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?
- 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.
The biggest hit we took was on the son’s 529 account. Even invested
conservatively, it dropped 35% of its value. The change in the student aid
rules, to count it as a family rather than a student asset, played a big role
in our ability to get enough financial aid to cover what we could not afford.
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."
