Archive for ‘trends’

August 20, 2014

Enrollment in two-year colleges continues to grow

by Grace

As families seek ways to make college affordable, the percentage of students choosing two-year colleges continues to grow.

Enrollment by School Type, Over Time

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School choice may be a key driver in containing total average spending.

This year, families reported the highest enrollment in two-year public colleges since the survey began, 34 percent in 2013-14 from 30 percent the previous year. At the same time, enrollment at 4-year public colleges declined from 46 percent to 41 percent. Although the proportion enrolled at 4-year private colleges remained the same year-over-year (22%), the average spending at that type of institution appears to reflect a reduced cost to the families who chose them.

In 2013 the private college tuition discount rate – the amount of financial aid as a percentage of tuition and fees – was “again at an all-time high”.

Not surprisingly, the amount spent to attend four-year schools is higher than two-year schools. The average yearly amount spent for two-year public schools was $11,012, a slight increase of $344 from the prior year but $10,060

In affluent Westchester County, New York, more high school graduates seem to be “choosing community college as a way to save money”.

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How America Pays for College 2014, Sallie Mae & Ipsos Public Affairs, August 2014.

August 19, 2014

Families are finding various way to cope with rising college costs

by Grace

Sallie Mae reports that American families are finding various ways to cut college costs.  They are relying more on out-of-pocket contributions and less on student loans.

Cost-Saving Measures

How America Pays for College 2014 finds that families are adopting multiple strategies to reduce the cost burden of paying for college, such as opting for in-state tuition (69%), living closer to home (61%) or at home/with relatives (54%), filing for education tax credits (42%), getting a roommate (41%)6, accelerating the pace of coursework (28%), or not deferring payments on student loans (23%). Not only was the choice of an in-state school the most frequently mentioned response, it is also most likely to be mentioned if only one cost-saving measure is adopted by the family. Most families, however, are likely to adopt a combination of cost-reduction approaches, such as opting to go to school in state and living at home or with relatives (43%).

Paying from current income and savings increased while borrowing decreased.

Out-of-Pocket Contributions

A significant source of college funding comes from the income and savings of families known generally as “out-of-pocket” contributions. In 2014, American families reported that out-of-pocket spending from parents and student combined was $8,850, accounting for 42% of the total amount paid for college. This breaks a three-year trend in decreasing out-of-pocket spending (46% in 2010, 41% in 2011, 40% in 2012, and 38% in 2013). Compared to 2013, American families increased their contributions from income and savings by $839 while decreasing the total spent on college by $295.

 

How the Typical Family Pays for College, Year-over-Year

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Borrowing

Families’ use of borrowed money used to pay for college in 2014—a combined parent and student amount of $4,610— dropped to the lowest it has been in five years. Borrowed funds paid for 22 percent of college costs in 2013-14, a decline from 27 percent the prior year. Student borrowing (15%) accounted for twice as much as parent borrowing (7%).

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How America Pays for College 2014, Sallie Mae & Ipsos Public Affairs, August 2014.

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August 12, 2014

Interest in Ivy League schools continues to be strong

by Grace

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Despite a drop in applications at Dartmouth, Harvard and Columbia, overall interest in Ivy League schools continues to be strong.

The number of applications has risen steadily for over a decade (perhaps best shown HERE), so even small drops in applications won’t have a huge effect on admission rates at the Ivies. Harvard may have dropped 2% in the number of applicants, but their admit rate went from 5.79% last year to 5.90% this year, not a massive change. Columbia received 1.73% fewer applications from last year to this year, but the competition is not exactly wavering; their admit rate for the Class of 2017 was 6.89% and for the Class of 2018 was 6.95%. Want an even scarier number? Across all Ivy League universities plus MIT and Stanford last year 305,101 students applied and 26,758 were accepted (8.77% overall acceptance rate). This year? 313,981 students applied and 26,154 were accepted. So what’s that percentage tell us? It’s not easier to get in. 8.33% overall acceptance rate. Admissions is a numbers game and the numbers aren’t bending.

There seems to be a general consensus that even with the current downsizing trend in higher education, “elite colleges will continue to hold their value”.

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“Breaking Down the Numbers in Admissions”, Application Boot Camp, July 24th, 2014.

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July 24, 2014

Loans overtook grants as the main source of college financial aid in 1982

by Grace

In the early 1980s loans begin to exceed grants as the primary form of college financial aid.

