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 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.

Now, here’s that same loan with a 5% interest rate:

If you graduated from college with a $200,000 student loan, and you wanted to pay it back within 5 years, your annual payments would be over $45,000. If your goal is to pay it off in 10 years, your annual payments are around $25,000. That’s a lot of money at a time in your life when you don’t have a lot of money.

Of course there are variables in these numbers. The amount borrowed is pretty high at $200,000. Many college students will get away borrowing much less than that. Interest rates will also vary. It was my goal to give an estimate.

Every college student should take a good hard look at those two graphics BEFORE they accept a student loan. I’m planning more college-related posts in the future.

Being on the topic of student loans, I’m curious what your position is on student loans and government involvement in education. I’d imagine you’d prefer less involvement than we currently have, but I was hoping to you could elaborate a little on your thoughts.

Although I’m far from an expert in this area, I can say that I think government involvement has helped make college more expensive. Colleges and universities have basically been able to put any price they want on the cost of education. They can do this because they know that the whatever the cost, the government will provide the funding. Had this source of funds not been there, colleges might have had to do some belt-tightening. Am I correct? I don’t know. It’s my opinion of the matter.

Regardless, government involvement in education in an effort to make college more affordable has had the opposite effect. What they should have done instead was force colleges to post their budgets online for all to see and scrutinize. Put some heat on the university to show us exactly why the cost of an education is outpacing inflation. That information would go along way towards keeping college costs in check.

What say you, AFM readers?

I chose to attend a top 70 school — and why not? It had everything: prestige, great location, typical campus, every major under the sun… the full college experience.

Five years later I am $200,000 in debt, as my education did not lead me to the career that would help pay off my loans. Also – I am only 23.

What’s even more, Sallie Mae [student loan corporation] won’t allow me to consolidate my loans, repay the loans based on my income, or defer again (as I’ve already deferred for 6 months).

My monthly payments to Sallie Mae are at a cool $891, and next November, 2011, will rise to a mere $1600. Not to mention the 5 other lenders [including federal] that I pay per month…

They got their fancy education and now they expect/want people to help them pay off their massive loans.

Did this person not put pencil to paper and perform a couple of calculations first before they decided to attend this particular school? Judging from their “It had everything: prestige, great location, typical campus, every major under the sun…” statement, I’m going to say no.

I’m sorry but I have a hard time feeling sorry for this person.

Would you borrow from your 401(k) to pay for your kid’s college education?

I would ONLY do this if I had a lot of money in my 401(k). But, it would have to be A LOT OF MONEY! Seriously, I think this is a bad idea. Parents who do this are jeopardizing their future because they have a limited number of years to replace those borrowed funds. The kid, on the other hand, has a career in front of them . At the very least, parents could help pay for the loan after the student graduates from college.

So, my answer is: no way. I would not borrow from my 401(k) to pay for my kids’ college.

What about you?

The main points from her piece:

• Early graduation is a big money-saver. Test out of classes if you can.

• Pick a solid school that’s also affordable.

• Tuition is a bill, so pay it — but not all at once. Pay as you go.

• You can work while in school.

• Cap loan payments at 10% of adjusted income.

• Forgive remaining balances after 20 years of repayment.

• Provide $2.6 billion for minority serving institutions.

• Appropriate $500 million annually for community colleges

• Provide $750 million for state education grants.

I don’t like the first three suggestions at all. Cap loan payments? Seriously? Forgive balances? Special treatment for minority schools? When I went to a state school in the mid-90s, there were lots of minorities on campus. I can’t imagine why colleges that specifically serve minorities should receive special aid in this day and age. I don’t think we should use taxpayer funds to keep them in existence.

Sadly, except for the community college support, NONE of the above suggestions address the real problem:

College is too expensive in the first place!

We don’t need help affording college, we need college to be cheaper.

How do we do that? Transparency! I see nothing wrong with colleges publishing their financials for all to see. Colleges should be held accountable for their budgets. It shouldn’t just be accepted that college costs will rise annually.

Thoughts?

Colleges costs are skyrocketing. At least that’s what everybody assumes, but it’s not true.

College sticker prices are soaring, but what matters are the actual costs that parents must pay. And this is the good news: net prices — after tuition discounts — have been falling significantly.

