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[chronicle_moderator]

As the cost of going to college skyrockets and limits on the amount of federally guaranteed loans remain the same, colleges are increasingly including private loans -- with adjustable rates -- in students' financial-aid packages. Are colleges obligated to explain to students the long-term implications of taking out such loans? Should colleges be allowed, as they are now, to "brand" the loans with their own name?
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[kaysixteen]

College costs are getting out of control, and it ain't because adjuncts are getting paid too much.  Soon we will be back in a 19th-century-esque position of seeing college mostly as affordable only for the very rich.  What can be done?

[francios19752]

right... by the time my son reaches college, i think that the cost would be a hundred times as it is today.  with the growing inflation and cost of money, we are more or less doomed.

good thing for first world countries whose inflation rates reciprocates with the people's income. third world nation such as the philippines increase cost of education at least 10% a year and the population's income is very far behind.

talk about a bright future.... :(


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[he_famktg]

"Are colleges obligated to explain to students the long-term implications of taking out such loans?"

Yes, without a doubt students should receive pro-active counseling on their financial aid options. When a student applies, a financial aid associate should place a call to that potential student asking them if they are aware of their financial aid options. The FAA should then guide them through the FAFSA and continuously monitor the student through any missing document collections and other key milestones. If inactivity occurs, a call needs to be placed to that student asking if they need assistance. The student should be able to reach a financial aid associate during day and evening hours if they have questions.

On another note, the cost of college will continue to increase as schools are pressured to have the latest (most expensive) technology in the classrooms and on campus (in addition to other factors). I fear this will have dramatic consequences on public service careers such as social workers, public teachers, school counselors, and more. Does anyone foresee special grants for individuals going into those lower paying, but necessary careers, especially those that require a master's degree?

I won't even talk about my gripe about students living on their own, paying their own bills, parent's not claiming them for taxes, and they are still considered a dependent. So if the parents make a decent living, we punish their children?

www.globalfas.com

[kaysixteen]

Lots of good points.  Ideally, the solution would be to eliminate government student loans altogether, and replace them with grants for the needy, while requiring colleges to get their costs under control.  College tuitions have shot up vastly more than inflation in the close to 40 years that the government has been in the student loan business, because this is essentially free money for the colleges, and they can and largely do just tell their students to borrow more, and raise tuition without being concerned that they would price themselves out of the market.

[conjugate]

Quite a dilemma.  On the one hand, colleges must spend lots of money on things that, when many of the colleges in this country were founded (say, pre-1940), required no money.  Computer labs, legal counsel, drug tests, outrageous journal costs, OSHA regulations, accreditation requirements, and more other costs than I can easily list, have become commonplace.  On the other hand, these costs (which among many others drive tuition increases) are for things that (while they may or may not directly impact student learning — sorry for the buzzphrase) a college cannot get along without.  Who will pay for these costs?  It gets passed on to the student or the taxpayer at some point. 

We must, as a society, determine what we can afford to spend, and spend it.  I think at least a bachelor's degree should be considered something that can be attained without loans except for the very needy (say, bottom 10% income families), and that society should figure out a way to pay for the rest.  Without that, we're going to sink in comparison to the rest of the world.

It's ironic; America spent much of the last half of the 20th century trying to make intellectual property safe and protected, while at the same time creating a future that would produce fewer and fewer intellectuals.  All I know to do about it is keep teaching, and try to instill an enthusiam for learning in my students.  I'm incredibly fortunate to have obtained all my degrees debt-free (really as much luck as anything else), but most students today aren't so lucky.

To bring back the original point, one reason these kids are going to college is to learn such things as how credit works, or doesn't work if they make a mistake.  It seems to me that not giving the students a clear picture of where their tuition money comes from and what it obliges them to do is at least somewhat unethical.

[oldassocprof]

The loans are now part of a "unintended" Ponzi scheme, with the colleges, unwittingly perhaps, in the catbird seat.  They've already been paid with current loan proceeds.  But many, many of these loans will necessarily default-- they're going to just be too much for the kids to pay back-- some have $200,000 or more in loans for careers that pay $30,000 to start-- and the result will make the "non-payback" era of the 1960s-1970s look minor.