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Figure 3 shows the amount of financial aid provided in each major category since 1980, in constant dollars (institutional grants are excluded, as they are treated as a discount off of tuition). In the early 1980s, federal, state, and private grants were the largest form of financial aid. But beginning in 1982, loans began to outpace grants, and since then they have remained the largest form of aid available to students to help them pay their costs of attending higher education.

The federal government had first stepped up its role in college financial aid in the 1960s.*

… The United States has long had financial aid for students, awarded in different forms (loans, grants or scholarships, government-subsidized jobs on college campuses, and tax benefits) and from different sources (federal government, state governments, higher education institutions, and private entities). The federal government first began provision of broad-based financial aid in the forms of grants and loans to students with the passage of the Higher Education Act of 1965. This Act also had a provision, the State Student Incentive Grant program, which encouraged states to create their own grant programs. These programs, along with the continued expansion of institutionally-funded scholarships, have helped to subsidize the price paid by students for attending college and have also served to lessen the impact of rising “sticker” prices, or the amount charged by universities before any discount is provided.

*The G.I. Bill began offering federal education benefits to veterans in 1944.

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Geiger, Roger & Heller, Donald. “Financial Trends in Higher Education: The United States” (Working Paper), Peking University Education Review, January 2011.

July 14, 2014

College tuition discounts continue to climb

by Grace

The college tuition discount rate – the amount of financial aid as a percentage of tuition and fees – is “again at an all-time high”.

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College continue their “high tuition, high discount” policy.

Private colleges are continuing unabated their strategy of setting high sticker prices while giving most of their students steep discounts, according to the latest survey of private colleges by the National Association of College and University Business Officers.

The colleges, many of which are struggling to meet enrollment goals, are taking in only 54 cents for every $1 they claim to charge in tuition.

The “high tuition, high discount” business model is often confusing to students and parents, but it’s how things are done at most private colleges: the colleges charge high prices and then offer students they want huge discounts. The discount comes in the form of need-based aid for low-income students and “merit” aid for students with characteristics that make them desirable to a college. At wealthy colleges, endowments may have actual funds to replace lost tuition revenue, but most colleges are just waiving the chance of getting more.

Is steep discounting a desperate, short-term strategy?

“If you do too high a discount, then perceptions of desperation creep in,” says Rao. People start to ask: “Are they going out of business? Is this product a dud?”

Mitchell Hamilton is an assistant professor of marketing at Loyola Marymount University. He says deep discounts are a short-term strategy at best. “When you’re looking at discounts of half off or more, or buy one get one free, those are for businesses that need immediate results,” he says. “Private universities are hoping that this is just a strategy to stay afloat until the economic situation gets better.”

Most observers seem to agree that if this trend becomes a race to the bottom, the losers will be ‘”smaller-sized, ‘no-name,’ tuition-driven schools.”‘  Top ranked colleges will continue to thrive.

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Ry Rivard, “Discount Escalation”, Inside Higher Ed, July 2, 2014.

Anya Kamenetz, “How Private Colleges Are Like Cheap Sushi”, NPR Ed, July 12, 2014.

July 11, 2014

Parents help sustain their adult children’s extended financial adolescence

by Grace

Most parents are providing some financial support to their children even after they graduate from college, thereby promoting a period of sustained adolescence among 20-somethings.

… nearly 85% of parents plan to offer their children monetary aid after graduation, according to a survey Tuesday from Upromise by Sallie Mae. Almost one-in-three parents plan to provide their grad with financial assistance for up to six months, and around 50% plan to foot bills anywhere from six months to more than five years.

The new normal means that adult children continue to rely on mom and dad.

So, what has changed since my son graduated a few decades ago? Sure, new graduates are entering a much more difficult job market than he did, and even those who do secure jobs are unlikely to have the job stability he’s enjoyed. But a difficult job market is only part of the story. Social norms have shifted so that accepting help from Mom and Dad well into your 20s is “OK.”

Psychologists call this trend “emerging adulthood.” As Eileen Gallo and Jon Gallo note in their paper “How 18 Became 26: The Changing Concept of Adulthood,” for a certain socioeconomic set, growing up and moving out—permanently—means downgrading your lifestyle. The authors quote sociologists Allan Schnaiberg and Sheldon Goldenberg as stating:

“The supportive environment of a middle-class professional family makes movement toward independent adulthood relatively less attractive than maintenance of the [extended adolescence] status quo. Many of the social gains of adult roles can be achieved with higher benefits and generally lower costs by sharing parental resources rather than by moving out on one’s own!”

