The cost of college: A balancing act
Students at Rutgers University in New Jersey protest tuition hikes last April.
April 4th, 2012
01:05 PM ET

The cost of college: A balancing act

by Carl Azuz, CNN

(CNN) Vice President Joe Biden and Education Secretary Arne Duncan spoke at a high school in Norfolk, Virginia, on Tuesday.  The reason:  To discuss student loans and college tuition.  If that sounds familiar, it’s because the cost of higher education has been a major focus of the Obama administration.

One of the president’s education goals is for the U.S. to have the world’s highest proportion of college graduates. America is ranked behind Russia, Canada, and several other countries in this category, according to the College Board.

But one of the effects of the Great Recession is that it sent many Americans back to school.  Attendance and tuition are up at college campuses across the country, and two priorities of the Obama administration are encouraging this college attendance and keeping tuition costs in check.

Starting in 2014, students who take out college loans will have an advantage:  Many won’t have to pay them back in full.  Part of President Obama’s 2010 health care reform law limits student loan repayment.

In the years ahead, graduates who go into the public sector (taking jobs as teachers and nurses, for instance) will only have to pay back 10 percent of their discretionary income for 10 years.  The government will forgive any remaining balance.  And in the private sector, graduates will also pay back no more than 10 percent of their discretionary income for 20 years before the remaining debt is forgiven.

So if graduates don’t have to pay back their loans in full, who covers the balance?  New loans will come directly from the federal government, which will stop subsidizing the banks that currently offer these loans to students.  The administration says that the money saved by stopping these subsidies will cover graduates’ remaining balance.  If it doesn’t, critics of the law say taxpayers will be chipping in.

The president also wants to force universities to contain their tuition –  in part by threatening to deny them some federal funds if they don’t.  Lower (or stagnant) tuition sounds great to today’s high school students.  But for many universities, tuition has increased because state funding has decreased.  Some states hit hard by the recession have actually authorized universities to increase tuition to make up for the funds that the state could no longer provide.

“There’s no one villain or savior in this,” says Pat Callan, president of the Higher Education Policy Institute.  “The cuts in higher education are incredibly deep.  The states have cut too deeply, and the colleges are too quick to turn to tuition as a first resort in dealing with the cuts.”

Callan gives the president credit for raising awareness about the rising costs of college, but he doesn’t believe the federal government has the leverage to significantly punish colleges and universities for tuition increases.

Part of the reason why is the complicated structure of college costs in the U.S.  Terry Hartle, senior vice president of the American Council on Education, calls this a “formula fight.”  He says the problem with changing the formula for federal aid “is that the terms are not very well defined.  Nobody knows what the administration means when it says ‘good value’ or ‘serving disadvantaged students well’ when it comes to higher education.”  Like Callan, Hartle credits the administration with putting a complicated issue on the agenda, but he says it’ll likely tee up an issue for the next Congress – not this one, as any significant plan will take time to hammer out.

For everyone involved, it all brings up as many questions as it does answers.  And regardless of whether some sort of compromise or impasse is reached, no one seems to know how – or if - any of this will put more diplomas in the hands of American students.

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soundoff (22 Responses)
  1. Savingstudent

    Beyond the cost of college – I agree with the fact that people are going in for pointless careers? How many psych major are really nessecary? They should dish out the aid to those who have a chance to actually pay it back in their chosen career. And that loan repayment thing where the government only makes you pay back such a small percentage is crap....because even if Obama does manage to get reelected....by time it's time for me to STOP paying for school (according to their 10/20 year plan) somebody else would have already changed the rules again. If you can't get a teaching or someother low paying degree from a low cost college don't even bother going – you'll never be able to repay your loans....Spring for the real college if you plan on making real money.

    April 17, 2012 at 4:05 am |
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    April 9, 2012 at 3:02 am |
  3. X=the Unknown

    Why are we not asking how much regents are being paid. after doing a search of regents in my state I found they were giving 3% and 4% pay raises within the last few years. but they have not had to take pay cuts. I would suggest that they take a few cuts as well, we students are starving for Money.

    April 6, 2012 at 4:18 pm |
  4. Lauren

    I have seen the Chancellors across many schools in southern California receive blatant and in-your-face raises during times of overwhelming tuition increase. I pay $36k a year and my education is very subpar. Just as Stacy had, I took two years off to save money for school. Unfortunately, that only lasted me a year in education. I think costs and expectations have become very imbalanced and something should be done quickly. Not to mention that certain Cal State schools are no longer accepting community college transfers? These are students are trying to be frugal, but the 4-yr universities see them as less profit and deny their furthering education. So corrupt!

    April 5, 2012 at 9:57 am |
    • X=the Unknown

      I know this well, Of every university I have applied to keeps denying my acceptance. I am sitting here in college where I need to be at the university level not college. I am quite insulted over the acceptance rate. there was an article that said that the rate of acceptance at the top few universities in the US hare at their lowest rate ever.

