Supply & Demand Reduces Tuition Costs

The Wall Street Journal: “U.S. college tuition is growing at the slowest pace in decades, following a nearly 400% rise over the past three decades that fueled middle class anxieties and a surge in student debt … Abundant supply is running up against demand constraints … Longer-running economic and demographic shifts also are at play. Lower birthrates and the aging of baby boomer children have reduced the pool of traditional college-age Americans.”

“Another factor: Congress last increased the maximum amount undergraduates could borrow from the government in 2008. Some economists have concluded schools raise prices along with increases in federal financial aid. A clampdown on aid, in turn, could limit the ability of schools to charge more … Moreover, the number of schools is declining in response to oversupply, particularly among for-profit schools, a trend that could reduce competition and increase pricing leverage for schools that remain open.”

“Public four-year colleges, which teach the majority of bachelor’s candidates in the nation and tend to be cheaper than private schools, are benefiting from increases in direct state funding as tax revenues improve. That has eased schools’ need to raise prices on students … State officials have also pressured schools, through legislation and public speeches, to rein in prices, and they are admitting more international students to boost revenues.”

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Super Seniors: The Six-Year Plan

The Wall Street Journal: “Low graduation rates hurt a school’s reputation, and staying enrolled for extra years adds to the tab for students. So dozens of schools and statewide systems are trying to cut back on the number of ‘super seniors’ milling about campus.”

“Schools have embraced marketing gimmicks like ‘Class of ’17’ bumper stickers to rally students around their graduation year. But they also are changing how they price a semester to make it easier to stay on pace to graduate, notifying students eligible to graduate that they should do so soon, and altering the classes offered in a given term to help students take the courses they need.”

“Nationally, four in 10 students who entered college for the first time as full-time freshmen in 2008 graduated within four years. The six-year rate hovers around 60% … Meanwhile, students who are ready to move on can struggle to get credit for how far they have come. With more than one-third of students now attending multiple institutions during their college careers, convoluted credit-transfer policies continue to slow the timeline to graduation.”

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Amazon Prime Loans: Read The Fine Print

The Washington Post: “Wells Fargo is offering Amazon.com customers discounted interest rates on private student loans, creating a partnership with the online retail giant at a time when private lenders are fighting for market share.”

“Amazon Prime Student subscribers who apply for any of the bank’s education loan products are eligible to have their interest rate lowered by half a percentage point. Wells will take off an additional quarter of a percentage point for borrowers who enroll in an automatic monthly loan repayment plan. Interest rates on Wells undergraduate loans for four-year colleges range from 5.94 percent to nearly 11 percent on a fixed-rate loan and 3.39 percent to 9.03 percent on a variable-rate loan. Students who enlist a parent or grandparent on the loan can get lower rates because co-signers are obligated to repay the debt if the borrower does not.”

“As it stands, interest rates on federal student loans are at an all-time low. Undergraduate students can expect to pay 3.76 percent in interest on new Stafford loans for the 2016-2017 academic year, while graduate students will be charged 5.31 percent interest. Government loans are only offered at fixed rates and students don’t need co-signers with stellar credit to qualify for the lowest rate. What’s more, federal student loan borrowers can take advantage of the government’s income-driven repayment plans that cap monthly payments to a percentage of their earnings. There is nothing comparable in the private market.”

Pauline Abernathy, vice president of the Institute for College Access & Success (TICAS), comments: “Amazon and Wells Fargo are trumpeting a discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record-low 3.76 percent fixed interest rate into taking out costly private loans with variable interest rates currently as high as 13.74 percent.”

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Happy ‘Lap’ Year: The 5-Year College Career

Money: “About a quarter of parents each year face the daunting prospect of paying for an extra year (or two, or three) of college, according to student loan lender Sallie Mae’s latest survey. The situation comes up so often that financial planner Allan Katz … has all his clients save for five years of tuition instead of four … Even that kind of preparation does not stop many parents from panicking when their child gets to junior year without enough credits to get a degree in four years.”

Financial planner Hank Mulvihill … takes it even further. He tells clients to expect to pay $50,000 a year for six years … During his 25 years as a planner, Mulvihill has seen the chips fall every which way. One family recently faced an extra year of tuition at a private university but simply did not have another $65,000. So the student had to transfer to an in-state public school to finish her studies.”

“Fear of going overtime in college has prompted some parents to push their children to stack up credits in high school so they can graduate college either early or on time … These are lessons that Frost Gordon will take to heart when her younger son applies to colleges next year. ‘I’m going to be more conscious about my spending now and plan for a fifth year,’ she said. ‘And I’m going to ask on the tours how many kids are getting an undergrad degree in four years’.”

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Thinking Outside the ‘Ivy League’ Box

Quartz: “Well-heeled universities tout the benefits their name will give graduates: namely strong alumni networks, star faculty, and a résumé boost. But you needn’t attend an Ivy to reap those rewards. In fact, lower tier school alumni networks are arguably stronger, because fellow alumni recognize that you didn’t necessarily have an easy path to follow. They might be more willing to offer career help, because your less illustrious school denotes that, like them, you are also full of hustle and tenacity.”

