Sunday, February 12, 2012

Outmoded Paradigm for College Tuition

Every year at about this time I have the same conversation with the financial aid office at my son’s private art college. I request an increase in his tuition scholarship because they raise the tuition about $2,000 every year, which means that his upcoming senior year will cost $6,000 more than his freshman year. And every year they tell me that they can’t consider offering him any more scholarship money until he takes out a student loan from the federal government; because he has not yet “accessed all his resources” (i.e., student loans). So every year I explain that we refuse to have our children take student loans, that the student loan system is an outmoded paradigm, and that colleges should find ways to lower their tuition costs and provide more financial assistance.

In this economy, young people coming out of college struggle to land any job, let alone a job with a salary high enough for them to pay off student loans. If my two older children had taken out student loans, they would be deeply in debt, they would have defaulted on those loans and destroyed their credit rating, they would be stressed about their finances, and they would be starting out in life with a depressing inability to save any money for many years. CBS News recently reported that student loan debt is swiftly becoming as big a blow to the economy (potentially bigger) as the mortgage crisis. Students are unable to pay their loans back and parents are going bankrupt as a result of borrowing to put their children through college. (Source: CBS Money Watch, Feb. 9, 2012.) Colleges walk off with the money paid by students and their parents, but the debt remains with the borrowers. President Obama did not finish paying off his student loans until he was already serving in Congress.

Most students must work at least part-time while in school and this makes it more challenging to graduate in four years. It now takes an undergrad an average of six years to complete a bachelor’s degree (national average); a degree which used to take only four years. (Many students take more than six years.) This means at least two additional years of paying tuition and living in poverty. When young people finally graduate, they often have difficulty transitioning into a paid job because of the rapid rise in unpaid internships. (See my blog of a few weeks ago on that topic.)

In December 2011, UC-Berkeley announced that it would offer more financial aid to middle-class students starting in the fall of 2012. (They defined “middle class” as families earning $80K to $140K annually.) This announcement was made after a study found that while low-income and high-income students were enrolling at UC-Berkeley in the same numbers, middle-class student enrollment has been steadily declining. (Duh.) The study found that low-income students were eligible for substantial scholarships and high-income students didn’t need scholarships, but middle-class students’ families couldn’t scrape together their expected contribution to tuition. (Ya think? They needed a scientific study to figure this out?) UC-Berkeley will not expect middle-class families to pay more than 15% of their annual income in tuition starting this coming fall. Many private universities (including Yale, Harvard, and Princeton) already made the no-more-than-15% commitment some time ago to families making up to $200K. UC-Berkeley is the first public university to make this commitment and now others are scrambling to find ways to follow suit.

College is not for everyone, but my husband and I loved it and we are firmly committed to giving our three children the opportunity to experience it. This is an option that should be available to any who choose it. Let’s get personal (even though it’s taboo in this country to talk about one’s personal finances). We have paid more than 15% of our income toward tuition for our youngest child’s freshman, sophomore, and junior years. That 15%+ does not include room and board. (He has helped with that by living frugally, plus he works a work-study job.) When our oldest started college in 2002, we owned our home (with no mortgage). Ten years later, we have two mortgages, a Parent Plus loan from the U.S. Department of Education, and an interest-free loan from the Hebrew Free Loan Association (terrific resource for Jewish families, by the way). With the money we borrowed, we have bought a bachelor’s in journalism for our daughter and a bachelor’s in applied arts and sciences for our son. They are both working and paying their basic living expenses themselves and they both value their college education, which taught them a great deal. In the spring of 2013, our youngest will complete his BFA in media arts. We are proud of our children for completing college. We are grateful that we have managed to help them pay for college without taking any student loans. Instead, however, we are carrying the debt ourselves. Our children have agreed to help us pay down the mortgages if/when they can afford to do so. Our other option is to eventually sell the house, which will require serious consideration regarding where and how we want to live as we age.

My point is that the system needs to change.

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