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Is the cost of college worth it?

Students, federal and state governments are producing a revenue stream for colleges.  Yet little of the revenue is going into the classrooms, according to a new report from the Delta Cost Project, a Washington DC based non-profit organization. (http://www.deltacostproject.org/)  The fastest growing operating expenses are related to research, public outreach and financial aid.  What is more upsetting is that the percentage of students who are graduating hasn’t kept pace with increases in enrollments, revenue and total spending.

The report is based data from the US Department of Education from the past 18 years from almost 2,0000 schools representing 90% of students.

The cost of college (for the current school year) has risen from 4.2% at community colleges to 6.6% at public 4-year colleges.  According to the Organizations of Economic Cooperation and Development (OECD), the United States spends more money per student than any other industrialized nation, yet it ranks at the bottom for degree completion (54%).  The organization average is 71%.

The cost of going to college is still rising much faster than inflation or Americans’ household income. The average cost of one year at a private U.S. college or university is now $21,235. That is up from about $15,000 five years ago. To put the 40% increase in perspective, household income in the United States during this same period rose just 4%. This makes it increasing difficult for middle class, poor and minority students to attend schools of higher education.

Tuition at less expensive, state-run universities is increasing even more rapidly. According to Patrick Callen, president of the National Center for Public Policy and Higher Education, that is because states are feeling the effects of a sluggish economy. “Public institutions have had their budgets cut by states, and they’ve been raising tuition to replace public money that’s been taken out of their budgets,” he says. But budget cuts are just part of the reason tuition rates have been increasing so rapidly. Mr. Callen points out that more and more American high school students are going to college, because nowadays, it is nearly impossible to earn a middle-class income without a college degree. This has created what he calls a “sellers’ market”-and schools are taking advantage of it.

The result is that students today are graduating with nearly twice as much education-related debt as graduates had ten years ago. A study conducted by the Public Interest Research Group found that nearly 40% of student borrowers leave school with what are considered to be “unmanageable” debt levels. Their payments, in other words, amount to more than 8% of their monthly incomes.

Patrick Callen says if something isn’t done about the cost of a college education, it’s going to have an impact on America’s future. “It influences students’ choices, like whether to go to graduate school, and can you afford to go get a graduate degree, if you already owe a chunk of money, in a field that isn’t going to have big economic returns – you know, teaching, social work, etc.”

The debt may also force people in their 20s to delay getting married and starting a family – a factor that could be behind the rising age of first-time marriage that the United States has experienced in recent years.

Of course, there is financial aid available for students, but Patrick Callen says increases in grant and scholarship money have not kept up with the increases in tuition. And he says universities have not always distributed that money wisely, because they are competing with one another for smart, accomplished students.

“A larger and larger percentage of the aid that’s there is not going to the students for whom it might make a difference in whether they go to college or not,” says Mr. Callen. “It’s going to be used as an enticement in this competition for students that will raise your prestige by getting students with the highest SAT scores (i.e. national exam scores) and the highest grade points out of high school.”

But unless more universities crop up in the United States, it will remain a sellers’ market – until the cost gets so high, that is, that students simply cannot go, regardless of how much debt they are willing to assume.

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