For many college students and their parents, finding ways to pay for ever-mounting tuition and fees is no easy task. So it's not surprising that graduates leave college with a growing bundle of student loans that many will pay off for a decade or longer. This week, Money College takes a close look at what's driving up tuition bills across the nation -- factors that vary greatly from one school to another, and especially between public and private institutions.
Monday: Tuition has rocketed upward at public and private schools alike, leaving students to accumulate mounting debts that would've been unfathomable when their parents were in college.
Tuesday: A growing number of liberal arts colleges and private universities now charge more than $40,000 per year for tuition.
Wednesday: Systemic budget problems at many public universities force officials to abruptly raise tuition every few years.
Thursday: Loans, cheaper and easier to dole out than grants, mean a growing number of students graduate with $20,000 or more in debt, which can take decades to pay off.
Friday: We take a critical look at who and what are to blame for pumping up tuition – and who deserves credit, however small the efforts, for trying to help students.
Also keep an eye out for daily guest commentaries running Mon. May 17 through Sun. May 23 by Money College columnists and editors.
She took out loans for part of the cost--about $2,000 over her college career--but after graduation worked as a teacher in an economically depressed county in northern Virginia, a job that paid back most of her loans for her.
"When she started working, she said it took three years to pay back all of her loans," Lenz says. "She certainly didn't have that burden of having to carry loans."
Fast-forward 30 years, and by the time Lenz started at Michigan State in 2001, tuition cost $165 for each credit hour, rising 35 percent by the time he graduated. Lenz grew up in Virginia, but received a scholarship that reduced tuition to a rate close to what Michigan residents paid.
The scholarship saved Jonathan Lenz about $64,000 by the time he graduated in 2005. Even with that savings, his time at Michigan State cost about $63,000 for tuition, fees, room and board. By contrast, his mother paid $4,300 for four years of tuition and housing at Michigan State in the early 1970s. Adjusted for inflation, that's still just $19,000--less than a third of what her son would pay.
Thanks to savings from his parents and a part-time job, Lenz didn't graduate with any student loan debt. But he's part of a rapidly shrinking number of college graduates who can pull that off. In fact, graduating college with loan debt of $25,000 or more today, especially for those at private institutions, represents the rule much more than the exception--the staggering result of tuition inflation that has far outpaced the cost of living over the last four decades.
How bad is tuition inflation?
Brace yourself, students, for a pop quiz with a startling answer:
A year of in-state tuition at a public university now averages nearly $6,000. Shelling out for a year at a private university averages more than $30,000. How much higher is that than tuition in 1976?
A) Twice as much
B) Four times as much
C) Eight times as much
The answer: Eight times as much.
Tuition, whether at public or private institutions, has soared in the last 35 years. Those are real-dollar figures, but over time, tuition rises twice as fast as the rate of inflation. That puts tuition on a path parallel to other stratospheric price spikes that have far outpaced the cost of living, like major-league baseball salaries or the cost of a home in San Francisco or Las Vegas before the real estate market collapse.
Since 1976, U.S. Department of Education statistics show that the cost of a year of school has risen by a factor of eight. Put another way, the price tag of college triples about every 17 years.
Meanwhile, aid has struggled to keep up. Until about 1990, the average Pell Grant award for low-income students was enough by itself to nearly cover in-state tuition at many public universities. Now the average Pell Grant ($2,620 in 2007, far less than the maximum of $4,310 that year) covers less than half of in-state tuition.
Who and what's to blame? It turns out there are many culprits behind rising tuition, and they vary from school to school, state to state.
"What you always hear about is the climbing walls and gymnasiums. That's a favorite thing for people to cite," says Mark Kantrowitz, a financial aid expert who runs FinAid.org. "But that doesn't have much of an impact. What has more of an impact are faculty and staff salaries."
At public and private institutions alike, growing ranks of faculty and staff to support new and expanded academic programs have made payrolls swell. With that, health insurance costs for colleges have also surged. The costs of keeping the lights and heat on in new, larger campus buildings are climbing, especially when those buildings stay open (but mostly empty) during school breaks.
As the housing bubble hit its peak in 2008, the presidents and chancellors of 23 private universities raked in more than $1 million in salary and benefits, according to data from the Chronicle of Higher Education. Even at public institutions that year, at least 10 chiefs received $500,000 or more in taxpayer-funded salaries; many more got state-funded houses and cars.
Public institutions have always relied on state legislatures for a large portion of their funding. But every time the economy turns sour and lawmakers look for places to trim budgets, higher education is often one of the first things to get whacked. To make up for it, public universities must abruptly raise tuition -- by as much as 20% in California and Arizona last year, for example.
Even in down times, public universities face constant pressures to expand their academic offerings, says David Longanecker, the president of the Western Interstate Commission for Higher Education, a policy think tank.
"As institutions have moved up the hierarchy of American higher education -- as community colleges become state four-year colleges, and as four-year colleges become comprehensive universities, and as comprehensive universities become major research universities -- as each of those move up, they become more expensive," Longanecker says.
There are some bright spots, though. For the lowest income students, many state schools offer programs that reduce tuition to zero and don't require them to take out loans. At least 70 public and private universities now replace loans with grants for students whose families make as much as $60,000 per year.
Federal legislation, though imperfect, has often tried to help college students. The Student Aid and Fiscal Responsibility Act (SAFRA), signed into law in March, puts $36 billion toward Pell Grants over the next 10 years. And the law will cap monthly federal loan payments at 15% of a student's income.
"This is one of the most influential education bills since the Higher Education Act and the GI Bill," says Dr. Andrew Nichols, a researcher at the nonprofit Pell Institute.
In 1944, the GI Bill of Rights enabled more than 7 million veterans to go to college. The 1965 Higher Education Act provided scholarships, loans, and work-study programs for undergraduate students; and, in 1972, established Pell Grants.
But the fact remains, rising tuition is squeezing middle-income students the most, students and experts agree. How that plays out in the coming years is unclear.
"What we've said is that it's OK to push more debt onto the middle class' kids," says Jake Faleschini, the president of the Graduate and Professional Student Senate at the University of Washington, "because we're not willing to invest what's necessary in higher education."
Money College writer Madeleine Kuhns also contributed to this story.
Tuesday: Tuition Ignition explores why a growing number of liberal arts colleges and private universities now charge more than $40,000 per year for tuition. And if you have a tuition story to share with us, feel free to email MoneyCollege@WalletPop.com.