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TMFJMo (73.81)

College Costs Gone Wild

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April 21, 2012 – Comments (7)

Here are some interesting numbers for you folks with kids. From 2000-2001 the total amount of student aid dished out to undergrad and graduate students was $98 billion. From 2010-2011 that number jumped to $227 billion. Now just for perspective if you tack inflation onto these numbers, the $98 billion in 2000 equates to about $125 billion in 2010. (Thanks inflation calculator!) In 2000 there were approximately 15 million undergraduate/graduate enrolled and in 2010 there were 20 million (this is information sourced from the US Census). So the student population grew by 33%, but the amount of total aid dished out grew by 132% (82% adjusted for inflation); slight disparity there, no?

Now there’s no agenda to this really. It’s more or less just to present some food for thought. But I do think it’s worth at least considering that one of the main reasons that tuition costs keep going up is because there is so much money being made available to spend on it. I mean if a school has a waiting list, then they have all the leverage. What if it was the schools chasing after the students? That would be pretty sweet, but it’s not that way and that’s a problem. Here's some scary info for you: total charges at a private college average about $40,000 per year today. Are you f$#&ing kidding me? I mean we’ve got 529s for our kids that in theory might not even cover a year at that rate!

The fact of the matter today is that student loan debt is now at $1 trillion total. That is more than credit card debt and even auto-loan debt. And what’s even scarier is that you can’t just default or wipe out that student loan debt in bankruptcy (not that I necessarily condone that mind you, but it’s relevant). That stuff is with you for good. Here’s another gem for you. The Federal Reserve Bank of New York recently did some research and found that Americans 60 and older still owe about $36 billion in student loans. Think about that for a second.

Foolish best,

Jason

 

7 Comments – Post Your Own

#1) On April 21, 2012 at 10:20 PM, miteycasey (89.32) wrote:

Put your self in the shoes of a President of a university. If the goverenment was going to give out 1Trillion dollars wouldn't you raise tuition?

Let the goverenment stop loaning out so much money costs will go down, but not as many kids go to college. Who does this hurt the most? I'm guessing the middle class as they are the ones who have to take out loans becuase the rich pay cash and the poor get grants instead of loans. 

I'm not really surprised.

Get the government and money involved and the cost is going to go through the roof.

 

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#2) On April 21, 2012 at 11:51 PM, TMFRosetint (99.53) wrote:

I wonder what the weighted average cost of that debt is, though. I'm guessing it's relatively low, so it would make more sense to finance a college education with debt than just paying cash.

I do think formal education is overrated, but I'm biased in that regard since I dropped out of the fourth grade. I will state that I ran the numbers and came out with a substantially negative NPV using a discount rate based on what my portfolio has returned.

I doubt that's true for everyone, though, so for many people I'd guess it makes good sense to attend college.

 Best wishes,

 Scott (TMFRosetint) 

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#3) On April 22, 2012 at 4:13 AM, Geldej (95.55) wrote:

more than half the time when they raise the tuition its because the state cannot afford to give out more cash to the school

for instance here at MSU Mankato. 5 years the state paid for 53% of the tuition, today its 47% so add in the state giving less funding plus inflation,

bada bing bada boom 

Aid doesn't mean free money, it means a LOAN from the government lets not get confused,

Only reason I get grants plus loans is because BOTH of my parents lost their jobs. If only 1 did, I would only get loans. 99% of all students qualify for at least 1 loan through the government. The loans range from 4.5% to 7.5% compared if I had to go to wells fargo at least 10%. If it were not for the government a lot of us would of had to drop out, straight up.

I know countless people that has loans through at least 4-5 banks, the reason they had to keep switching was banks stopped giving student loans. The government was there to support those students so that they could further themselves and not fall further behind in life and instead make better use of their potential. Luckily MN has some of the cheapest schools in the country, Average tuition plus living expenses is about 16,000 a school year. My girlfriend goes to St. Kates in st. paul tution is 42,000 a year. I can't tell you how many times I told her to transfer to public school, get the same education for less cost. She has professor that works there and at inver hills commiunity college which is less tution than my school even, He says he gives same tests, powerpoint etc to community college as at st. kates, but comm college is tens of thousands cheaper. Its her personal choice to go to all girls school, she loves it and she should and I support her. trust me, that doesnt mean it makes sense to me.

