It’s bad and about to get worse. Five intersecting parabola are about to make financial planning for college even tricker. Coming soon to a demographic near you –
1.A significant drop in the number of college aged applicants.
2. Think of your own utility bills. Anything decreasing? – Fixed expenses at colleges and universities are bound to increase.
3. Oh, and you may have noticed, the absence of a viable middle class and vibrant economy.
4. The reality that student debt is even more unattractive in an era of economic contraction.
5. No jobs for college graduates.
Those pressures are amplified by the continuing costs in maintaining grotesquely over developed non-academic facilities. Not only are most colleges attempting to provide a four year spa and boutique experience, the investment in student centers, yoga studios, rock climbing walls, lavishly appointed dormitories, cottage style individual apartment options, made-to-order omelette stations, and hundreds of other amenities continue to carry their own annual maintenance costs. This is not the article to take on the “Amenity Race” that has suffused the college decision making process, but canny shoppers should note that there is no such thing as a free soft yogurt dispenser.
Colleges have enormous fixed expenses which not only include plant, maintenance, and utility costs plus the salaries paid to teaching faculty, as well as their health insurance and retirement plans. Fortunately, the administrative staffs are also bloated and also due the same health and benefit package.
How to beat the rising deficits? With the help of well paid consultants (Ca-ching!), the offices now known as centers of Enrollment Management have come to understand that although they may be able to attract some of the 1% as full-pay customers, the great majority of tuition bills will be paid by people who have to scramble and sacrifice to meet tuition costs. Since the key to beating costs is economy of scale, the happy college is a full college… actually an over-full college. Run year around. Add on-line distance learning. And, finally, discount tuition for those who can come close.
Aye. That’s the rub.
The most needy will continue to receive federal support, some grants, more loans. What some colleges used to call “gapping”, offering less aid than a family might actually be qualified to receive in the hope that some other source of support might come through, is now a more widely practiced ploy. The newer and equally unfortunate trend is in market discounting.
It’s not called that, of course. It’s called The Presentation of Merit Scholarships. There have been merit scholarships around for a long time, and many of them actually do reward merit. Specific talents and skill sets (debate, playing the tuba, National Merit Scores) still are recognized and supported. Students of modest attainment (and their counselors), however, have been surprised of late to find a cheerful letter offering a merit scholarship accompanying the admission decision. The total cost of a year spent at a reasonably well known independent college is going to approach almost sixty thousand dollars when the entire grab-bag of expenses is considered (travel, books, special-interest trips, athletic gear, etc.) An admission letter reveals that the cost of tuition for the coming year has been set at $47,350.00. The cheerful recognition of merit announces a scholarship of $15,000.00. All of a sudden, this option becomes too hard to turn down.
Yes, the family will still have to come up with the $45,000.00 dollars left on the tab, but, hey, who turns down a $15,000.00 offer? Should this be (as most are) a family unable to find an extra $45,000.00 in the cookie jar, this education will have to be financed. Even if the college awards a grant as well as seeking income from job and loan, there will probably still be a gap. How does that gap get filled?
Second mortgage? Second job? And, whopping student debt.
The local community college may offer an incredibly affordable education with the possibility of transfer to the flagship State U, but that “merit” scholarship hits parents where it matters most. In their pride.
A quick look at the college’s financial assets will reveal those endowed scholarships that are awarded regularly to those of merit. The ” My-Kid-Is-Great” scholarships come from a different basket.