Rising College Tuition Costs Unlikely To Shrink

Whether you are watching local news or NBC’s Brian Williams, the rising cost of college tuition seems to be a universal headline.

According to a recent Bloomberg report, over the last 30 years nationwide, college tuition costs – including fees – have increased by more than 1,100 percent. For the purpose of perspective, health care costs rose by half that percentage over the same period of time.

“College is more expensive than ever before,” said Mark Foster, the director of education for Credit Counseling of Arkansas. “Everything goes up, of course, but it seems like the cost of college goes up at a much higher percentage than other things.”

When you look at the average rise in just tuition costs among northwest Arkansas schools, including the University of Arkansas, John Brown University and Northwest Arkansas Community College, the increase is about 65% over a 10-year period. That’s roughly a 6.5% increase each year.

So what’s driving those costs? Foster believes it’s due in large part to the lack of state money.

“The cost hasn’t really gone up so much as colleges were subsidizing a greater portion and over the years that has declined,” he said.

That factor, among others, is driving student loan debt, which is already $1 trillion nationwide. The under 30 age group makes up nearly 40% of borrowers, and last year alone, they spent roughly $43.5 billion on student loan repayments.

“We just can’t figure out how to provide what we need to provide without some tuition increase,” said Dr. Suzanne McCray, Dean of Admissions and Vice Provost for Enrollment at the University of Arkansas.

In 2005, according to a 2013 FICO report, the average U.S. student loan debt was $17,233 per student. In 2012, that number jumped $10,000 to $27,253. That’s a 58% increase in just seven years.

But McCray says universities, including UA, are scrambling to find ways to keep costs affordable.

“We’ve raised $7 million for Access Arkansas, in order to get students who are low income additional money,” adds McCray.

SQUEEZING DOLLARS
John Brown University (JBU), a private institution in Siloam Springs, is constantly searching for ways to help students out financially, according to Kim Hadley, Vice President of Finance and Administration at JBU.

“We’re the first institution in the state to be zero landfill, and we actually looked at that as a sustainability, not only in taking care of the earth, but it’s actually saving us money,” said Hadley. “All in, we actually generated a net $17,000, so we’re looking at everything in terms of how to save money, from very, very small things, all the way up to energy costs.”

“We’re looking at how we can save costs across the board in our cost structure, as we raise endowed scholarships to help students on their revenue side,” Hadley said.

Two-year schools, such as Northwest Arkansas Community College (NWACC) in Bentonville, are feeling the pressure to keep costs low as well.

“Well, we’re always looking at what we can do to help our students be able to afford to come to college and others to be able to attend college,” adds Steven Hinds, executive director of public relations at NWACC. “So, for instance, this year we did not have a tuition increase.”

But that’s not an easy thing to do, according to Hinds, especially when state support has continued to decrease over the last few years.

“We have had marginal increases over the last few years, as others have, and part of that is attributable to the fact that we only receive such low funding from the state.”

DEBT LOAD GROWING
Despite the problems universities and colleges are having, the average student loan debt in Arkansas still remains well below the national average. But the rapid rate of growth nationally is still affecting graduates in the Natural State as Foster points out.

“We are seeing an increase in people coming to us owing more than they ever have in monthly student loan costs,” said Foster, who sees up to $500 a month in some cases.

Brandon Augustine, a 2012 graduate, doesn’t pay any college loans. But it’s not because he doesn’t have any.

“Making just the minimum payments on my student loans right now would be about $340 a month,” said Augustine. “And that’s not counting the $500 a month my parents are paying for their loans they took out while I was in college, too.”

Deferment is one option for struggling grads, but for only so long. Eventually you’re forced to pay, which can be a bit of a problem if you don’t have the money, says Augustine.

“I was pretty much making the choice between paying my bills and paying my loans.”

Consider this, the student loan delinquency rate has jumped 22% from 12.1% in 2005 to 15.1% in 2010, according to a recent FICO report. It’s easy to see why with 48% of the 25-34 year-old age group unemployed or under-employed, and it’s taking a toll on the economy.

“Students are moving back in with their families because they can’t afford a place of their own or they’re delaying marriage or having children because of all these costs,” said Foster. “We’re starting to see these effects on our society.”

Educators, echoing the sentiment of Hinds, say additional support from the state would go a long way in keeping tuition down, but local lawmakers, like State Representative James McLean, a Democrat and chair of the House Education Committee, say it’s easier said than done.

“There’s not a lot of money to go towards higher education like we all want. It is a problem that we are all aware of,” says McLean.

FACTORS IMPACTING COSTS
The cost of college increases nearly every year.

Inflation plays a key role, but so does the overall cost of a quality education from competitive salaries to maintenance work. This has been the case for years, but what’s different now is the amount students are having to pay, and it’s driving student loan debt.