Keeping their 20-something children on the family cell phone plan is one common example of how “sharing parental resources” makes it easier on young adults as they transition to financial independence.  Another example is health insurance, where Obamacare now requires family policies to continue coverage for children up to age 26.  Individually these are small examples, but in total many parents are heavily subsidizing their adult children’s lifestyle.

Retirement expert Dennis Miller says parents should consider tough love instead of risking their own future financial security.

Retiring rich is hard enough without paying for your child’s extended adolescence. The job market may be tough for new graduates, but forcing your child to navigate it anyway might just be the best way to help.

Miller believes it’s possible to be supportive without hindering a young adult’s financial and emotional independence, and has some tips that can be read at the link above.

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Kathryn Buschman, “The New Normal? Some Parents Plan to Aid Children 5 Years after Graduation”, FOXBusiness, May 27, 2014.

Dennis Miller, Paying bills for adult children? Try tough love instead, MarketWatch, July 8, 2014.

June 26, 2014

More students are receiving special accommodations for SAT and ACT tests

by Grace

Some recent numbers show the increase in students receiving special accommodations for SAT and ACT testing.

During the 2010-11 school year, 5 percent of all test takers were provided with some feature that was intended to adapt the test to their needs, ACT spokesman Ed Colby said, compared with 3.5 percent of test takers in the 2007-08 school year.

The numbers of requests have been rising among SAT takers, too, along with an increase in test takers overall. Once students are approved for an accommodation, they don’t have to reapply. Of new requests—almost 80,000 during the 2010-11 school year, compared with 10,000 fewer five years earlier—about 85 percent are approved, said Kathleen Steinberg, the spokeswoman for the College Board. The ACT said roughly 90 percent of requests made are granted.

Rich kids are more likely to receive accommodations.

Controversy has swirled for years about which students deserve special help. A 2000 California audit concluded that those getting college entrance testing accommodations “were disproportionately white, or were more likely to come from an affluent family or to attend a private school.”

More than a decade later, the Tribune’s review of data obtained under open records laws indicates that’s true in Illinois, where the percentage of test takers with accommodations doubled the national average.

Schools in wealthy enclaves with predominantly white students were at the top of the list when it comes to students getting ACT testing accommodations in Illinois, the 2011 data show.

A recent report from the General Accountability Office found that testing for qualifying disabilities “can cost from $500 to $9,000″.  Wealthy families can afford to pay these costs when the schools will not.  They also tend to have the expertise and money to force schools to pay for legally required testing.

One local affluent school district recently had a long list of applications for accommodations that was waiting to be submitted, probably typical for high-income locales.

The most commonly requested accommodation is extended time, but some others include “a quiet testing room, a reader or a scribe, enlarged print test booklets and/or answer keys, the use of a computer, additional or extended breaks, and multiple-day testing on the ACT”

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Nirvi Shah, “More Students Receiving Accommodations During ACT, SAT”, Education Week, May 14, 2012.

 Diane Rado, “Many Illinois high school students get special testing accommodations for ACT”, Chicago Tribune,  April 29, 2012.

Jed Applerouth, “SAT and ACT Accommodations”, Independent Educational Consultants Association, April 9, 2014.

June 4, 2014

Home equity loans regain popularity as college costs continue to rise

by Grace

A rebound in house prices and near-record-low interest rates are prompting homeowners to borrow against their properties, marking the return of a practice that was all the rage before the financial crisis.

College costs continue to rise, so home equity loans may rebound in popularity as a tuition-funding vehicle.

Ian Feldberg planned to open a $200,000 Heloc this week with Belmont Savings Bank to help pay his son’s college tuition. The medical-device scientist purchased his home in Sudbury, Mass. for a little over $1 million in 2004, and estimates that its value dipped as low as $800,000 during the financial crisis. However, after applying for the line of credit, he found that its value had completely recovered.

“I’m very pleased about that. My options for tuition fees were either that or to cash in on my pension prematurely,” he said.

A too-big-to-fail bank steps up home equity lending, and Tyler Durden of Zero Hedge expresses some concern.

