While tuition, room, and board have always been considerations in deciding which college to attend, the exponential rise in costs is preventing a slew of talented people from attending America's top universities.
A recent study by Sallie Mae found that 67 percent of families eliminated colleges based on cost, up from 56 percent of students in 2009. Of those surveyed, 40 percent said they dismissed schools based on cost before they had even researched the school. Families spent an average of $21,178 on college, about the same amount they spent the previous year.
The growing influence of college cost on selection reflects a still-sputtering economy, as wages have remained stagnant. Given concerns over their own job security and retirement costs, parents are shouldering less of the tuition burden, and students are increasingly aware that borrowing too much to pay for school could hamper their economic growth for years after graduation.
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The Sallie Mae report finds that student borrowing covered 18 percent of the total cost of college, up from 14 percent prior to the recession, while parent borrowing has remained at a steady 9 percent. Almost a third of students borrowed money for college this year, compared to just 12 percent of parents. Scholarships and grants comprised 30 percent of costs, up from 25 percent four years ago.
Even wealthy families are borrowing more and spending less on college. Families that make more than $100,000 have curtailed their college spending every year since 2010. Last year, they spent an average of $23,900, just 7 percent more than middle-income families. The gap between the groups was 28 percent in 2010.
IT'S ABOUT THE ROI
Today's families are less likely to see college as valuable for the experience alone, but rather as an investment in the future that will lead to better work and higher earnings for graduates. "Families are not only becoming more cost-conscious, but they're also more worried about their return on investment," says financial aid adviser Mark Kantrowitz. "In-state public schools are a much better deal for most families than private schools that charge $50,000 or $60,000 per year and aren't very generous with their financial aid."
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Among his clients, Kantrowitz says that if the difference in the cost of a school is $1,000 or less, families will pick the school that's a better fit; but if the difference is $5,000 or more, they tend to choose the lower-priced college. Students are also increasingly aware that they may need to go to attend graduate school to get into their field, which may require additional loans.
Families should explore all options before making a final decision, says Paul Combe, president and chief executive officer of American Student Assistance. He encourages students to apply to their dream schools and see what kind of financial aid package they're offered before dismissing potential colleges based on the sticker price. Last year, private colleges offered students an average 45 percent discount off the advertised price via institutional aid.
"You don't want to eliminate schools based on bad information," Combe says. "The only way to really know whether you can afford a school is to work through the numbers. Consider what your debt payment will be after graduation."
THE MAJOR MATTERS
The numbers show that students are starting to realize that that more expensive schools do not always correlate to higher earnings, and one's major is a far better indicator of future salary than one's choice of college. Experts often cite a rule of thumb that students not let their total borrowing amount to more than their projected first year's salary.
"If you want to be a school teacher, the only reason to go to Harvard is if you want to live in Cambridge," Carnevale says. "It doesn't matter where you go to school. You're going to make the same money after you graduate."
The Sallie Mae study found that social science majors pay the most for their degrees, on average $28,800, but have one of the lowest-paying starting salaries, $36,988. Engineering majors also pay a lot for their degrees, averaging $25,600, but their starting salary, at $63,000, is much higher.
"In the end, college selection is a business decision," says Fred Amrein, founder of CollegeAffordability.com. "Families need to approach it like that. You can't just hand over $200,000 to an 18-year-old and say, 'Do what you want, I hope it works out.'"
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