Tuition Costs is our Next Mortgage Meltdown .May 29, 2009 How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising [...]
[...] Ridiculous College Tuition Costs is our Next Mortgage Meltdown .May 29, 2009 How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising [...]
[...] Ridiculous College Tuition Costs is our Next Mortgage Meltdown .May 29, 2009 How are the high college tuition costs similar to our mortgage meltdown? In my opinion, the rising [...]
I agree. College costs are far outpacing inflation. Eventually, the bubble will burst. If lots of students can’t get a loan or otherwise afford to go to school, they’ll have to find a way to lower the fees. I hope!