The Wall Street Journal reported yesterday that home-equity lines of credit (Helocs) had increased at a 8% rate year-over-year in 1Q14. Some banks are more aggressive than others, and perhaps we shouldn’t be surprised to see TBTF government welfare baby Bank of America leading the charge, with $1.98 billion in Helocs in the first quarter, up 77% versus 1Q13.

What could possibly go wrong?

As HELOC delinquencies are off their highs (for now) but remain elevated… (we are sure this renewed ATM usage on the back of created wealth and stagnant wages won’t harm that downward trend at all…) – will we never learn?

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And then there’s this.

Think about that for a minute. A “medical-device scientist” can’t send his kid to college without either a Heloc or cashing in on his pension.

Life goes on.

Related:  “Federal Direct PLUS or home equity loan for college costs?” (Cost of College)

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Tyler Durden, “Home Equity Loans Spike As Americans Scramble For Cash”, Zero Hedge, 05/31/2014.

May 28, 2014

American teens are not interested in summer jobs

by Grace

Fewer teens are working.

… In 1978, nearly three in four teenagers (71.8%) ages 16 to 19 held a summer job, but as of last year, only about four in 10 teens did, according to data from the Bureau of Labor Statistics for the month of July analyzed by outplacement firm Challenger, Gray & Christmas . It’s been a steady decline, seen even during good times: During the dot-com boom in the late 1990s, when national unemployment was only about 4%, roughly six in 10 teens held summer jobs….

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And they are not very interested in getting jobs. Only 8.3% of teens who were not working last summer said they even wanted a job.

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This doesn’t mean that teens are simply tanning by the pool or binge-watching Bravo (though some certainly are). Challenger says that many teens are in summer school (rates of summer school attendance are at one of the highest levels ever, he says), volunteering, doing extracurricular activities to pad their college applications and trying out unpaid internships. And all of these are worthwhile endeavors (well, minus the tanning and Bravo), especially as it becomes more competitive to get into many elite colleges.

Lack of work experience can be a disadvantage.

That said, experts say that paid work has value for a number of reasons — and that teens (even those who plan to go to college) who don’t do it may be at a disadvantage. “It’s critical for teenagers to work, to begin to understand the working world, the value of a paycheck” says Gene Natali, co-author of “The Missing Semester” and a senior vice president at Pittsburgh investment firm C.S. McKee. “Choosing not to work a paid job has consequences.”

The good old days?

One of my older relatives had a job in high school delivering both the morning and afternoon newspapers.  He and a friend would rise early each day to roll up and deliver papers before their first class, and then repeat the routine after school.  He was also in the school band, played varsity tennis, and maintained good grades, clearly demonstrating he was able to manage his time effectively.  A generation or two later, it’s hard to imagine many kids successfully maintaining a similar schedule of activities. Many of them need reminders to take their Adderal in the morning, and think they are too busy for a part-time job.  Maybe my relative was a remarkable young man, but many of his peers also worked during high school.

Times have changed.  Expectations have changed.  Kids have changed.

Related:  “Teens are too busy preparing for college instead of working” (Cost of College)

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Catey Hill, “American teens don’t want to work”, MarketWatch, May 3, 2014.

‘Teen Summer Job Outlook Teen Employment Culd Remain Flat as More Say “Nah” to Summer Jobs’,  Challenger, Gray & Christmas, Inc., April 28, 2014.

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May 26, 2014

2014 college graduates are ‘the most indebted class ever’

by Grace

The average Class of 2014 graduate with student-loan debt has to pay back some $33,000 … Even after adjusting for inflation that’s nearly double the amount borrowers had to pay back 20 years ago.

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… A little over 70% of this year’s bachelor’s degree recipients are leaving school with student loans, up from less than half of graduates in the Class of 1994.

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 … According to a new Pew Research report, a record 37% of young households had outstanding student loans in 2010, up from 22% in 2001 and 16% in 1989….

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Related:  ‘Growing student debt may be a reason for weak housing market’ (Cost of College)

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Phil Izzo, “Congratulations to Class of 2014, Most Indebted Ever”, Wall Street Journal,  May 16, 2014.

Richard Fry and Andrea Caumont, “5 key findings about student debt”, Pew Research Center, May 14, 2014.

Richard Fry, “Young Adults, Student Debt and Economic Well-Being”, Pew Research Center, May 14, 2014.

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