A nice simple question for a Friday afternoon.
I often get this question asked that follows along the lines of: "Given the drop in the stock market (still 30% below its peak in 2007), the drop in home values (down 30% from its peak in 2006), the drop in the availability of private loans, how are students and their families managing to pay for college?
- I can cite the 25% increase in federal loans, which amounts to about a $16 billion increase year-over-year, based on this chart from the Chronicle of Higher Education.
- Pell Grants increased by about $3.5 billion over the past year.
- What about college discounting? Earlier this week, Inside Higher Ed had an article about one school bucking the discounting tide. The article cited this amazing statistic that "Between the early 1990s and 2007, average tuition discounts for first-time freshmen grew from 27 percent to 39 percent, according to the National Association of College and University Business Officers." I knew college discounts were common but 40% was higher than I would have imagined. The article goes on to note that "many college presidents say they offered even larger discounts this year -- convinced that it was necessary to double down at a time when affordability was such a concern for families. With college endowments imploding this is not a long-term solution.
What are the folks in the trenches seeing? How did families manage this fall?
Update: Here were comments from one reader:
"Most of us baby boomers were only in the stock market for retirement funds, so that was never part of the plan to pay for college.
The drop in home values did affect us, but we took a 15 year mortgage when our son was 3, and the house is now paid off. So we have enough equity (even with the drop in value) to help pay the tuition bill if we need to borrow, and money that was our mortgage payment is now going to the college to pay our family contribution.
We never planned on a private loan - it would be home equity or PLUS if we needed it. The son took the full sub Stafford and a Perkins loan, so he is doing a good share of the borrowing.
Hooray for colleges that can commit to meeting full need, and to those using the federal methodology to determine that need – which today is a more realistic view than including homes and other children’s assets like the other need analyses currently in play! The transparency of the methodology allowed us to determine if our financing plan was realistic at a private college, but public colleges were an option as well.
The bottom line – planning – even with a multiplicity of financial setbacks (loss of job, single worker for many years, and loss of employer provided tuition support), it appears that we will make it possible for the son to be at the best college for him."