Is College Tuition Overpriced?

Two days ago I returned to Denver from having toured several selective midwestern private liberal arts colleges with one of my student clients. Each school is on the small side (averaging 2000 students or less), each has a reputation as a fine institution, with multiple factoids of distinction, such as freshman retention rates, graduation rates, percent employed after graduation, etc., and three were even profiled in that overly-touted 2006 tome Colleges That Change Lives.

Two of the four institutions charged students in the current (2010-11) first-year class just under $50,000 for tuition, room, board and fees, and two charged about $52,000. Are these charges worth it in terms of quality of experience and value of degree? Are they worth generating debt that will trail behind graduates and their families for years, perhaps decades to come? I think not, and I’m far from being the only college commentator who thinks so.

Many higher education journalists and bloggers observe that college costs have exceeded the inflationary spiral of health care costs in the U.S., and some forecast a course reversal that will rival what followed after the recent mortgage-bank crisis and consequent recession. So what will stop the craziness? Families that refuse the hype and demand accountability for fees, and students who agree to attend the best college that their parents (and they themselves) can reasonably afford.

I wholeheartedly agree with the advice given by one financial aid expert whom I recently heard at a public forum. He suggested that parents and students have an open talk about what is affordable well before a college list is assembled. Students can apply wherever they wish, within reason, but attendance is predicated on the total cost of attendance quoted by colleges after all discounting from grants, awards, and scholarships is reviewed.

The smart and talented student-client (a junior) who accompanied me on the trip hales from a regular middleclass Colorado family, and she has a sibling who will likely begin college during her third year of attendance. If costs continue to increase I am certain that she will be facing $60,000 in fees at the kind of college she hopes at attend, and her parents will have a dual burden for at least two years. I plan to advise her to apply widely, both in-state and out, and to seriously consider her best offers only. If this posture becomes the norm, colleges will need to take note, and adjust their pricing accordingly.

Financial Aid and Recession

College bound high school seniors, their parents, and college officials are typically anxious at this time of year regarding admission decisions, aid packages, and what colleges call “yield,” which is the size of the incoming freshman class after offers are made, accepted and declined.  Due to the deepening recession, this season those anxieties are significantly magnified.

Here is a quick overview of what national education sources are saying about the status of financial aid for college in 2009, along with some tips for making the best of the situation. Happily, there is actually some good news despite the gloomy economic picture at present!

 Good News:

The best news is that federally funded student loans are secure and have been affirmed by recent congressional legislation; in fact, funding has been expanded somewhat. This applies to Stafford loans, Perkins loans and PLUS loans.

 Many families will qualify for the American Opportunity Tax Credit included in the recently passed stimulus package, a potential credit of $2500.

 Colleges are aware of and concerned about the ability of families to afford the cost of higher education in the current climate.  As a result, most are trying to contain costs (60% of U.S. colleges have hiring freezes at present), striving to limit the extent of tuition increases, and in some cases, attempting to increase institutional aid packages.

 Not Such Good News:

Private college loans are now much harder to come by and carry less desirable terms than in the past.  These have been affected in much the same way as other forms of credit, unlike federal student loans, which are guaranteed by the government.  

 The continued stability of federal grants, such as Pell grants, may be tenuous, as more families are now eligible given the drop in net worth for most Americans.  While increased eligibility is positive, it is also possible that the unanticipated increase in demand will negatively affect the availability and the size of future grants.

 Virtually all colleges provide aid on their own, based on unmet need as well as merit.  Given the particular strains faced by public institutions that rely on state funding, and different strains faced by private colleges (in the form of decreased donations and diminished endowments), institutional award packages may not match what students have been offered in the past.

 Tips for maximizing aid in the present environment: apply early, shop around for the best offers and packages, appeal award decisions whenever circumstances change, and definitely ask about the financial health of the institution when visiting campus.  Also beware of financial aid scams in the present environment.  Check out “too good to be true” private offers with the financial aid office at your college.  Also check into the background of private entities that promise to secure questionable levels of aid.