Archives For College Funding

A friend posted this picture on facebook:

College Debt

Sure would be nice if young people would investigate what they are getting themselves into BEFORE they rack up a lot of debt. I guess that’s too much to ask.

I read this essay in last weekend’s WSJ about the skyrocketing cost of going to public college.

It opened with…

When Steve Joiner attended the University of Colorado in Boulder in the late 1980s, his parents—an Air Force mechanical supervisor and a teacher—paid his tab of about $4,000 a year, roughly $8,600 in today’s dollars. He earned a master’s degree and became a high-school math teacher.

In August, Mr. Joiner’s daughter Akaysha, the valedictorian of her high-school class, enrolled at CU, as the big campus here is known. But tuition, room, board and books for in-state students is now $23,000 a year—a sum Mr. Joiner and his wife, a social worker, weren’t prepared for.

The big difference between now and then: Though Colorado taxpayers now provide more funding in absolute terms, those funds cover a much smaller share of CU’s total spending, which has grown enormously. In 1985, when Mr. Joiner was a freshman, state appropriations paid 37% of the Boulder campus’s $115 million “general fund” budget. In the current academic year, the state is picking up 9% of a budget that has grown to $600 million.

He then goes on to list a few factors that have led to these price increases:

• administrative costs have soared over the years


• public (taxpayer) funding has decreased

I wish the author would have gone into more detail regarding administrative costs. I have always thought that administrative costs have gone up simply because they are expected to go up (self-fulling prophecy). In other words, if we didn’t just expect prices to go up, colleges might be under pressure to control costs.

What’s interesting about the public funding portion is that the author found that money to be diverted to other areas like primary education and Medicaid. Simply put, there isn’t enough money to do everything. This is unfortunate because college costs are increasing so much that they are keeping some people from reaching their potential and becoming productive citizens. Let’s not forget the fact that more social spending also enslaves the general public by making them more dependent on the government than on themselves.

Take a look at this Medicaid past, current, and future spending chart I found in an actuarial report on Medicaid spending (click on the chart to go to the PDF report):

Medicaid Spending

This does not bode well for controlling the future cost of public college. It also does not bode well for a healthy middle class.

Another link posted by Russ.

College in 18 years

In 18 years, the average sticker price for a private university could be as much as $130,428 a year (See chart.) The situation isn’t much better if you go the public route. Sending your child to a state university could set you back at least $41,228 a year.

Seems unreal. But…

I remember looking at one of my old spreadsheets from the early 2000s where I used $13,000 as the cost of one year at the University of Texas. It’s now around $25,000 a year. Unbelievable.

Maybe it might be wise to consider some college alternatives.

Thanks to Liz Weston (@LizWeston for linking to this on Twitter: What’s the value of college degree?

In light of the post I put up yesterday, this is a timely article. I love this point (bold mine):

Anthony Carnevale, the center’s director, explains why students need to pay attention to their earnings potential when picking a major.

Think about it…

If you become a petroleum engineer, you’ll earn $90,000 out of college. If you become social worker, you will make $35,000. The differences are huge.

This was the point I was trying to make yesterday. You have to look at your life as a business and perform some sort of due diligence and cost/benefit analysis when picking a major and a school. It makes no sense to go to a private school, accumulate $100,000 in student loan debt in order to become a teacher making $35,000 a year, and then complain to the rest of us about how hard it is to pay off your loans.

Granted, not everyone is engineering material. Not everyone is teacher material either. Go to school to become whatever it is you want to become. Just be sure and understand the costs/benefits of your desired degree.

From a recent WSJ article:

Tracy Paulsen, a 34-year-old lawyer from Wenham, Mass., said she recently moved in with her aunt, has put off marriage talk with her long-term boyfriend and depleted her individual retirement account—all so she can get a handle on more than $200,000 in student loans outstanding, most of which paid for law school. “It’s a noose around my neck that I see no way out of,” she said.


I feel for this woman. I can’t imagine having that kind of debt hanging over my head.

I don’t have an easy solution in mind. Maybe freeze the debt so that it incurs no more interest. Stretch the payments out, possibly.

The article doesn’t mention how much the original debt was That Miss Paulsen had accumulated. But, even if it were $100,000′ her monthly payment would be $277 for thirty years with NO INTEREST. That’s a pretty hefty obligation.

The bottom line is that college students need to do some due diligence before they take out these massive loans.

From today’s WSJ:

As many state legislatures debate double-digit percentage cuts in higher-education funding, presidential pay could become a sensitive subject. In Austin, for instance, University of Texas Chancellor Francisco G. Cigarroa is asking lawmakers to limit proposed reductions in the state’s funding of higher education, even as his compensation was third highest, by total cost of employment, among public-university leaders in America.

Last school year, Dr. Cigarroa was paid $750,000, with perks such as deferred compensation bringing the total cost of his employment to $813,892, the Chronicle survey said.

A University of Texas spokesman said Dr. Cigarroa has received no pay increase since taking the job two years ago. In a statement, Gene Powell, chairman of the University of Texas System Board of Regents, said the vast majority of the chancellor’s compensation comes from an endowment rather than from taxpayers.

Did you catch the first sentence of that last paragraph? “A University of Texas spokesman said Dr. Cigarroa has received no pay increase since taking the job two years ago.”

I always find it funny that executive pay is always defended by, “But he hasn’t had a raise in X number of years.”

Even with a 3% inflation rate over the last three years, this president’s purchasing power is still over $684,000. Not too shabby if you ask me.

It’s no wonder college is so expensive.

I was looking at the CPI numbers this morning and noticed something interesting. For some reason, the CPI puts education and communications together in the same category:

I can think of one good reason to group the two together: to hide the inflation rate of education. To see what I mean, take a look at this graphic I put together that shows the total and average annual rates of inflation for each of the categories:

Wow. Look at the three subcategories for education compared to the subcategories for communications. Then, notice the the numbers for the education and communications category as a whole. No wonder why the BLS puts these two in the same category.