A Generation Hobbled by the Soaring Cost of College

The New York Times put together a series of multi-media pieces surrounding the college loan crisis that not only affects the students involved but the nation as a whole.

I've likened the student loan crisis to the mortgage crisis in that the continuous rise in costs (tuition) outstrips any rise in income.  The mortgage crisis was similar as the rise in house prices outpaced in minute rise in wages.  Someone making $40k a year was told that they could get a mortgage for $400k although there was no logically way for them to ever repay that amount.

You can access the full piece here which is quite lengthy.  Se highlights below

• For all borrowers, the average debt in 2011 was $23,300, with 10 percent owing more than $54,000 and 3 percent more than $100,000, the Federal Reserve Bank of New York reports. Average debt for bachelor degree graduates who took out loans ranges from under $10,000 at elite schools like Princeton and Williams College, which have plenty of wealthy students and enormous endowments, to nearly $50,000 at some private colleges with less affluent students and less financial aid.
• “If one is not thinking about where this is headed over the next two or three years, you are just completely missing the warning signs,” said Rajeev V. Date, deputy director of the Consumer Financial Protection Bureau, the federal watchdog created after the financial crisis.
• Mr. Date likened excessive student borrowing to riskymortgages. And as with the housing bubble before the economic collapse, the extraordinary growth in student loans has caught many by surprise. But its roots are in fact deep, and the cast of contributing characters — including college marketing officers, state lawmakers wielding a budget ax and wide-eyed students and families — has been enabled by a basic economic dynamic: an insatiable demand for a college education, at almost any price, and plenty of easy-to-secure loans, primarily from the federal government.
• In the last decade, even as enrollment at state colleges and universities has grown, some states have cut spending for higher education and many others have not allocated enough money to keep pace with the growing student body. That trend has accelerated as state budgets have shrunk because of the recent financial crisis and the unpopularity of tax increases.
• Nationally, state and local spending per college student, adjusted for inflation, reached a 25-year low this year, jeopardizing the long-held conviction that state-subsidized higher education is an affordable steppingstone for the lower and middle classes. All the while, the cost of tuition and fees has continued to increase faster than the rate of inflation, faster even than medical spending. If the trends continue through 2016, the average cost of a public college will have more than doubled in just 15 years, according to the Department of Education.
• “I readily admit it,” said E. Gordon Gee, the president of Ohio State University, who has also served as president of Vanderbilt and Brown, among others. “I didn’t think a lot about costs. I do not think we have given significant thought to the impact of college costs on families.”
• Still, economists say, growing student debt hangs over the economic recovery like a dark cloud for a generation of college graduates and indebted dropouts. A study of recent college graduates conducted by researchers at Rutgers University and released last week found that 40 percent of the participants had delayed making a major purchase, like a home or car, because of college debt, while slightly more than a quarter had put off continuing their education or had moved in with relatives to save money. Roughly half of the surveyed graduates had a full-time job.
• From 2001 to 2011, state and local financing per student declined by 24 percent nationally. Over the same period, tuition and fees at state schools increased 72 percent, compared with 29 percent for nonprofit private institutions, according to the College Board. Many of the cuts were the result of a sluggish economy that reduced tax revenue, but the sharp drop in per-student spending also reflects a change: an increasing number of lawmakers voted to transfer more of the financial burden of college from taxpayers to students and their families. (Local funding is a small percentage of the total, and mostly goes to community colleges.)

• Donald E. Heller, an expert on higher education, said elected officials in both parties had figured out that colleges were one of the few parts of state government that could raise money on their own. If lawmakers cut state financing, the schools could make it up by raising tuition.
• “It lets legislators off the hook and makes universities look like the bad guy,” said Mr. Heller, dean of the College of Education at Michigan State University.
• Ohio’s flagship university, Ohio State, now receives 7 percent of its budget from the state, down from 15 percent a decade ago and 25 percent in 1990. The price of tuition and fees since 2002 increased about 60 percent in today’s dollars.
• The consequence? Three out of five undergraduates at Ohio State take out loans, and the average debt is $24,840.
• At Ohio State, “college can be a reality for everyone, no matter your income or background,” its Web site says, while at Ohio Northern, future students are urged to get over the “sticker shock,” and focus instead on “return on investment.”
• Oberlin College’s Web site tells prospective students that its financial aid policy is simple: “We meet the full demonstrated financial need of every admitted student.” The University of Dayton declares itself “one of the most affordable private Catholic schools in the country” and a “lifetime investment, appreciating over the course of time.”
• Colleges are aggressively recruiting students, regardless of their financial circumstances. In admissions offices across the country, professional marketing companies and talented alumni are being enlisted to devise catchy slogans, build enticing Web sites — and essentially outpitch the competition.
• While there are standardized disclosure forms for buying a car or a house or even signing up for a credit card, no such thing exists for colleges.
• Instead, college pricing is complicated by constant tuition increases, a vast array of grants and loans and a financial-aid system that discounts tuition for most students based on opaque formulas. “No one has a vested interest in simplifying the process but families,” said Mark Kantrowitz, the founder of FinAid, a Web site devoted to explaining college financial aid. “It obscures the price of a college and makes the choice of college not depend on the price but other factors.”
• The situation has parallels to the mortgage crisis of a few years ago, said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. The for-profit colleges are like the subprime lenders — attracting the limelight because they represent the worst of the problem, he said.