Friday, May 25, 2012

A Contrast in College Finances

A colleague of mine forwarded this article from a recent edition of the New York Times about the increasing burden of student loan debt.  The article discusses how the average amount of loan debt per student continues to rise, with it reaching $23,330 in 2011.  Additionally, many colleges and universities attempt to gloss over the costs of attendance during the admissions process, and students are encouraged to look at their college experience as a "return on investment" and a "lifetime investment, appreciating over the course of time." (source:  Since 2005, the number of students who default on their loans within two years has doubled to one in ten.

One of the reasons the article cites for skyrocketing student loan debt is the rising cost of state public colleges and universities due to decreased state funding.  As the economy has struggled in the last several years, states have cut funding to higher education.  This is combined with many legislators pledging not to increase taxes at the same time that they are giving tax breaks to corporations and eliminating estate taxes, both sources of revenue that could be used to help fund higher education.  Additionally, for-profit colleges account for a quarter of all federal grants and loans.  Yet, only 22% of students receive a bachelor's degree within six years at for-profit schools, compared to 65% at non-profit private schools and 55% state public schools.  Students at for-profit schools are also twice as likely to default on their loans as students at private and public non-profit colleges.  (source:

Overall, the message of the article is that families and students are responsible for examining very closely the often confusing financial aid proposals and information that colleges send, mapping out the projected costs of the education over four-to-six years, and for being open to less-costly options if they may help to graduate a student with less debt.  (

In contrast, NPR's Planet Money blog posted this graphic today that shows how the sticker price (it covers tuition only, not room-and-board) at public and private colleges has increased over time, but how the net price (the price that most students end up paying after grants and scholarships) has not:

source: and

I wrote about the difference in sticker and net price in a recent blog post.  So, how do these two articles work together?  How is it that for many students college cost has remained relatively the same, yet student loan debt is increasing?  I have no definitive answers, but can only surmise that the average student loan debt numbers are higher partially because a large portion of the debt may be due the debt accrued at for-profit colleges, which is not a part of the graphic above.  Further, the graphic above does not include room-and-board and other living expenses, which have also risen over time but which may not be covered by the grants and scholarships that help to relieve some of the burden of tuition for students.  Finally, the graphic shows average costs, and those students who are expected to pay more "net price" at public and private non-profit schools have a lot more to cover now than they did in 1996. 

What do we take away as school counselors?  We have a continued commitment to talking about the costs of college with students and families and reminding them that it should be a factor in their decision.  Further, as discussed before, we should encourage students to shop around and apply to public and private colleges, especially those students who are strong academically and have special talents or aptitudes, as they may receive offers with a great deal of scholarship and aid.  The hope should be to have students looking at multiple schools at multiple price points so that when they are making a final decision, they have several options to peruse.  Finally, pointing out to students and families other paths to getting a college education that would lower their debt load--starting at a two year college and transferring to a four year school or perhaps going to a four year school but living at home or with a relative while doing so.  The implications of their choice not only in school but in how much they pay for that education could linger for a lifetime.

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