Affording college is harder than ever

It is not a mystery to anyone that college tuition rates are going up at an alarming rate. According to the Census Bureau and the Department of Education the average college tuition since 1978 through 2014 has increased an average of 7.3% per year while the consumer price index (all items) has increased at a rate of 3.7% per year. The next highest increase comes from medical care at 5.6% increase over the same time period. Increase in housing prices over that same 36 years was a 4.6% increase. It is this significant cost increase of the average college tuition that is forcing college students to do a couple of things differently than ever before.

A couple of the changes that have occurred for college graduates are as follows:

 

  1. Younger Americans are renting longer before buying homes, and
  2. Debt loads are increasing at alarming rates.

 

The lifestyle change for young Americans could be due to several factors. Certainly a significant one is the burden they face in paying their student debt payments. Having student debt affects them in two ways. One way, they have the debt service payment count against the amount of home they can qualify for. Secondly, the debt payment they have to make limits their ability to save for a down payment. This is born out by Zillow, who noted, that in 1970 through 1974 the first-time home buyer rented for an  average of 2.6 years before purchasing a home. Now Zillow reports that from 2010 through 2014 the average was 6 years of renting housing for the first-time home buyer. A couple of other factors that might also play into the delay of buying a home include increased rental rates and career instability, but certainly the money aspect of the debt load in accumulating a down payment and qualifying for a home play a tremendous role in delaying the purchase of a home.

Vector concept of investment in education with coins books and scales

Increasing Cost of Tuition

The second item of increasing debt is due largely to increasing costs to attend colleges including the average college tuition cost. Private college tuition averages $44,000 per year while it is $15,000 for college tuition at a state school. Still 4 years of state school tuition at $15,000 per year adds up to $60,000 which represents a lot of money. It also suggests that the student would graduate in 4 years which isn’t necessarily a correct assumption. Students now graduate with an average of $30, 000 in debt.

So what could the average high school student and their parents do to reduce this huge expense and potentially enormous debt in order to get a college education? First and foremost is picking the right school to attend. Several factors should be considered in picking the right school. Those factors would include:

 

 

  • Matching your student with the school best suited for their abilities, interests and talents.
  • Searching colleges based on demographics and personalized areas of interest.
  • Assessment of the list of colleges matching the student’s abilities and areas of interest with the college that grants the largest amount of financial aid.

One of the driving forces in the increased college debt loads for students is the mistake made in picking the right school for a student’s abilities. Current statistics show that 37% of students transfer to a different school largely due to being at the wrong school initially for the student’s abilities or area of interests. Demographics of the college also play into the factors of changes such as distance from home and family, climate, or social attitudes of the school population. However, more important than those three items is choosing the school based on the greatest amount of aid available. Wouldn’t it be nice if students and their parents had a college tuition list showing which schools provide the greatest amount of financial aid that also match the student’s abilities, interests, talents, and demographic requirements? Unfortunately, no such list exists in a public database that parents can access. However, the private proprietary software we posses has such information. As a couple of examples:

Four excited University students with professor

Boston College; the average cost of attendance (includes tuition, room and board, books, etc.) was $65,194. Average need met* was 100%. Aid from scholarships and grants was 80%, and money from loans and jobs was 20%.

College of Charleston; the average cost of attendance (includes tuition, room and board, books, etc) was $45,515. Average need met* was 57%. Aid from scholarships and grants was 54% of the 57%. Money from loans and jobs was 46% of the 57%.

*Average need met, means incoming freshman with need for assistance and the percentage of their need that was satisfied and by what means it was satisfied.

 

College tuition comparison explained:

So as you can tell by the comparison of the two colleges listed above, Boston College tuition and expenses is much higher than the college of Charleston tuition respectively $65, 194 versus $45,515. Even though Boston College on the surface would be approximately $20,000 more expensive, 100% of the financial need was met mostly with aid whereas the College of Charleston tuition was only satisfied at a rate of 57%. It is also especially important to realize that of that 57% of need only 54% of the 57% came from scholarships or grants.

Students and parents armed with this type of information could save literally tens of thousands of dollars over their college careers while reducing debt and a tremendous amount of out of pocket expense, making it easier past graduation, to be able to purchase a home. Owning a home has its benefits not discussed here but could happen sooner than the average six years it now takes to become a first time home buyer.

Firedream college planning services has access to 9000 colleges and their tuition, etc., expenses and how much those colleges offer in meeting the financial aid needs of their incoming and continuing students.

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