The Rising Costs of Education

Generation Debt: Take Control of Your Money - A How-to Guide
by Carmen Wong Ulrich

(Page 2 of 4)

"Universities share one characteristic with compulsive gamblers and exiled royalty: there is never enough money to satisfy their desires."

So we've established that to make a good buck in this grande land called America, we need at least a college education. And to get this education, what is required of us? Money. Lots of it.

Why does it cost so damn much if it's basically a requirement? We can go to public high schools on our parents' tax dollars because it's required. So why is a college education getting exorbitantly - almost prohibitively - expensive the more we need it?

Well, you can refer to Prof. Bok's dead-on quote above for a quick answer. A bit of a longer, more involved answer is that universities are moneymaking and increasingly commercialized private institutions (even the public ones) - some are even corporations (University of Phoenix, anyone?).

Since the late 1970s, when Pell Grants from the federal government covered up to 84 percent of the costs of a four-year college, the bankrolls and operations of higher education have taken a big, hard right turn. A combo of the feds pulling back on their support of college students and the schools themselves (an energy crisis, crime, and war gobbled up most of the government to-do list in the 1960s and 1970s), universities needing to find alternative funds to support their growth and research (hint: athletics) and a ratcheting up of competition among institutions have created a rising spiral of college costs.

According to CNNMoney.com, the reason tuition costs rose between 4.5 and 11 percent for the 2004-05 school year was a combination of labor costs and health care for staff, student aid (since fewer can afford to go, schools are giving more and more aid - whaaa?), and, as I already mentioned, competition among schools in the battle for the best reputations, best faculties, and best student body (gotta pump out more rich, successful alums).

You can't blame them, really. We've already established that job competition requires higher education levels and training, so universities and colleges are under more pressure than ever to attract top students, athletes, and funding. However, institutions have become so skilled and entrepreneurial in their approach to moneymaking - including corporate sponsorship of research facilities and top students - that they are, for the most part, richer than ever. So again you ask, why the mind-blowing costs?

Well, just how bad is it? (Humor me here.) It got bad enough that in 1998 Congress created an amendment to the Higher Education Act ordering a study of the costs paid by institutions and the prices paid by students. (Just to make sure there wasn't some price gougin' goin' on, no doubt.) The commission that ran this study found that the amount students pay for their college education is increasing faster than inflation (both private and public), and that institution costs are also increasing fast, but not as fast as the payouts made by students.

Our friends at the BLS break it down farther: From 1987 to 1997, the Consumer Price Index for goods and services rose 41 percent, while during the same decade college tuition and fees rose 111 percent! The U.S. Department of Education reported in 2002 that between 1981 and 2000, in both public and private colleges and universities, the average tuition (adjusted for inflation, of course) more than doubled, while the median family income rose only 27 percent in that same time period. Hmm. Quite the gap to close there.

So just at a time where you gotta gotta have that degree, it gets harder and harder to pay for it. And though at least half of students get some or all their tuition paid by their parents and almost a third live at home, too, Mom and/or Dad are becoming less and less likely to help out. Why the tighter wallets? Because parents are living longer and longer, and their retirement accounts got hit hard by the previous recession. Thus, they now have bigger and bigger retirement costs and needs.

So we get resourceful. The Census Bureau says that 75 percent of all full-time college students worked while in college. A staggering 40 percent of these worked full time. (Good Lord - you guys are amazing ...) The BLS puts this number closer to 30 percent, with 53 percent of students working twenty-five or more hours a week.

But there are only so many hours in a day and for now, self-cloning is prohibitive, so loans are rapidly becoming the number one method of paying for a college education (that's not including the wonderfully lucky bunch who just write checks - bah).

Back in the day, the federal government straight up gave money to college students (in the form of grants), but now the government has instead become the biggest lender to college and graduate students. Well, at least they're subsidized loans (see chapter 3 for an explanation of why this is a good thing).

It doesn't really seem to matter too much in dollar amounts due whether you go to public or private schools. Nellie Mae (she probably visits your mailbox every month, or maybe her sister Sallie?) reported in 2003 that the average debt incurred by a graduating four-year college student was $21,200 for private schools and $17,900 for public schools. Yee-ouch.

Let's juxtapose those digits with what Nellie Mae reports as starting salaries after graduation: $26,400 (private) and $26,800 (public).

A moment of silence to digest the shock.

Do I dare even venture into the land of graduate and professional school costs? Heck, as I'm writing this, I've got a supergrand five-figure total for my master's degree. Why not ...

According again to Ms. Nellie Mae, the average debt a graduate student leaves school with - along with that diploma - is $45,900. This same graduate student will average a starting salary of $42,100 a year. That shade of red does not exist in nature.

It's been awhile now since credit cards have become a substantial way of life for graduate students, even just for day-to-day expenses. Undergrads have caught on. The average undergrad now leaves school with $1,843 in credit card debt.

It's a love-hate relationship we have with the debt we incur for our higher education. The bills are a tremendous burden - yet without them, we wouldn't have been able to get that degree that got us that well-paying job, right? Quite the Faustian bargain. But I'll get to show you how to get the upper hand on this smooth devil called debt soon. Stay tuned.

Copyright © 2006 by Carmen Wong Ulrich

About the Author

Carmen Wong Ulrich was most recently the special projects editor at Money magazine. She's also a guest lecturer at the annual NFL rookie camp and is a former contributing editor at KING.