Poll: College sticker shock setting in

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Sallie Mae

Where the money for college comes from

When the annual Sallie Mae “How America Pays for College” survey was released this week, it targeted the most crucial element in American higher education today: how much it costs and how to pay for it.

College financing influences everything — what colleges students attend, what they study, how much time they study and, of course, their job prospects.

And that’s not even counting its effect on Mom & Dad.

Here on the blog we’ll be looking at the ins and outs of paying for college, of whether that little orange slice of the pie on the left keeps shrinking — and whether the purple slices are growing to unhealthy levels.

We’ll get a good start with Sallie Mae’s 2010 report , which shows what families have been doing and thinking since the financial crisis.

Some of its main points:

College costs are climbing fast

Just look at the chart below.

Since last year, the average total cost of college has grown by either 17 percent (as illustrated) or 24 percent (related to factors in the fine print). Tuition at the expensive four-year private college went up the least (8.4 percent) this past year, while tuition at the inexpensive two-year community college climbed the most (21 percent).

“Students and parents are getting sticker shock,” said George Walters, financial aid director at Mesabi Range Community & Technical College.

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Sallie Mae

The cost just keeps on climbing

Those numbers are a bit high, assures publisher Mark Kantrowitz of FinAid.org and FastWeb.com, because they’re just estimates that families give Sallie Mae. The College Board puts the increases at 4.4-7.3 percent, and the Consumer Price Index has tuition rising at 6 percent.

Whatever the true number is, he said, the point is this: “It’s the perception that matters, that influences behavior and the choice of college.”

A section of the middle class is getting hit the hardest

Families making less than $35,000 a year spent a little less on college than they did last year, while families earning $150,000 or more said they spent about 9 percent more.

Those making from $35,000 to $100,000, however, saw costs jump 20-21 percent.

Meanwhile, more people who make between $35,000 and $50,000 a year are borrowing for school. Those who are a little richer and a little poorer, however, are borrowing in lower numbers. Only the group making $100,000 or more saw the number of people borrowing also rise.

“There is support for those underprovided, and the wealthier can afford (college),” said University of Minnesota Parent Program Director Marjorie Savage, author of the book You’re on Your Own (But I’m Here If You Need Me): Mentoring Your Child During the College Years. “It’s the middle class who tend to take out loans. They have less ready access to funding.”

Parents are worrying more and cutting corners

In one of the most dramatic changes since last year, almost half of the parents surveyed said they were “extremely worried” that schools would increase tuition. Two years ago, only a third felt that way. One in three worry about job loss and how it would affect their ability to pay for college, and more than a quarter worry about their children being able to find jobs.

Ronald Ramsdell, whose College Aid Consulting Services of Minneapolis advises families on the financial aid process, said, “I’ve been doing this for 20 years, and over the last 3-4-5 years, because of the economy, cost of education going up, parents losing employement, they’re are doing a total 360 to afford a good college for kids.”

Almost all of those surveyed are doing something to lighten the load, such as curbing spending, taking on extra work, or having their student children live at home. Some relatives of students are pitching in and playing an ever greater role, and parents are scrambling to find new sources of money.

Sounds familiar to Tracy Batsell, 46, of north Minneapolis. Her son, Rickey, is on a full athletic scholarship to the University of Arkansas at Pine Bluff — but still has various living expenses that aren’t covered. She’s trying to get a master’s degree herself, and together they’ll probably have a loan bill of about $100,000 when both are done.

She eats chicken salad instead of shrimp salad now, and shops at Cub instead of Byerly’s. Her son has no car, and she has taught him “the magic of the coupon.”

Ricky’s grandparents have also helped out financially. Despite those measures, she said, “I’ll be working until the day I die” to pay off those loans.

Mallory Haines just wants to work through school. The 19-year-old Mesabi sophomore hopes to transfer to St. Cloud State for chemistry, so she works two jobs to save $5,000 for her first year there. She doesn’t allow herself many frills.

“I’ve learned that driving around in my car is pointless, and going out to eat is pointless, and packing a lunch to eat saves a lot of money,” she said.

And if that’s not enough?

“I might have to take another job.”

They remain determined to make college happen

Despite the hardships over the last three years, more than eight in 10 parents remain convinced that college is an investment in the future of their children. Six in 10 say they’ll “stretch themselves” to afford it, and that they’d rather borrow than forgo college.

“I think it’s worth it,” said Bonnie Stock, who with her husband has been putting three children through St. Cloud State and the College of St. Benedict. ”You need it for any job, whether you stick to your (field of study) or not.”

Ramsdell sees parents have their moments of doubt.

“But they’re old school,” he said. “They realize their kid may not have a decent job (after college), but they do it anyway.”

As Batsell put it: “The choice between doing it and not doing it? There really was no choice. Part of the promise to my son was, ‘I will help you do this.'”

Note: College finance is a big issue, and On Campus will continue to look for other angles to explore in the coming weeks. But I need your help.

I’d like to know what you’re experiencing — as a parent, student or relative. Does the report reflect your situation? Is there an angle we’re not seeing?

  • wbgleason

    The way to attack this problem is to figure out WHY the cost of education has so far outstripped inflation.

    One way to do this is to ask educational institutions, like the University of Minnesota, to be more transparent about their cost model. How much EXACTLY does it take to educate one U undergrad per year? I know the answer to this question is debatable, but could we please make an estimate and put the numbers out on the table?

    I hear people, especially U of M administrators and flacks, say things like: “but the state only pays twenty percent of the U's budget.” This ignores the fact that much of the U's budget is NOT devoted to education. If tuition accounts for 80% of the cost of education for an undergrad – which is claimed some places by the admin – and the state kicks in an approximately equal amount – back of the envelope, here – then there should be plenty of money WITHOUT raising tuition.

    Could someone in Morrill Hall please explain? And if you don't, soon, then stop complaining about being jobbed by the mean old state legislature.

    • afriedrich

      You're exactly right, and it's a question we've been asking here. It's tough to solve the problem when we don't know that cause. I'm starting to look into it, and would love to hear any tips.

  • Erlka55

    I've been out of college since 1992; back when it was “chesp”; but high interest rates, that were locked in to this; and, I'm still paying on my student loans, and I'm not near the bottom of the loan, in fact the principal is 25% higher than when I started, b/c I've been underemployed / unemployed for many of the 18 years I've tried to pay it back; so, the $13,000 balance I started with, will be over $40,000 by the time I pay it back; and, now I have three kids of my own wanting to go to college…but I have to say sorry, I'm still paying for my own!

    • afriedrich

      That's why government plans that scale payments to the amount that graduates are making — and include some degree of debt forgiveness for the chronically unemployed — are interesting. Sorry to hear you've got such a bad situation. Ouch!

  • Erlka55

    And, with supply and demand, there is no end in sight for costs to rise: every parent is desperate for their kid to go to college (plenty of demand), and willing to take a loan (ability to pay goes up), then costs stay high; we need to say No to such high costs, and not rely on loans.

    • afriedrich

      Interesting point, and one I've read bits and pieces about. Some have likened the education-finance situation to the housing bubble. Cheap cash drives prices up.

  • Elle1354

    As a parent I am experiencing FEAR! As a single Mom who is a teacher, somehow my family contribution for one of my 2 sons in college 10 years ago was $20,000 a year- over half of my take home pay. My youngest child is now a senior in High School and he hasn't even been able to get a part time job to start saving. I owe a lot of money for my graduate degree and I cannot imaging how schools think families can come up with the amount of money they ask for. I wish something would change for families in my income bracket.