“Keeping tuition low and affordable is one of the most important things that we do and we talk about it constantly,” said UA Chancellor David Gearhart, who says he’s very aware of the problem.

He quickly points to a number of things the university is doing to help keep tuition prices down, from cost reduction plans to multi-million dollar scholarship campaigns. However, he says schools can only do so much.

“I think the biggest thing, really, for tuition nationwide is the decline in state support,” says Gearhart. “There’s been a precipitous decline in state funding for the last 30-35 years.”

Gearhart remembers a time when 75 percent – if not more – of a student’s tuition and fees were covered by the state. Now it’s less than 50 percent, but why?

Rep. McLean says the state’s obligations for three huge cost silos impact all discretionary spending.

“In the state of Arkansas, 90 cents of every dollar goes to three things: K-12 education, our prisons, and Medicaid,” explains McLean. “So, there’s not a lot of money that goes towards higher education like we all want.”

As chairman of Arkansas’s House Education Committee, McLean is all too familiar with this issue but says the state is strapped financially and that there’s not much he or anyone else at the state level can do.

“With the tight budgets we have in Arkansas – with revenue stabilization, which essentially says you cannot spend more than you take in – unfortunately higher education is always hit first,” said McLean.

‘ANYTHING HELPS’
It’s actually better now, too, than it was, at least according to McLean’s Republican counterpart, State Senator Johnny Key, chairman of the Senate Education Committee.

“Over the last couple of sessions, we have tried to find ways to put new money into higher education,” said Key. “It hasn’t been enough to match the need, but there for several years we didn’t add any new money.”

Anything helps, according to Gearhart, but he says consistency must play a bigger role.

“Last year, the state gave us a small percentage increase and we kept tuition at a reduced level,” explains Gearhart. “We have said that if the state can give us two to three -percent every year – maybe even just inflation, which is a little under two-percent – then we can keep our costs at a relative amount.”

Again, though, that consistency is easier said than done, says McLean, and with the rising delinquency rates among student loans, McLean says true reform has to begin with Washington.

What, exactly – if anything – is being done right now on Capitol Hill?

More than you might think, according to Congresswoman Virginia Foxx (R-North Carolina).

“It looks in many ways that the current aid structure is missing the mark,” says Foxx, a former community college president and current chair of the House Subcommittee on Higher Education. “The Subcommittee on Higher Education has met several times to begin the reauthorization process for the Higher Education Act.”

The Higher Education Act of 1965, in its original form, intended to “strengthen the educational resources for colleges and universities through financial aid.” On average, Congressional reauthorization happens about every five years, and the current reauthorization is set to expire at the end of 2013. But, as Foxx points out, this time around, deeper changes are needed.

“The cost of tuition at many schools has gone beyond inflation,” adds Foxx. “Some experts think that increases in federal financial aid are driving up the cost of tuition.”

Two of the groundbreaking ideas Congress is considering include 1) lowering the amount of federal loans students can borrow based on the kind of program they are enrolled in, and 2) establishing a database to monitor student progress.

These two ideas, in theory, should cut down on the amount of college loan debt, and could potentially lower higher education prices.

“We’ll explore opportunities to simplify and strengthen the current financial aid system to ensure that it’s really working for students and taxpayers,” Foxx said. “And we’ll look for more…innovative, cost cutting teaching methods.”

So far, these are simply ideas and given the recent legislative gridlock in D.C., Congress may not actually renew the law until President Obama’s successor is in the Oval Office.

PARENTAL RESPONSIBILITY
Even with new measures in place, though, it will not solve the problem entirely.

Students and parents have to shoulder most of the responsibility. In the last five years, families went from paying 37 percent out of pocket to 27 percent – another indicator of what’s driving debt. Experts contend that stronger emphasis on saving for college needs to be re-established, and it’s very doable at every income level.

According to U.S. News and World Report, an investment of just $25 per month into a 529 Plan, which is a tax-advantaged college savings account, starting when a child is five, would accumulate to $6,300 over 13 years if the account earns an average of 7 percent per year. That’s the equivalent of two years tuition at a community college, according to the American Association of Community Colleges.

If parents saved $100 per month over the same time period, with the same 7 percent rate of growth, they would save $25,300. That would almost pay for three full years of tuition and fees at a public four-year school or one year of tuition and fees at a private school.

Experts say even if you got a late start saving, you can still make quite a dent in your child’s college costs.

Saving $25 per month for six years with a five percent annual growth rate will add up to $2,100. $100 per month would accumulate to $8,300.

Those investments could pay substantial dividends.

A recent report released by the Arkansas Research Center showed that five years after graduation, Arkansans with an associate’s degree earned almost twice ($27,631) what a high school graduate earned ($14,972). A bachelor’s degree earned Arkansans $38,887 annually and those with more education, such as advanced degrees, earned an average of $52,447 five years after graduation.