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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, 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."

"It's been really one of the silent killers of this economy, because there's so many people that, you know, would love to buy a house, would love to get a new car. just to add to their life in the natural ways that most people do. But because they're really, you know, struggling with so much debt, they're not able to do that," Buffone said.

She's part of a program called Sponsor-Change, a Pittsburgh-based organization that helps students volunteer in exchange for a loan payment.

"It's allowing me to give back to the community, and at the same time still maintain my financial responsibilities," Buffone said.

If you thought private college costs had gone up a lot, it's nothing compared to many state universities, which educate 80 percent of the country's students.

In California, state university tuitions have increased more than 50 percent in just two years.

"A big explanation for the rising price of college that students pay in recent years is that states are not funding as much of the expense of educating students as they used to," said Baum. "So public college prices are going up really fast, and that has very much to do with state priorities."

At Santa Monica College, President Chui Tsang has had to hike tuition from $36 to $46 per credit, and at the same time decrease course offerings for the community college's 30,000 students.

"Between 2008 and now, we have to reduce our offering each year by 1,100 sections," said Dr. Tsang. "That's a tremendous impact on the students that we can serve."

Students like Jasmine Delgado are struggling to enroll in all the classes she needs. "I've come from a low income family, and my mom's our only, you know, provider," said Delgado. "And my father's disabled. So, it's scary."

In order to create more classes, the president and his board came up with a solution: provide 50 additional classes at triple the state-subsidized cost.

Enraged students promptly made it clear: No sale.

Outside of a board of trustees meeting on April 3, students reacted. Jasmine recounts what happened: "As the crowd started to swell, we were being pushed forward into the police officers. And one of the police officers pepper sprayed us, and then I was pushed to the ground."

Delgado feels the two-tiered pricing system is financially discriminatory. "Only those who would be able to afford these classes would take them," she said.

The proposal was killed, and the school officials are learning to live with less, though President Tsang worries about what will happen to California's community college students.

"The chancellor's office has estimated close to 280,000 students that we're not serving this year - 280,000 students that were locked out of the system," said Dr. Tsang.

Back at Sarah Lawrence College, students were also wary of paying the price.

Megan Roguschka is the first person in her family to ever attend a four-year college, and she's had to both take out loans and work part-time. "I actually have multiple jobs on campus: I work in the admissions office, and I'm an interviewer for senior students that are coming in. And I am also an R.A. on campus, so I am one of those resident advisors that comes and gives you cookies!"

Next year she will be going to Harvard, to study for a Ph.D. in anthropology. But to get there, she's in the hole some $23,000.

"I think that if you value education and you value what it gives to you, you're willing to sacrifice a little bit to get there - at least for me," she said.

You don't need a Ph.D. to wonder: How much debt is too much?

Sandy Baum has one easy tip: "One rule of thumb is think about how much money you're likely to earn in the first few years that you're out of college, and try to keep your debt so it doesn't rise above your annual earnings level."

And then the $64,000 question: Is college worth it?

Sarah Lawrence President Karen Lawrence certainly thinks so: "Over a lifetime, college graduates earn about a million dollars more than if you had a high school degree alone. But a college degree is not only about how much money you make; it's about being able to find a job that you love doing."

Mark Kantrowitz thinks it all adds up for government, too. "Someone with a college degree pays twice as much in federal income tax as someone with just a high school diploma," he said. "People typically work for about 40 years over their lifetime, so they have one decade to pay back the government for the cost of the grants, and then three decades of pure profit to the federal government.

"So it's financially worthwhile for the federal government to invest more in financial aid to get more students to graduate," said Kantrowitz.

For Megan Roguschka, the question is a no-brainer: "Yes. And I would do it again, and again, and again!" she laughed.

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