But the federal guarantees insure a classic case of moral hazard. 

When the defaults feed back through the system, campuses will be forced to downsize or close in the face of their students incurring higher interest rates matching the real risk taken on by the lenders and the probable unwilingness of the feds to completely vouchsafe the system anymore.

[mkbales]

I've heard that recent research indicates that one of the reasons college tuition is rising faster than inflation has to do with a differnence in productivity gains between colleges and the private sector. My basic understanding is that as productivity has increased in the private sector there has been no corresponding increase in higher ed (most colleges actually aim to be "ineffecient", i.e. low teacher/student ratio). Yet colleges must still increase wages and other expenditures at least somwhat in-line with other large organizations but they don't have the increased income from gains in productivity to off-set those costs, thus a rise in tuition. Has anyone heard anything about this or other studies into why tuition is increasing?

[zharkov]

.... Has anyone heard anything about this or other studies into why tuition is increasing?

Tuition is price inelastic, that is, if my school increased tuition by 10 pct, say, we don't lose 10 pct of our students.  (Some might leave, but less than 10 pct.)

Given that tuition is price inelastic, most schools spend money to improve facilities, from labs to dorms to soccer fields. This attracts more "customers."  Also, in almost all cases, colleges ultimately answer to either the state legislatures (public), bondholders (private), or stockholders (proprietary). These stakeholders, generally speaking, want increased enrollment, which means spending more $$$ on facilities.

[sibyl]

A terrific introduction to the economics of higher education is "Tuition Rising," by Ronald Ehrenberg, a Cornell economist who used to be a vice-provost there and who is now VP for economics (or something similar) at AAUP.  Ehrenberg's central point is that the things that constitute excellence in higher education -- up-to-the-minute research facilities, extensive libraries and print resources, low student-faculty ratios, high salaries for faculty and living wages for maintenance and janitorial staff, comprehensive student services and activities, even comfortable dorms -- are all things that can only be developed by spending money.  None of them can be developed by saving money.  Naturally, because the principal expense of any institution is salaries, it's extraordinarily difficult to find efficiencies that reduce costs.

His second chief point is that, partly because of the first point and partly because of the way decisions are made in HE, there are inadequate structures for central administration to control costs.  To take the most glaring example:  In industry, managers can anticipate their labor costs years in advance because they can issue fixed-length contracts; whereas in academia, managers cannot anticipate these costs because senior faculty (i.e. the most expensive) have the unilateral right to decide whether to retire.

Shifting gears:  I was interested in oldassocprof's comment about federal loans.  His or her point applies equally well to other large-scale federal programs such as home mortgage loan guarantees, the FDIC, Social Security cost-of-living adjustments, and Medicare, all of which provide some goods to individuals and concomitant goods to secondary industries at a cost of dollars to taxpayers and of moral hazard to the secondary industries. 

The Cold War boom in federal support for higher ed presumed that the nation should underwrite higher education because college graduates would help us defeat communism.  The Spellings Commission report -- at least the parts I've seen in media excerpts -- suggests that now the rationale for higher education is to move students to graduation.  I haven't seen it articulated in the Spellings report, but it appears to be part of the broader movement to say that in the global economy the goal of higher education is workforce preparation.  What's left unclear is how colleges provide "workforce preparation," whether colleges will adequately prepare the workforce by graduating anyone who enters, whether the workforce can be adequately prepared with more efficiencies in teaching, and so forth.  Those are legitimate questions, but the Spellings Commission has leaped over them to suggest that graduation is an end in itself -- perhaps on the theory that if HE has a federal mandate to produce graduates, it will feel compelled to jump-start the conversation about those underlying questions. 

I worry that the feds will not provide leadership on the important questions, and the unimportant ones will become ends in themselves unless HE can take the leadership to address the underlying questions.