Rising Student Loan Payments & College Tuition Costs

by Silicon Valley Blogger on 2010-05-2613

Just as bad as our health care system woes are the financial issues faced by many college students who fall into serious debt due to student loans.

I’m fortunate that I went to college during a time when it was still fairly affordable. Plus I was doubly fortunate that my parents shouldered that expense completely so that I could completely focus on getting my degree. That said, I’m more worried about what the future holds for my children’s generation. For instance, I believe I’ve done the right things here, by setting up 529 college savings plans for my kids at the start of this decade (and before they were born), yet, a part of me is just a tad bit insecure about whether there’ll be that shortfall in savings when college comes around the corner.

With the way the stock market is behaving and the way college costs are growing each year, you can only hope that you won’t be staring at a huge gap between your savings and the final tally, when the time comes. Just check out the following sobering statistics on education (source: Finance My Money, NY Times).

While the average undergraduate college loan debt stands at $23,000 (for 2007-2008), there are those cases that seem pretty extreme, like this guy who ended up with $275,000 in student loans plus interest:

He’s 24 years old with an onerous debt burden today, which he’ll only be able to retire completely by the age of 50 (unless he comes across a huge windfall). Wow. It’s easy to feel sorry for someone in this situation but I also wonder about how you go about deciding just how much of your future you’d be comfortable putting on hold (or trading) for a college degree.

Student Loan Payments & College Tuition Trends

Here’s how college tuition rates have soared from the early 1980’s through 2007, as compared to increases in medical care, the Consumer Price Index and median family income.

college tuition

Here’s another look at the costs of education throughout the years (from 2002 through 2010):

annual college costs

And finally, something to lose a little sleep over no matter how prepared you are: here’s a picture of the projected costs of a 4 year college education through 2027 (from 2009 to 2027):

projected costs for college education

With health care costs and college to look forward to, I can only weep for my savings and stock brokerage accounts: they’re going to have to work harder somehow!

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{ 13 comments… read them below or add one }

Funny about Money May 26, 2010 at 5:22 pm

These figures are horrifying. I can’t even imagine how people are going to send their kids (or themselves) to school as these costs rise. If I’m not mistaken, in that last graph “current dollars” means not inflation-adjusted — that is, year by year everything (including salaries) will go up commensurately. Still…it’s outrageous to have our young people starting their adult lives saddled with debt.

One good strategy for students who are going to end up graduating from public universities is to take the first two years of coursework at a community college. This cuts the total bill significantly. Those who are going to elite private schools and whose families are not wealthy should seek scholarships and work-study jobs, since two years at Podunk Junior College will not recommend one for Princeton.

basimoneytips.com May 27, 2010 at 3:43 am

I am surprised how non-assuming people tend to be over student loans. You still have to pay them back! I think people believe they will come out earning a lot more than they actually will – and then the truth will set in.

I agree with Funny – if students can take classes from a community college, that can certainly help lessen the bill. The classes can transfer and you can still get the degree from the college of your choice. Just make sure the classes with transfer!

Miss Platnum May 27, 2010 at 6:16 am

Yes, it’s indeed hard for young people to start living their lives. But remember that if you want something, you can work to achieve it! Anyway, I wish all young students much luck.

Kosmo @ The Casual Observer May 27, 2010 at 7:15 am

“If I’m not mistaken, in that last graph “current dollars” means not inflation-adjusted”

I believe it means the amount of the check you would need to write in that specific year. In 2027, you’d need to write a check for $178K. In other words, current doesn’t mean “in 2009 dollars”.

Susanna May 27, 2010 at 9:47 am

This is truly wretched. The cost of education is outpacing the growth of income by an order of magnitude! I realize outreach programs can be important and schools want to diversify their course offerings, but come on… The cost shouldn’t be growing out of control like that. The average American should not have to get themselves in $30k of debt just for a 4-year degree from a state school.

Goran Web Design June 2, 2010 at 4:54 am

Having just had our first child I have to say that this post has really opened my eyes. One of our biggest expenses is medical aid, and if education is so much more then we are going to have to start saving now!

ConsumerMiser June 4, 2010 at 5:14 pm

Whoa, I think Ryan definitely made some wrong decisions. He turned down a full scholarship at another school to go to NYU in the middle of Manhattan. NYU is a great school, but its not worth paying over $275,000 (over a quarter million) more versus another school, provided that school is at least an average school. Even if its a below average school you are comparing to NYU, you really have to weigh the pros and cons of going into all that debt. I also think Ryan could have gone to NYU for closer to $200,000 in debt, even with interest. After 4 years, he’s only paid about $12K off. I feel bad for him. I can relate, but only a little. I had debt when I graduated from law school, but it was only around $65K. I took out as few loans a possible and received some financial aid. I felt that I had to get a high paying law firm job and I was lucky to get one. The income, budgeting, my frugal ways, and money management, helped me reduce this debt.

CBus June 22, 2010 at 12:31 am

So Ryan went to one of the most prestigious business schools in the country (daresay the world?) where he learned all about accounting and finance, and yet he is surprised by how much debt he got himself into in four years? College isn’t meant for everyone, the world will always need plumbers and electricians and assemblers and etc who earn their trade through apprenticeship, hard work, vocational school, and practical application. It seems Ryan has missed the boat between the books and his pocketbook. That either says something about the school, or something about his application of the material.

Stuart Jones September 17, 2010 at 3:45 pm

Tuition costs are ridiculous today and I have had to do a lot of things differently since I have 3 daughters in college. On the internet I was able to locate a lot of different grants and scholarships that were designed to pay college tuition costs. The problem I ran into was that I had a difficult time finding them again and I was not all that computer savvy. As someone with little patience I downloaded an ebook called Secrets to getting free college tuition Revealed, which I had stumbled upon during one of my searches. I found it to be very helpful for getting me to grant sources that I had not found before. In addition to providing the links to get me directly to the source of the grant or scholarship, it provided me with help and preparation to get through the process quicker and with less stress.

Silicon Valley Blogger September 17, 2010 at 10:51 pm

I would be very very careful about what it is I pick up from an ebook or online when it comes to applying for grants. I found out that a lot of these offers that promise you grant money and easy processing of your grant application are all bogus and many are scams. So beware of the possible scams that abound in this area! Anyone that offers you ideas to apply for grants or free money for tuition or a college education may be suspect. Just be wary of what is promised you and confirm those resources.

Shennan T. October 4, 2010 at 3:27 pm

It’s amazing the spike that the price of tuition has had over everything else.

Minimum Wage December 2, 2010 at 3:08 pm

I am reducing my student loan debt $30 per year. Which means I’ll be dead before my student loans are.

Perhaps I should try oxidizing my debt rather than reducing it?

Silicon Valley Blogger December 2, 2010 at 6:39 pm

@Minimum Wage,

Concentrating on making more money can make a bigger dent on your debt. I know you have said time and again that you are unable to find better jobs, that you have not updated your skills to become more marketable in today’s work environment and so on. Your situation sounds very challenging and it’s actually quite similar to the lives led by some of my family members who’ve had it really difficult no matter how hard they tried. Some in my family have higher degrees but live very modestly and simply. But the one thing they don’t have is debt.

A good start would be not to add any more new debt to your load and focusing on increasing your income asap. If you are not able-bodied then there may be some form of assistance in your community that can help you move forward.

Just a friendly note that focusing all your energy on the glass half empty won’t get you as far as if you are able to look at it half full instead.

So good luck with your endeavors and keep reading everything finance. Hopefully you find inspiration and information from the various resources that are available out there. They’ve done me quite a lot of good!

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