College costs climbed 40% in six years; parents suspect that the recent Cost Reduction Act may be too little, too late
Each year, Iowa Treasurer Michael Fitzgerald likes to ask young children at the Iowa State Fair to guess how much their college educations might cost. "Guesses range from 'free' to $1 billion, but most children expect a fee of $1,000," he says.
Their parents know better, but still, may not grasp the true cost of an education.
A Storm Lake family shares their stressed budget as it sent a freshman off to college recently.
Tuition in-state at the University of Iowa - about $6,300. No sidewalk sale, but it sounds do-able, and like the other state universities, it's comparatively reasonable - Iowa has the lowest tuition in the Big 10.
But wait - don't forget our student's dorm room and board - well over $7 grand for a standard room with a standard roomie. Fees, textbooks (close to a thousand bucks worth on average) lab expenses, transportation costs (estimated at about $900), personal needs such as clothes, phone, laundry, etc., even the $40 fee to have your application looked at.
Bottom line, according to the U - this local family had better plan on spending a cool $18,138, with no frills.
So what are we talking here? With modest inflation and our best hopes that our academic wunderkinds do not drop out to become roadies for Pink - surely a four-year investment of at least $80,000.
Figures vary widely by university.
A local student at a nearby community college paid $3,672 in tuition and fees, with total costs estimated at $8,822.
The average for private colleges in Iowa for last year was about $18,500 in tuition and fees, with total expenses near $26,000 a year, according to the College Planning Center.
Buena Vista University tuition is $24,796 this year, which includes a laptop computer lease. Room and board makes it $31,810.
Planning is a key in making the college choice affordable, families are finding. At St. Mary's High School in Storm Lake, for example, an initial meeting for parents has been held at the start of the 9th grade year to begin looking at educational choices and testing as they may impact higher education down the line. Many parents have started saving much earlier.
Choosing a college is not as clear-cut as a price comparison, families are finding.
Some factors they say that they discover:
1. Smart Shopping - Some colleges charge the same rate for resident and out-of-state students, while others charge outsiders a considerably higher rate. In Iowa, for example, Buena Vista University charges the same tuition for in-state and out-of-state students, while the state universities charge nearly triple for outsiders.
Average room and board fees vary in Iowa from about $3,000 to $8,000 for fairly similar services, according to a recent survey by InfoPlease website.
2. Financial Aid - Some universities offer more in terms of scholarships and assistance than others, or differ in qualifications. BVU boasts that about 99 percent of its students get some help in offseting the cost of their education, and the University of Iowa claims about 90 percent do not pay full sticker price. Actual costs after financial aid may paint a much different picture than comparing off-the-rack tuition listings. Application fees to several colleges may be a small investment to pay to get an idea of what the actual cost of eduation may be. For example, BVU in Storm Lake says that the average financial aid package for 2006-2007 was $21,228, leaving its students with an average out of pocket cost of $7,624.
3. Get What You Pay For - Don't compare just costs, but value. A school with a well-regarded program in the student's particular major of interest, along with a great placement record and a good graduation success rate, may be worth more than competitor schools. Community college can be an affordable choice, as long as credits will transfer into a four-year program and learning levels are similar to those of the university the student may transfer into.
4. Getting Funding - About 85 percent of students from Iowa families with income of $20,000-$40,000 get some aid. The key can be to apply early enough to beat universities' priority application dates. Grants, such as the federal Pell Grant and SMART Grant, are usually geared toward undergraduate students in financial need, and are determined by a formula based on parent's income. Scholarships are more often based on achievement, althoug need may also be taken into consideration. Families say that the best strategy is to apply early and often, for anything that sounds like a student may qualify. University admissions offices may have good listings of available resources, and additional scholarships are available from private sources for students who do the work to find them. The average out of pocket cost in 2006-07 was $7,624.
5. Borrowing - For most students, some debt is necessary. Federal loan programs are available with limits on the amount available, but interest fixed at around 5-7 percent depending on the program. Repayment can usually be delayed until six months after graduation. There is a current boom on private student loans, but be aware that some may charge interest rivaling high-load credit cards, making them difficult to pay off. If you need to borrow additional resources, you are probably better off checking with a reputable local bank than calling a number from a late-night TV ad.
Back to our Storm Lake family. They have prepared well and worked hard for this moment. The student worked full time all summer, and is prepared to work 20 hours a week during the academic year - about all that can be managed with a full class-load, study time and hours required to be volunteered in the field of study.