I just found out that after my 9 month grace period after graduating in about 2 weeks. I will owe about 28,000$ starting in december, merry christmas to me! This is on the LOW end, I have friends graduating from my school with 50,000$ due, not including interest.

I am so much of a not only better but stronger person today as a result of going to college. If I had gone straight into work force at 18 full time, there no way I would be were I am today. It was worth every penny. 

Tuition is not the problem for college students, its not what upsets us at all. We all understand that the state is under pressure and cuts have to be made that shouldnt be.

What is upsetting, 600 students in a major with 5 professors and 400 level classes with 60-70 students. These are not general classes like biology 101, this is specific to your major such as MN criminal code 438. Students see professors being laid off but yet the school somehow has the cash to build new dorms, or new nursing building or new college of business building etc.

We feel as if the shool is no longer there to serve the students but only to try and impress the future ones.

It will eventually collapse due to an event that puts everyone over the edge. Seems to me thats how most movements pretty much become movements. Can only put up with so much.

 Every bill for every semester, there is the exact percentage and $ that state aka tax payers contribute to the school to pay for part of the tuition. If the state didn't contribute to tuition costs it would be 4500 to 5000 semester it would probably be over 10,000.

There have been articles on here before asking if college is a bubble, I personally would say no because of the personal accomplishments I have achieved. There is nothing like having a question for a professor who has 25 years of experience on the job with 5 different agencies and a Dr. degree. When you ask them a question they don't just answer it they can talk about everything related to it and giving personal experiences of what your asking about. Not to mention college grads only have about 4.5 unemployment rate which compared to only high school students is about 10% i believe. Lets not forget the pay is about double if not more depending on what you go into when you graduate. 

When I look at CEO's even the most incomptent ones, guess what they have a college degree, very very few only have high school diploma.

But everyone knows going to the ultra private schools like phoenix, is a total scam and a Dr. there is not same as Dr. at university, we actaully go into the field for years at a time and publish research. At the same time most of them don't have Dr. degrees or nearly as much experience. For instance I know people that have gone to those school and said their teacher only had a bachelors and 5 years on the job. When they transfered to our university, it was a night and day difference in literally everything.I really do feel bad for them paying even more than st. kates. Thats the bubble I think of. 

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#4) On April 22, 2012 at 10:29 AM, Option1307 (30.54) wrote:

Intersting stats thanks for sharing, +1.

 

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#5) On April 22, 2012 at 12:12 PM, TMFRosetint (99.53) wrote:

Interesting perspective, Geldej. Thanks for sharing.

My guess (I haven't run the numbers beyond the top 20 or so) would be that there's an overrepresentation of people without college degrees on the Forbes 400. The most interesting one I know of is Kirk Kerkorian, who dropped out of middle school. 

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#6) On April 25, 2012 at 12:44 PM, lemoneater (86.26) wrote:

Students see professors being laid off but yet the school somehow has the cash to build more dorms, or new nursing building, or new college of business building etc.

We feel as if the school is no longer there to serve the students but only to try and impress future ones.

I could not agree more! Some private colleges are making this same mistake.

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#7) On April 25, 2012 at 1:56 PM, WikiCPA (46.51) wrote:

I think a big factor to this student debt is very closely related to the income gap between the 99% and the 1%. Coming from a liberal arts state school in California, you see how people with degrees are not landing the dream job they envisioned, forcing them to take jobs as baristas and carpet cleaners to pay off their sociology or art history degree. It's hard to relate to but imagine investing $60-80K on margin when you have no equity or capital to back it up, and then the investment fails, and you are only 22. No surprise that you are paying for that for the next 30 years (especially if you don't have a STEM background).

The wild costs for college seems justified to me. Seeing how university of phoenix and devry/itt tech have been faring well, one can safely assume there is a supply of kids wanting to get educated, or parents that want kids to and are willing to pay for it. As for the argument for students seeing teachers laid off and new buildings, i saw this at my own school and was appalled until i found out that the alumni donated millions to the school recently but it can't be used to pay for faculty salary or that sort of stuff (all depends on what the alumni wants, a teacher to stay longer? or to have a new gymnasium built with their name in front of it?). And even though my school started out at $5K/year when i started ($10K/year now), I would have rather gone to a $40,000/year school (and take out loans if needed) if it would given a better chance to be recruited to goldman/jpm/barclays. Bigger risk, bigger reward right?

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