Mint.com put up a great poster on their site about the cost of a college education. At the bottom of this post I have included the poster. One of the things that I was surprised to see Mint discuss was how increasing government financial aid increases the cost of college tuition.
While there are many reasons for college tuition going up faster than the rate of inflation, one of the main reasons is increased Federal loan money. Every time our politicians increase the available money for federal student loans college raise their tuition by almost the same amount.
Why wouldn't they? Colleges know that the demand is huge for a college education. After all they rejected 85% of applications submitted by high school seniors. So, they know that there is a huge demand for their college. And, they know that this demand means that people will pay the higher tuition.
Politicians make this mistake time and time again because they want their constituents to think that they are helping students and parents. But, in fact they are really hurting middle class students.
Why do I think that middle class students are hurt disproportionately? Well, poor students get a lot of student aid grants and other need based financial aid. Wealthier students have parents who can afford to pay their college tuition. But, the middle class are hit hard by tuition increases.
College financial aid offices use income formulas to determine whether students qualify for need based financial aid. Most of these formulas start cutting off financial aid for families making over $65,000 a year. This prevents a lot of two wage earning families from receiving financial aid. So, middle class student are coming out of our colleges with the lion share of student loan debt.
Hopefully, the Government wakes up and stops increasing the amount of available student loan money. While it is great to be able to go to college, the unintended consequences of strapping our youth with ever increasing student loan bills is not good for our country.
Mint.com help from Mint.com
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I really like this post and it brings up great points that people just think of as the way it is. Everything is not without cause and affect.
There are some colleges however that are bucking the trend. What I mean by that is a select group of colleges have changed their financial aid programs to not have their students saddled with debt. I believe it was started by Princeton and now Yale, Williams College, as well as others have followed suit. What they have done is grant students the money that they would have otherwise taken federal loans to get. I think it is a huge step in the right direction unfortunately it’s only a very few select schools that are able to do this.