Jerry knew what to expect. Large tuition bills. Loans. Paperwork. A rush of financial decision-making that induced an odd mix of confusion, outrage (how could it cost so much?), and pride that his child was going through this important rite of passage.
He felt so strongly about college that he put no limits on where his children could go. “My only rule was they couldn’t go west of the Mississippi,” says Schmitt, 62, director of a global services with the telephone firm Chorus Call in Monroeville. “The college experience is just too valuable to mess around with. My dad put me through college. I always figured that was my responsibility to my children.”
Schmitt took a deep breath when he found out Ameeta’s tuition, room and board at Washington & Jefferson was around $40,000. A $10,000 scholarship from the university took some of the sting away. Jerry cashed in his IRA and took out an education loan for parents, called Parents PLUS, and sent her off to school. He was somewhat relieved when Ameeta decided she wanted to go to a bigger school and chose Pitt, Jerry’s alma mater, where in-state tuition was $15,000. “I sure didn’t discourage her,” he says. Even with a lower-cost school, Schmitt went into debt to educate his daughter, a language major. “I just figured somehow or another I’ll manage to pay for it.”
Outside of buying a home, a child’s education is one of the most expensive things most people will ever do. Most do what Schmitt did—scratch out enough from their savings, forego major purchases, and borrow to meet the costs. But this is getting harder and harder to do.
The average annual cost of college in the U.S. is $21,000 for a four-year school, up from $12,000 a decade ago, according to the U.S. Department of Education. It’s gone up at twice the rate of the consumer price index over the past two decades. The most expensive private colleges now cost well over $50,000 a year, with tuition, room and board, books and fees. This is a king’s ransom for many parents, who ask themselves, “why is this so expensive?” almost as soon as they ask, “how can I ever afford this?” and then “is it worth it?”
Topping it off, the mechanics of how colleges finance their operations are more complicated than ever. Even though costs are rising, so is financial aid. So the actual costs of the 4,000 different institutes of higher learning in the U.S. are hard to discern. It’s enough to leave parents wringing their hands, hanging their heads, and shaking their fists.
“The economics of higher education are just so bizarre and so byzantine that it’s understandable that most people don’t understand it,” says Roland King of the National Association of Independent Colleges and Universities.
Most colleges sell the education they provide as an investment, and the idea has appeal. But the true costs of this investment only dawn on some parents when they get their first tuition bill the summer before their son or daughter’s freshman year.
“Some parents, you can sense in their voice, ‘Oh my gosh, how am I going to do this?’” says Natalie Wilson, director of financial aid at Carlow University (tuition, room and board: $32,000). “You talk to families where this is their child’s first choice and they don’t have the heart to tell them they can’t come. And you can tell they’ll figure out a way to send them here. They’ll borrow a lot of money, but they will find a way.”
More Americans than ever are finding a way to send their children to college. Colleges conferred 1.7 million bachelor’s degrees last spring, up from 1.2 million in 2001. Part of the reason why college is so appealing is that it is increasingly seen as a pathway to a better life. The average high school graduate earns $31,000 a year, compared with $58,000 for someone with a bachelor’s degree, according to recent U.S. Census data.
But the real costs of this investment are going up. To attract students, schools have spent more on better facilities and dorms, and are charging parents accordingly. They also face intractable rate hikes for health insurance, which have been going up at 8 to 10 percent a year in many cases.
King says private colleges and universities have done all they can to cut “low hanging fruit”—layoffs, hiring freezes, early retirement plans—and what’s left seems essential to many college administrators. Increasing class size would save money, but dilute their product. “You can only put so many students in a classroom to produce the experience that students and family are looking for in a small liberal arts college. And you can’t do that in a 500-student lecture hall.”
Technology, facilities, and research support are other major cost drivers. Higher ed is one of the most regulated industries in the world, and all that government reporting means schools must hire additional staff.
But the main cost for any university is its faculty, and herein lies a particularly tough issue for college presidents. Tenure, the system which gives professors job security and time to do research, is held up by critics as a lag on budgets. Asked how they would cut costs, 17 percent of university business officers said they would eliminate tenure in a recent Moody’s/Chronicle of Higher Education survey. Another 38 percent said they would increase teaching loads. Supporters of tenure say it grants faculty members academic freedom, a linchpin of academia for centuries.
Regardless of its relative benefits, most universities are already circumventing the tenure system by hiring adjunct and part-time, non-tenure-track professors to teach classes. “Even though nobody’s admitting it, they’re effectively working around tenure, and coming up with a shadow professoriate,” says Jane Wellman of the Delta Project, which tracks higher ed spending. This has obvious downsides as far as academic performance. Adjuncts might be cheaper, but will they have the wealth of experience, contacts in an industry or field, and depth of knowledge to help their students succeed?
Even without touching the tenure system, Wellman thinks universities can cut costs by trimming the number of course offerings. Too many courses are offered not because of student interest but because they are on a topic of particular interest to faculty, she says. This poses a sticky labor issue, however, and most universities tend to put off these tough decisions, she says.
“Reducing course offerings is good over the long term in reducing budget pressures, but you don’t necessarily get a lot of cash out of it in short term,” Wellman says. “So if you’re in a budget cut mode, the universities probably see that the hassle factor is likely greater than the immediate financial reward.”
