Although growing tuition may be slowing down this year, several elements continue to drive up the cost of receiving a degree in the United States, pushing the total amount of student loan debt above the $1.75 trillion level. But what are the reasons for these high (and growing higher) costs? More in this blog.
Although growing tuition may be slowing down this year, several elements continue to drive up the cost of receiving a degree in the United States, pushing the total amount of student loan debt above the $1.75 trillion level. But what are the reasons for these high (and growing higher) costs?
When parents and college-bound applicants see the overall cost of attendance, they could experience sticker shock. The College Board estimates that the annual undergraduate budget is close to $30,000 even for in-state institutions. For schools located outside of the state, that amount increases to roughly $45,000. We now have to pay significantly more than our parents or grandparents did when they were our age on our homes, automobiles, food, and clothing. This is due to inflation.
The price of college is one thing that has not increased at the same rate as inflation. Actually, it has been rising far more quickly. So, why is college SO expensive?
Let’s dive in.
Nowadays, going to college is much more expensive than it was in the past. However, depending on the kind of institution you attend, the amount you must pay on education varies greatly. For instance, compared to four-year universities, two-year community colleges have significantly reduced annual tuition and fees. Private institutions typically have the highest tuition costs, with out-of-state students paying considerably more.
The average cost of a college in the United States, broken down by school type, is as follows for the 2020–21 academic year:
The cost of higher education is clearly comparable to that of a house. But things weren't always like this. Take a look at this in-depth analysis of the factors that contribute to the high cost of higher education.
A 2019 report from the Center on Budget and Policy Priorities says that the steep rise in college tuition over the last ten years is due to cuts in state funding for higher education. “After accounting for inflation, the total amount of state funding for public two-year and four-year colleges in the school year that ended in 2018 was more than $6.6 billion less than it was in 2008, just before the Great Recession hit full force," says the report. "In the hardest years after the recession, colleges responded to big cuts in funding by raising tuition, laying off teachers, cutting the number of classes they offered, and sometimes even closing campuses."
Even though the federal government gave money to many colleges during the pandemic and financial aid for students continues to grow, neither of these things solve the systemic problem of decreased state funding, which is one of the main reasons why tuition costs are so high.
Many American high school students now feel obligated to attend college because graduates tend to earn higher salaries than those without. In 2020, the U.S. Bureau of Labor Statistics says that people with a bachelor's degree will earn 67 percent more per week than those with a high school diploma and have a 39 percent lower unemployment rate.
Because of this social and financial pressure, more people want to go to these schools, which lets colleges charge more for their services.
With less money coming in, universities need to start acting more like companies. That means vying with rival institutions for the most privileged and academically capable pupils. Colleges attract and retain students in part by providing first-rate facilities and services, such as high-tech athletic facilities, luxurious living quarters, gourmet dining halls, and other such offerings. Some authorities claim that in order to pay for these improvements, universities have had to significantly raise tuition.
College attendance has steadily gone up since the 1940s and 1950s, when the federal government made it cheaper for military veterans and average citizens to go to school. This is another reason why college tuition has gone through the roof. As the number of students grew, there was less money for each one. So schools not only get less money, but each dollar doesn't go as far as it used to. So, colleges have had to raise their prices to keep up with the number of students who want to go there.
Many people think of scholarships, grants, and other forms of free money that don't have to be paid back when they think of financial aid. But the government also offers low-cost student loans as a form of financial aid. And because these loans are easier to get, college costs have also gone up.
In the 1990s, for example, many students and their families were able to get unsubsidized federal loans. This made schools less likely to keep tuition costs low. Their students have just taken out more and more loans to pay for school. And the wheel keeps turning because these students and their parents still believe, correctly, that a college degree will give them a much higher lifetime income than their peers who didn't go past the 12th grade.
It is critical to be honest about your family's ability to pay for college. Too much debt can cause students to fall behind financially for years, whether they end up paying off their own student loans or helping out their parents later in life after they gave up their retirement to pay for their education. Remember that formal education is not required for success. In numerous ways one can achieve success. Trades and other blue collar jobs, for instance, are in high demand and pay well. Retailers can set their own prices rather freely. They have a higher salary than any student in the liberal arts. Think carefully about whether or not you need to spend $200,000 on higher education before you rule out all other possible means of financial support. Going to college is not your only choice.
If you do choose to attend college, how can you then prevent paying too much for college?
Our Master College College Funding Course can show you how to save THOUSANDS on the cost of college. We show you how much you can afford and how to pay down to the penny. Click the link for more information today! Have any questions? Please do not hesitate to contact us.
Usually, parents do not begin to worry about these financial matters until the student has already made a list of potential colleges. Parents and students should participate actively in early planning to make sure college is not a financial burden. Establish reasonable goals for your college options based on what you can actually afford, and start saving as soon as you can.
Here are three types of savings accounts that can help you plan for your kid's college education:
Money in a conventional savings account would not grow quickly enough by the time a child reaches college age because of the quick rate at which college tuition grows over time. Instead, as we mentioned above, think about investing your education money in a 529 plan run by your state. You can invest money in these accounts to use later on for tax-free, eligible higher education costs. Every dollar you save means you would not need to borrow as much. Additionally, 529 plans give families the freedom to enroll their kids in a more expensive institution than they otherwise might.
To set up your 529 plan, speak with one of our investing professionals at Vincere Wealth. They can get you started today!
Attending a less expensive institution is perhaps the greatest and best option to reduce your education expenses. You may even decrease your entire college expenses if you attend a community college in your neighborhood and even stay at home for those two years. You can transfer to the four-year institution you have been considering for your junior-year campaign once you have completed your general education requirements and have a better idea of what you want to study.
Make sure to explore all available funding options after selecting a school that matches your budget before taking out student loans or agreeing to income-sharing contracts. These alternatives include pulling money out of savings accounts, getting part-time work to supplement income, submitting an application for private scholarships and government awards.
Students should always, always apply for scholarships. Also submit a Free Application for Federal Student Aid to request financial aid (FAFSA).
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Compared to most other purchases we make, the price of education has been rising considerably more quickly. Loss of financing, increased enrollment, and more readily available student loans are some of the factors contributing to the rapidly rising expense of college. Students who want to reduce these expenditures should begin making preparations with their family as early as possible.
I hope this was helpful!
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