Here are the most recent average sticker prices along with the net tuition prices from annual College Board price survey.

Why is the actual price so much lower? Federal tax benefits, such as the American Opportunity Credit, help a little, but the big price breaks come from tuition discounts — otherwise known as scholarships or grants — that the schools award. The average tuition discount at private colleges and universities is at an historic high of 53.5%.

Finding the Money

The trick is finding schools that will discount the price for your child. And that’s where you have to play detective. To win these big grants you need to be able to identify the financial fingerprint of any college or university.

As a higher-ed journalist and college consultant, I’m always checking out the financial generosity of individual schools. I’m going to show you two of the ways that you can follow the money trail for any college.

I’m using New York University as an example because this is an institution that’s wildly popular despite its mediocre financial aid policies.

Here are a couple of questions that you need to ask when identifying a school’s financial fingerprint:

What is the percentage of financial need met?

How much will a school kick in to help with a student’s demonstrated financial aid need? One place where you can find the answer is at the
College Board.

On the home page, type in the name of a school in the College Search box and when its profile appears, click on Cost & Financial Aid. Under the heading Financial Aid Statistics, you’ll see that NYU typically meets 71% of a family’s financial aid need. That’s a miserable figure for a highly selective and wealthy university. In comparison, Columbia University meets 100% of its students’ qualified financial need.

What is a school’s breakdown of loans vs. grants?

A school can boast that it meets a high percentage of a family’s financial need, but you have to see how it assembles its financial aid package. Does the package include a bunch of loans, which parents aren’t going to be thrilled with, or grants, which is free money.

Once again, I used the College Board’s stats on New York University. I discovered that a whopping 44% of the typical NYU aid package is loans and work study. Once again this is awful. In contrast, 91% of Columbia University’s financial aid package is grants and the remainder is work study with no loans.

Bottom Line:

College price tags are meaningless, but you will save even more money if you evaluate the financial fingerprint of a university before your child falls madly in love with a school like New York University.

Lynn O’Shaughnessy, the author of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price*, is an independent college counselor and college blogger who writes for TheCollegeSolutionBlog, CBSMoneyWatch and US News & World Report.

*Affiliate Link

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

“Maybe half of it was my fault because I didn’t look at the fine print,” Dr. Bisutti says. “But this is just outrageous now.”

More details from the article:

She says she knew when she started medical school in 1999 that she would have to borrow heavily. But she reasoned that her future income as a doctor would make paying off the loans easy. While in school, her loans racked up interest with variable rates ranging from 3% to 11%.

She maxed out on federal loans, borrowing $152,000 over four years, and sought private loans from Sallie Mae to help make up the difference. She also took out two loans from Wells Fargo & Co. for $20,000 each. Each had a $2,000 origination fee. The total amount she borrowed at the time: $250,000.

In 2005, the bill for the Wells Fargo loans came due. Representatives from the bank called her father, Michael Bisutti, every day for two months demanding payment. Mr. Bisutti, who had co-signed on the loans, finally decided to cover the $550 monthly payments for a year.

$555,0000!!!!! WOW! It’s a shame on several fronts:

1. That college should even be that expensive in the first place. No, it doesn’t have to be that expensive. She could have gone to a cheaper school.

2. That this person was so clueless as to allow herself to get so deeply into debt.

I think it’s obvious that a lot of people do not think and plan ahead when picking a major and attending college. This woman should have:

&bull.; had a plan together so that none of this would have been a surprise. I realize you can’t plan for everything but she should have had some idea as to how much she would be making upon graduation.

• She should have looked for help. Grants, scholarships, and the like. Surely she could have gotten some help.

• She should have known EVERY DETAIL of her loans. There should have been no surprises.

• She also should have seriously considered how much she was spending and looked for alternative schools.

This woman is in deep doo-doo. I’m not a law expert but I’m thinking she doesn’t have a lot of options except to pay off the debt. She can do it but it’s going to take a lot of resolve. Lots of bread and water, walking, and lots of hours of working. Unfortunately, she’s upset because “her damaged credit has prevented her from buying a home or a new car.”

I don’t think she gets it.