Some hard lessons about college costs
In the political battle over college student loans, where will the SMART MONEY go? Democrats and Republicans both say they want to keep the interest rate on subsidized loans at 3.4 percent, but remain at odds over where the money should come from. Of course, what makes the issue so volatile in the first place is that college costs have been skyrocketing, but why? Our Cover Story is reported now by Rebecca Jarvis:
It's as picture-perfect as a college can get. But this idyllic campus outside of New York City is also a portrait of what college is America has become. Really, really expensive. ,/P>
In fact, Sarah Lawrence College has the dubious distinction of being perhaps the most expensive college in the nation.
The all-in costs to be a student there next year will top $60,000, for one year, said President Karen Lawrence.
She insists that her school, which provides an average of $31,000 in financial aid, is worth every penny.
"Ninety percent of our classes are seminars with an average of 11 or 12 in those classes," Lawrence said.
She says those small classes means lots of faculty, and that costs a lot. "Their salaries are not inflated, but you need more people, and that's where the money goes."
"In other industries, we found ways to produce things using fewer labor hours, using more technology," said Sandy Baum, a senior economics fellow at George Washington University (which, at $55,000 a year, is pretty pricey). "We haven't really figured out how to do that in education."
The result? College tuition has risen as twice the pace of inflation. In fact, they've doubled in 10 years.
Baum also said the increased cost is not due to faculty being paid lots of money: "Faculty salaries have been pretty stagnant. But their compensation goes up when health care costs go up."
And higher prices - combined with growing enrollment - means there's much more student debt. The nation's student loan bill now tops all the nation's credit card bills.
Mark Kantrowitz, the publisher of finaid.org, one of the country's leading financial aid websites, said, "More and more students are having difficulty paying for colleges, which often forces them to borrow more, so debt at graduation is increasing quite steadily."
Last year, according to Kantrowitz, the average debt at graduation was $27,200. "If you throw in the parent loans, it's $34,400."
Last month students showed at the Washington, D.C. offices of Sallie Mae, protesting the higher and higher cost of a higher education.
Last week, still more protests.
"I absolutely see this as a crisis," said Natalia Abrams, an Occupy Colleges organizer. "It seems that every state, every school proposes 10 percent increases every year."
Abrams estimated that at least once a week there is a protest at a school against student debt.
Interest rates for new federally-subsidized student loans are set to double this July. Last Tuesday, President Obama spoke out against increasing student debt by asking Congress to extend lower rates for federally-subsidized Stafford loans that are set to double this July. He also worked the college circuit, extolling an audience of students to speak up to Congress: "Tell them now is not the time to double interest rates on your student loans."
Mitt Romney also called for an extension of the lower rates, even though some Republican lawmakers have opposed it: "I totally support extending the low interest rate on student loans," he said.
But how to pay for it? House Republicans voted to use money set aside for the Obama health program. That's a non-starter for the president. For their part, Democrats proposed using money set aside for oil and gas companies.
All of this, in an economy struggling to create jobs for all the students with all that debt.
In Pittsburgh, Chelle Buffone, a recent political science graduate, calls student debt "one of the silent killers of the economy."
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