      "The Higher your education is, the lower your real education really is"

      April 6, 2012 at 4:24 pm |
  5. Kristi

    So all the people who take out loans in 2014 will get theirs forgiven after 10 yrs while I"m still paying for mine! And even though I work for a University (in a financial aid office), I cannot qualify for the public service loan forgiveness unless I consolidate mine w/ the federal government (which why would I do that when my current consolidated loans have a 1% interest rate). And if paying off other peoples' student loans falls on me, a taxpayer, I'm gonna lose it! I'm still working my butt off 50-60 hrs a week at one job, and a second job to try and make a dent in my debt–why do I need to help pay off someone else's! And furthermore–students now a days are getting more dumb! They have no common sense-I say everyday that common sense is a superpower (cause not everyone has it). They have no concept of what they are taking out. Talked with one student yesterday and she has 2 yrs left in her graduate program and already has $195,000 in loan debt–she can only get up to $224k in her med program. We calculated–her payments will be almost $1000 a month. And she just said, "well I guess I'll be taking out grad plus loans or private loans to finish."

    April 5, 2012 at 9:49 am |
  6. mattymotorhead

    How's this? Cut the funding (including insane salaries of the coaches) for the sports programs to reasonable and managable levels. 2 examples: U of Illinois, $32K a year for tuition, fees, room & board. The new football coach is GUARANTEED $9 million! UIC Edwardsville: $21K -> no football program. It is a disease that perpetuates itself. When I got my undergrad in the 80's at a major southern university, my costs were about $2800 a year. My graduate degree in the early 90's at a major S. Calif. university was no more than $5200 a year. Football coaches made maybe $200K or so a year. Now they earn upwards of $4 million a year? Insanity!!!

    April 5, 2012 at 8:07 am |
    • Ron

      You have to love a country that puts so much emphasis on education and then pulls the rug out from under the students. College is fast becoming an option only for the already affluent student or the ones with stellar grades. Most kids fall right in the middle of both, and their options are dwindling. On a brighter note any student who manages to graduate will have a truck load of debt to pay off, and good luck finding a job.

      April 5, 2012 at 8:37 am |
  7. Ct

    If they used that time to work they'd make more money and could afford it.

    April 5, 2012 at 7:02 am |
  8. Brian

    Through my time at school I often found the one's with the time and the energy to engage in protests and civil actions were often the ones getting the useless degree and not having to work a job.

    April 5, 2012 at 1:54 am |
  9. the truther

    We wouldn't have this issue if we were atheists

    April 5, 2012 at 1:05 am |
  10. Stacy

    If we made the banks eat the cost rather than tax payers, the banks would stop making excessive loans. Someone working on a PhD in electrical engineering will probably be able to pay off $100k in loans, but not someone working on a General Studies degree. A bank who will have to eat the costs will be inclined to look at the situation and only make loans that make sense.

    If banks refuse to make loans, students will be forced to choose majors that will lead to a job! Students and schools will be inclined to keep overall costs down. Students will be forced to work while they are attending school to reduce the amount of debt. These are all good things. If the gov't eats the cost, there is no incentive for anyone to control the costs.

    I am currently a grad student. I will graduate with no debt this year. I did this by working full time for a few years and saving money to go back to school. While I am in school, I am working as many hours as I can. I am very careful with my spending. My parents are not helping with this degree. I received a scholarship that covers only the out of state portion of my tuition. I know everyone can't get through school with no debt, but anyone who graduates with more than $20k or $30k in loans made some very bad decisions.

    April 5, 2012 at 12:37 am |
    • Brian

      Stacy, you know that the one thing worse then having to many college loans.
      Bragging about your life choices on the internet.

      April 5, 2012 at 1:55 am |
    • Ron

      No everyone is a straight A student, all brains were not created equal. That does not mean kids with straight B's in school don't deserve a college education. Good for you, no debt. Have a cookie. Come back when you have something insightful to share with the class.

      April 5, 2012 at 8:43 am |
  11. Maya

    Instead of the taxpayers having to pick up the balance, it should be those schools which outright lie to their students about employment prospects. If this kind of abuse is going to stop, they must be punished for their fraud. Create large civil penalties for use of misleading employment placement statistics, require them to publicly disclose how tuition is spent, tie federal aid to actual employment placement statistics (and give preference in aid to students who pursue majors where employment demand is highest), and you'll see these schools clean up their acts like you wouldn't believe. The federal government helped create this mess with its far too liberal policies on financial aid. They gave to the keys to the sports car to the kids, and now they can't figure out why the car has come home totaled. Now they need to make things right and take the kids out back to the woodshed.

    April 4, 2012 at 11:27 pm |
    • WhatNow

      Actually, this problem started when states started cutting funds that were regularly given to colleges and universities.

      April 5, 2012 at 8:25 am |
  12. Shelby

    I have friends that have walked away with over $100,000 in student loans from a public university. This would have been wonderful 5 years ago.... can you imagine paying that loan off for 30 years? Just looming... all the time....

    April 4, 2012 at 10:20 pm |
  13. ChrkeePrde

    Rising aid means colleges can raise their tuition more and more... why hasn't the Dept. of Education figured this one out? WTH

    April 4, 2012 at 9:00 pm |
  14. Pablo

    I think that college is something very well needed and people need it to get jobs an learn, but does it have to be so expensive???

    April 4, 2012 at 6:18 pm |
    • Selftaught

      junior high is beneficial too; you should start there where the above sentence belongs.

      April 5, 2012 at 8:44 am |