Subscribe to this BlogA solution to the college-cost crisis
If you want to measure the impact of the recession, there’s no better place to look than college financial aid offices. According to a just-released survey by the National Association for College Admission Counseling, some 90% of colleges and universities reported a spike in financial aid applications during the last admissions cycle. To meet the surge in demand, schools provided financial assistance to a larger number of students, as well as boosted the amount of grants, loans and work-study.
Another bullet dodged. But the scramble to meet the needs of last year’s freshman class raises a couple of urgent questions. Will the schools be able to provide adequate aid for students applying for next year’s freshman class? And over the long run, will colleges remain affordable for middle-class students?
To answer to the first question seems to be: doubtful. Many college officials are already worried about their ability to provide sufficient financial aid.
Meanwhile, the colleges themselves are in worse shape than last year. Endowments have taken a big hit, which has left even elite schools, including Harvard and Yale, facing steep cost-cutting. State universities are also facing steep slashes in government funding. All of which means it will be even harder for colleges to meet demands for financial assistance next time around.
The current aid crisis only underscores the never-ending problem of soaring tuition costs. As MONEY and many other publications have frequently pointed out, colleges are jacking up tuition costs at twice the rate of inflation; education expenses have far outpaced inflation for more than two decades.
Meanwhile, most families are less prepared than ever to meet those bills. Numerous surveys have shown that few have the cash stashed away to pay the five-figure tuition amounts required by many schools. So expect aid applications to soar again.
But the recession does offer a sliver of a silver lining—the higher education establishment is finally taking a serious interest in controlling tuition costs. For one thing, research outfits like the Delta Project are taking apart college balance sheets to analyze the true drivers of price inflation—something that, amazingly, has not been done before. Armed with this type of information, college administrations and policymakers may finally make smart choices to rein in spending.
Even more promising, there’s growing competition for higher education dollars from online universities. In a recent Washington Monthly article, “College for $99 a Month,” Kevin Carey, policy director of Education Sector, discusses the booming number of students attending online classes at very low fees—a trend that threatens to disrupt the business model of traditional colleges.
Writes Carey:
“…the day is coming—sooner than people think—when a great deal of money is going to abruptly melt out of the higher education system, just as it has in scores of other industries that traffic in information that is now far cheaper and more easily accessible than it has ever been before. Much of that money will end up in the pockets of students in the form of lower prices, a boon and a necessity in a time when higher education is the key to prosperity.”
Unfortunately, that day won’t be soon enough for families caught in today's recession. And no one, even Carey, believes that high-priced Ivy League schools are facing extinction—there will always be families willing to pay up for brand name educations. Still, as a result of these market forces, hundreds of second- and third-tier colleges are already hard-pressed to justify their steep costs. And for students seeking an affordable education, that’s a promising sign of things to come.
It is clear that various types of student services are driving tuition costs. Caeer and placement services for current students and alumni are a "must have" item. Many other student activities outside the classroom also put demand on scarece resources. And the Information Technology departments, providing students, faculty, and administration with expensive services is a big factor. Security departments have also seen major expansions as crime, terrorism, and campus massacres have required more professional operations. Faculty instructional costs are not growing as fast as these other aspects of the educational environment. If students and their parents only wanted course instruction, tuition costs would be much lower.
The big college mystery is how much will college cost me? And how will I pay for it? On today's market, more than 800 college-planning books and Web sites are brimming with often useful but always generic information.(And many unfortunately generate leads for colleges and loan companies.) None of these resources provide personalized information that makes your college costs transparent. The federal government recognizes the consumers' need for college cost transparency and issued a mandate that by fall 2011 all colleges must post a net cost calculator to help students better understand their true out-of-pocket costs. (Only a handful of colleges offer a net cost calculator today.) In a 2008 national survey of 610 veteran high school counselors and college admissions officers, 95% said that having a side-by-side net cost comparison of colleges a student prefers would improve a student's ability to select the right college. To help students better plan and pay for college, nonprofit USA Funds is supporting StudentAid.com's Access for All program that provides free to low-income students a side-by-side comparison of out-of-pocket (net) cost and student aid eligibility for 6 colleges of a student's choice years before students apply to college. Parents of all incomes who want to get the best deal – financially and academically – for their children may want to check out this new way to evaluate college costs.