College Loans: A High Price to Pay?

While British college students riot over rising college costs, they actually have a bargain relative to U.S. students. Market Watch suggests U.S. students may get a better deal in the U.K.

…. the cost for an overseas undergraduate at St. Andrews for the academic year 2009-10 would be about $19,000. And if you’re lucky enough to be able to claim “home” or “European Union” status, this figure … would be just shy of $3,000 a year. Even to study in the University of Oxford’s hallowed halls would cost a U.S. student just over $20,000 for an undergraduate program of study. (The fee would be about $4,700 for a U.K. student.)

In the U.S., escalating higher education costs mean more students are relying on loans to fund their education.

Inflation-adjusted tuition and fees for four-year public colleges and universities are three and a half times higher than they were in 1980.  While this has put college out of reach for some, for most, it has meant a greater reliance on loans to finance the gap.

According to Pew60% of all graduates had borrowed to pay for college, compared with about half (52%) twelve years earlier in 1996.

Furthermore, the size of the amount borrowed is also escalating. Among 2008 graduates who borrowed, the average loan for bachelor’s degree recipients was more than $23,000, vs. the $17,000 (in 2008 equivalent dollars) the average bachelor’s degree recipient borrowed in 1996 . For associate’s degree and certificate recipients, the rate of average loan increase was even greater, to more than $12,600 from $7,600 ( in 2008 dollars).

At a time when education is more important than ever, there are signs that some are simply being priced out of the 4-year college market.

The aggregated impact of the increased number and size of loans can be seen in the chart above from Pew. The average amount of debt per student has been steadily escalating, but the rate increased sharply in 2004. The immediate impact of decreased affordability can be seen in several recent developments: 1)  Intent to go to college is declining ,2) the number of part-time students is increasing and 3) the rate of college completion is declining.

Intent to go to college

  • 35 percent of Florida’s 2009 graduates had no plans to attend college, two points above the 33 percent recorded in 2008 and worse than the national average of 30 percent.
  • Nationally, of the 32% who do not plan to go to college right away, 16% plan to go ‘eventually, but 4% say they never plan to go, half of them (2%) citing finances as the reason.

Community College Enrollment Surge

  • In 2008, 39.6% of 18-24 year olds were enrolled in college, which was up slightly from 2007.
  • However, the percent enrolled in 4-year college virtually flat vs. 2007 at 27.8% while the percent in 2-year college increased a full percentage point to 11.8%.

Part-time students

  • Among current undergraduate students in total, just 48% are full time;
  • 35% are part time and the rest are a mix of part-time and full-time, trading class time in order to squeeze in a job or control costs.
  • Among current 2-year degree seeking undergraduates, 74% are part-time. This group represents more than a fourth of total undergraduates.

Completion rates

  • On average, 4-year public schools graduate only 37% of their students within 4 years.
  • The on-time graduation rates at 2-year colleges is worse, only 25% graduate within 3 years.
  • According to Newsweek, longer times to complete means higher costs — and opportunity cost from lost years of work.

Economic Return

Perhaps we’re moving to a model where six years is increasingly the norm for completing college, and it is becoming more acceptable to say you are ‘working to complete college’?

Regardless of the cost and difficulty acquiring one, no one is challenging the need for acquiring a college degree. The data still supports that those who have one do better economically than those who don’t.

In 2009, an analysis by the Center for American Progress (The College Conundrum) found that among 25 to 34 year old men, just one-in-five (19.4 percent)  who had a college degree actually earned less than the average male high school graduate. For women the case is even better, just one-in seven women with a college degree (14.0 percent) did worse than those without.

As a society, there is no question that a more educated population is a good thing. The question is how will we pay for it?