Their budget for freshman year is as follows:
Costs at U of I: $18,500
Academic scholarships: $5,500
Summer work earnings: $3,000
Part time work during school $4,500
Family savings $7,500
That leaves the student facing loans of at least $5,500 a year, perhaps $25,000 to be repaid after college.
The news doesn't get any easier to swallow.
Fitzgerald estimates that the cost of higher education may double in the next 15 years. By 2020, the cost of a college education at a public school may be nearly $107,000, while private schools will cost over $300,000, he said.
Politicians have lately started to pay attention to the worries. Gov. Chet Culver, in a speech in Storm Lake, admitted that Iowa has been among the worst states in the country in making college tuition achievable to lower income students, and said it is a priority for the coming years.
The state has also initiated a 529 plan to provide certain initiatives for parents to save money for future college expenses for their children.
Senator Tom Harkin praised the Senate's passage of the College Cost Reduction Act of 2007. This aimed to raise the Pell grant program and other measures to help low and moderate income Iowa families afford college.
"At a time when higher education is more important than ever for career success, rapidly increasing tuition costs are pushing college out of many students' reach. Those who can go to college often graduate with a mountain of debt that restricts their career choices and forces them to delay making important investments, such as buying a car or a home," Harkin said.
As the cost of college has skyrocketed 40 percent over the last six years, the buying power of federal grant aid has fallen, forcing many students to turn to private loans with high interest rates, Harkin said. The cost of fees and expenses to attend a four-year public college in Iowa increased 62 percent from 2001-2006, from $7,589 to $12,329.
Currently, Iowa students at four-year colleges and universities graduate with an average of $22,727 in debt - the second highest rate in the country.
The College Cost Reduction Act signed late in 2007 will cut excess subsidies to the private loan program by $18 billion and channel those savings into Pell Grants. The legislation boost the maximum Pell Grant from $4,310 to $5,100 this year and $5,400 by 2011.
This legislation would also encourage public service by providing some loan forgiveness for graduates who pursue certain public service careers or TEACH grant funds for those going into teaching in areas with shortages.
Interest rate cuts are phased in for the federal student loan program through 2011. Caps are put in place on epayments by student borrowers at no more than 15% of the amount a borrower's and the borrower's spouse's adjusted gross income exceeds 150% of the poverty line.
Once a college is selected and check for tuition written, the budgeting effort does not end. After scouring websites by universities, education programs, bankers and other sources, here are the most-mentioned tips for cutting down the cost of the college years.
10. Create a budget - Know exactly what resources, expenses and living costs are for each month, to avoid having to borrow more money than absolutely necessary. Get organized. Keep ATM transaction receipts, bills, purchases and tax records organized together in labeled files. This will help you stay on track with your budget.
9 . Work - A student can not only offset college costs, but learn valuable working ethics. Ask about work study programs at your school. If possible, work in the field you are studying, but if not, at least use the opportunity to cultivate a good recommendation that will pad out a resume later.
8 . Buy Used Books - Cost can be about half the price of new volumes. Consider the possibility of sharing with another person, or buying directly from a student who had the class the previous semester. There are also online sources for many common textbooks.
7. Keep the car home. Parking, insurance and gas can be expensive. If everything you need is within walking distance, or your school provides inexpensive transportation sources, you can do fine with a bike. If you do take a car, plan to carpool trips home.
6. Cheap credits - Can you take a summer class at a community college to save some dough and get the same input as a university? Or does your school offer credits for work experience in the field or volunteerism programs?
5. Shop around. You compared prices to find your college, now be selective to get the lowest costs for living expenses, credit cards and bank accounts.
4. Get smart about credit. Credit cards are not magic money. Don't spend more than you can afford to pay back. It's a good time to learn a lesson called "live within your means."
3. Look at living options. In a lot of cases, living on campus is cheaper than any other route. In some towns, you can do better splitting an apartment or house. Creative options such as house-sitting are possibilities, and often students can become resident advisers and get a break on costs.
2. Clubbing is expensive, and hangovers exact their own price. Find inexpensive ways to entertain yourself. Check the listing of activities on campus for fun that most students miss entirely. Visit most museums and art galleries for free, check out books and movies music at the library, take a walk to the park instead of paying to do the treadmill at the gym, catch local bands at the coffeehouses.Consignment shops, coupons and fast-food deals for college students help. It all adds up.
1. Use your student loan to finance your education, not your lifestyle. You eventually have to pay, so don't use this money for a spring break, i-Pod downloads, bars and and eating out. Bank the excess until you need to pay it in tuition.