“The Washington Post reported on a recent study by Princeton economists in which college graduates who applied to the most selective schools in the 12th grade were compared to those who applied to slightly less selective schools. They found that students with more potential earned more as adults, and the reverse held true as well, no matter where they went to school. Likewise, star faculty are not always found where you’d expect. Big name schools are not necessarily the best places for professors; plus, many professors split teaching time between multiple colleges and/or universities.”

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42: Tuition-Free School in Silicon Valley

Business Insider: A radical French technology school funded by $100 million from billionaire entrepreneur Xavier Niel is coming to Silicon Valley, and has plans to grow to 10,000 students in the next five years. The tuition-free college alternative is primarily focused on teaching coding and entrepreneurial thinking, and is called “42,” a nod to the book “Hitchhikers Guide to the Galaxy,” where 42 is the answer to “life, the universe and everything.”

“42 doesn’t require a high-school diploma or give a traditional certificate at the end. The students, ages 18 to 30, get accepted into 42 through a logic-focused entrance exam (no coding experience is required) … There are no teachers. Students work in groups of two to five on computer programming challenges … There is no tuition. Niel has provided $100 million to launch the new nonprofit school in the US.”

“Since its launch in France, 42 has received more than 200,000 applications, and taught over 2,500 students. “

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Shady Grove: The Future of Higher Ed?

The Washington Post: The Universities at Shady Grove “is a program unlike any other, with nine state universities converging at the Rockville, Md., campus, part of an effort that began 16 years ago to reduce college costs, produce an educated workforce and encourage college completion among populations that traditionally struggle to get their ­degrees.”

Shady Grove offers a way for community college students to transfer into undergraduate programs at nine of the 12 schools in the University System of Maryland, including the University of Maryland Eastern Shore, Bowie State, Towson and the state flagship in College Park … Each school has its own office on campus and individual banners raised high above the quad … All classes are held in Rockville and taught by professors from the partner schools, so a student seeking a bachelor’s degree in social work from the University of Maryland Baltimore County can earn the degree without ever setting foot in ­Catonsville.”

“Students pay the tuition their home school charges, but they spend less on fees tied to facilities, parking and athletics. By spending two years at Montgomery College before heading to Shady Grove, students can save an average of $8,000 on tuition and fees … Students must get accepted to one of the partner schools, but once they’re in, they have a better chance of graduating through Shady Grove than if they had transferred directly to the school. The program has a 75 percent graduation rate for transfer students, the highest in Maryland’s university system and higher than the 58 percent national average.”

“It’s a very innovative model,” said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities. “You have a public institution responding to market conditions in a way that expands access.”

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The Cost of College Continues To Rise

The Boston Globe: “The average annual “sticker price” — the total cost of college without factoring in any financial aid — for a four-year private college in the United States was $40,656 for the 2014-15 school year, the most recent year for which data was available … The US public four-year college sticker price was $22,093 … For two-year public colleges, the sticker price was $16,444 nationally … The upward trend is clearly visible in data collected by the federal government for the past 15 years.”

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Need-Based Scholarships Offer Ivy-League Discounts

Business Insider: “In 2015, the average need-based scholarship at Yale was a generous $43,989, knocking off a substantial amount of that school’s sticker price. At Harvard, 65% of students receive scholarships, and the average need-based scholarship is $46,000. These schools, along with the other Ivies, can offer such generous financial aid packages because they have extremely large endowments. Harvard’s endowment alone is worth $37.6 billion.”

“But while the net price of attending an Ivy might be really low for low-income students, those students are still not enrolling at any college in very high numbers … One reason low-income students may not enroll in large numbers is that many schools don’t do a good job of publicizing the difference between the sticker price and the net price.”

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Raise.me: Introducing Microscholarships

A startup website called Raise.me allows students to earn scholarship credits in exchange for taking certain courses and realizing other achievements, The New York Times reports. “The start-up’s approach is a mash-up of two popular economic concepts. One is ‘nudging,’ that is designing systems to influence the choices people make, ideally for their own good. The other is microfinance — incremental loans for entrepreneurs who would not otherwise have access to funding.”

“Raise.me charges participating institutions annual fees of $4,000 to $20,000 based on a college’s size and scholarship program. Each college sets its own criteria. Penn State has made its Raise.me program available to students at five high schools in Philadelphia, as well as six rural Pennsylvania high schools. Those students may earn scholarships of up to $4,000 a year for four years. Among other awards, the university offers them $120 for each A grade in a core course, $400 for each advanced placement course, $100 for each year of perfect attendance, $100 for a leadership role in a sport or extracurricular activity and $5 for each hour of community service, up to $500.

“The potential risk is that introducing monetary rewards could curb students’ intrinsic motivation to succeed in school, or their innate enjoyment of activities like reading, in favor of striving for scholarship dollars.” However, Raise.me co-founder Preston Silverman “said that the scholarship program did not displace students’ inner enthusiasm, but rather enhanced their motivation by showing them additional ways they could prepare for college.”

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