At the same time, public investments in higher ed are stagnating. In an era of budgetary shortfalls, higher education is an easy target. That’s because public colleges and universities have a built-in safety valve: tuition. The Pennsylvania State System of Higher Education raised tuition on its 14 state-owned universities by 7.5 percent this year, to $6,240, to make up for a $52 million loss in state aid and $38 million loss in federal stimulus money. Pitt also raised its tuition 8.5 percent, to make up for a 23.5 percent cut in its state aid. Pitt’s in-state tuition for next year will go up to $15,272, while out-of-state tuition will rise 4 percent, to $24,680.
The Pell Grant, the federal government’s central instrument for making college affordable for lower-income students, pays for less and less of a college education. In the 1970s, the grant used to pay for two-thirds of a typical college education, according to the Institute for College Access & Success. Now government aid pays for about one-third of a public university education.
All of this means that families and students are making up more of the costs of pricier schools, and this poses a large problem for higher education. Average student debt is currently $25,000 and climbing.
“Families are increasingly being priced out of a college education, especially at higher-priced institutions,” says Mark Kantrowitz, a Cranberry-based consultant who runs Fastweb and FinAid, two popular financial aid web sites. “It’s starting to approach an affordability crisis for low- and moderate-income students.”
As a result, many families are considering lower-priced options. That’s what Philip Gruszka did with his two sons. Gruszka told his sons they’d be going to Community College of Allegheny County (CCAC) their first two years of college.
“We knew we couldn’t afford to do four-year schools for both of them,” says Gruszka, who is director of parks management and maintenance with the Pittsburgh Parks Conservancy. At first, his sons, both graduates of North Allegheny High School, were disappointed.
“Both of my boys felt pretty bad because they saw all their friends going on to four-year schools.” CCAC cost a fraction of what four-year schools cost—$2,000 a year in tuition and fees. But the education was equivalent, Gruszka says. “The class sizes are so much smaller and the independent attention is so much greater than what they would have gotten at a major university.”
After receiving his associate’s degree from CCAC, Jeremy, the younger of the two, enrolled at Pitt for two years to study business. The Gruszkas didn’t qualify for need-based grants, so they are dipping into a home equity line of credit to help Jeremy, who is entering his senior year. And Jeremy is borrowing $35,000 in student loans, which isn’t much compared with what some of his friends are taking out—upwards of $60,000 to $80,000.
But the cost is worth it, Gruszka believes. And not just in a monetary way. “Even though this is more money than we’re comfortable handling, when you look at the benefits of the education, and those life experiences you have in college, and the information you’ve internalized, you can’t put a dollar amount to it.”
One reason why tuition is higher is that many colleges have increased tuition so they can offer more in financial aid to lower-income students. The average full-time student receives around $13,000 in student financial aid, which can include loans, compared with $8,500 in 2000. This high cost/high aid model of higher ed finance means that those who can afford to pay full tuition are effectively subsidizing those who cannot.
At Carnegie Mellon, where the full cost is $57,500 per year, students who receive financial aid get an average of $23,000 in grants and loans.
“There has always been the Robin Hood quality of college cost structure,” says Roland King of NAICU.
The high sticker price might scare off low-income families from even applying to certain schools, but colleges do it because they want to encourage diversity, and because many use financial aid as a recruiting tool to compete for the best students. Robert Morris University, for instance, is increasing its financial aid budget 19 percent this year, even as the number of applications has gone up in recent years.
“If colleges didn’t do this, most could fill their class with nothing but wealthy full-pays,” says King. “But at most institutions, there is a commitment to serve a socio-economically diverse pool of students.”
The student aid system worked in favor of Caitlyn Brown when she was looking for schools. She was a straight-A student at Thomas Jefferson High School. She has four siblings, however, and her mother and stepfather told her she would have to find a way to pay for school herself. “We could’ve never come up with that kind of money for her,” says Colleen Halt, Caitlyn’s mother. Halt, who went to trade school to become a hairdresser and later a medical assistant, says she knew her daughter would go to college “since she started walking and talking. Even though we didn’t have the money to send her anywhere, her brains were going to get her somewhere.”
Caitlyn had her eyes on Butler, the private school in Indiana with the great basketball team. “I wanted to be far away from home, and I really wanted a small, private university where my class sizes would be 20 or under, and I didn’t want to be in a city, but near a city.”
Caitlyn was hoping for enough scholarship money to afford the school. When she found out from Butler that she’d have to pay $10,000 per year in addition to maxing out her federal student loan, she was crestfallen. She wound up going to Robert Morris. It met all her prerequisites, minus the “far away from home” part. Tuition was $30,000, but with $8,000 in federal and state grants, a $6,000 scholarship from the school for math and science students, and a $5,000 merit scholarship from Robert Morris, plus work-study, she could make it work. Caitlyn needed to take out student loans, but her out-of-pocket expenses were only $800 a semester.
Caitlyn freely admits her decision to go to Robert Morris was based on money, but says she doesn’t regret going. She says she likes the school’s small class size, and has been active in her sorority, Delta Zeta, where she is an officer. A biology major, Caitlyn has her eye on medical school. She’ll leave Robert Morris with many fond memories and a $20,000 student debt. But, like most college students, she thinks the money borrowed will be money well spent. “I have to be okay with that, because this is a stepping-stone to where I want to be next.”
Colleen says she has watched her daughter become more mature during college. In an intellectual sense, her daughter seems “bigger” every time she comes home. “I don’t know how to else to explain it. She hasn’t changed, she’s still the same person. She’s just gotten more ideas.”
As for med school, Colleen tells her daughter not to worry too much about the student debt, which can total $250,000. It will work out in the end, she tells her.