Higher education costs are in crisis
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By Brian C. Greenberg CPA, CCPS - Published: November 4, 2005
It is not a question of "if," but rather "when," the middle class will be priced out of access to higher education. The trends are clear: current costs are staggering, causing families and students to take on debt that will burden their financial decisions for years to come.
If tuition costs continue to increase at its current pace, the middle class will be shut out of college within a generation. Access to higher education will then revert to pre-World War II status: an institution exclusively for the wealthy.
In 1994, students whose families earned more than $100,000 per year represented 15 percent of the campus population. Ten years later, this percentage has risen to almost 33 percent of all students. What does this show? That the presence of students from middle- to lower-income backgrounds are a diminishing on our college campuses.
Families with two children who earn at least $100,000 per year are expected to pay for a public university education without receiving any aid. The cost today is $20,000 per year; therefore, the family burden will be approximately $90,000 (including price increases) upon completion of the student's education in four years. If the student chooses to attend graduate school, add at least another $100,000.
By the time this student begins work he/she will have more than $200,000 in debt. A second child on the same track adds another $250,000, after adjusting for inflation.
If the cost of tuition rises by 7 percent per year, a public university education will double in ten years. Realistically, public tuition is rising at a much faster rate due to the cutback in support from state funding. Corresponding family incomes are not increasing at the same rate. At some point, the burden of all of this tuition debt will result in the tragic realization that students must forego a college education because they simply cannot afford to assume the debt.
And what about private college costs? Today, one year of private college tuition costs $29,000; $39,000 or more for elite schools. As ridiculous as these costs seem, a more disturbing fact is that families who CAN afford these fees are actually getting discounts on their tuition bills! A $39,000 tuition fee often will be reduced to $30,000 for the family who can pay as opposed to "giving away" a full $30,000 scholarship to a poorer family in need. The school matriculates the wealthier student by giving out fewer dollars. As a business decision this makes sense. As an education policy this is awful, as the more qualified student may be rejected for a student whose primary qualification is that his/her family can afford the tuition.
While there are many explanations for these pricing trends — cutbacks in state funding, not-for-profit schools that lack market disciplines, increasing professor salaries — the result is that college costs are soaring out of sight. As for those who believe that no financial sacrifice is made by American taxpayers living under President Bush's "guns and butter policies," think again. Since the Iraqi war began, low-interest rate college loans have disappeared (rising to 6.1 percent for PLUS loans) and federal grant money for Pell grants has dwindled significantly.
What to do? Government deficits are an indication we are living beyond our means. Should we seek out a super wealthy individual like an Andrew Carnegie to act as a benefactor and give back to society some of the riches he/she has reaped? An unlikely option. Tax cuts? These have only served to shift the burden of government from the wealthiest to the overburdened middle class.
Perhaps we should begin to evaluate and limit the size of "mega"endowment funds that universities like Harvard University hold. What will they do with $23 billion, buy France? Clearly, society must recommit to educating its youth. A society that does not invest in its children and open access to its finest educational institutions to their best and brightest, as opposed to those whose only qualification is that they can afford it, is doomed.
Brian C. Greenberg is a Certified Public Accountant and Certified College Planning Specialist. His advice and tips have been featured in national newspapers and on his weekly AM radio program, "Greenberg News."
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