College Just Got More Expensive
This article surveys the problems. It offers no solutions for the middle class. Private colleges are priced astronomically.
There are solutions, of course. Pretend that you're poor. The poor can buy just as good an education as the middle class can.
The secret is to use the institutional loopholes that are supposedly designed for the poor, but which few poor kids or their families ever hear about.
Avoid debt. You must avoid debt.
Higher education just got more expensive. Under the new federal budget, interest rates will rise on student loans. Many lenders will start charging students higher fees, as well. College costs are up anywhere from 6 to 7 percent, depending on the type of school. Small, additional federal grants are planned this year for some of the neediest students. But Pell Grants -- the government's basic aid program for the poor -- haven't risen since 2003.
As a result of cost constraints, we're seeing more "sorting" by income and class in American education. The average private college is trolling for students who can pay. Students in well-to-do families are switching in larger numbers to public universities, perhaps because their parents haven't saved enough for education and retirement, too. The quality publics are also enrolling more out-of-staters (who pay higher tuitions), leaving fewer spots for the in-state poor. The poor are shifting to two-year community colleges. . . .
Government-backed student loans. Today's variable rates are changing to fixed rates for new loans. Starting July 1, borrowers will pay 6.8 percent, up from 5.3 percent today. Existing student loans will still bear variable rates, which could rise even higher. New PLUS loans for parents will rise to 8.5 percent (up from 6.1 percent). For the first time, they'll be open to graduate students, too. . . .
The new budget phases out some of the fat subsidies that the government grants to lenders for administering student loans. As a result, at least some of the lenders who previously offered no-fee loans will start charging borrowers 1 percent of the loan upfront.
Debt consolidation. Students with several student loans can convert them into a single debt with a fixed interest rate. You'll pay the weighted average of the loans you consolidate, and rates rise July 1. If you're eligible, consolidate now, says attorney John Dean of the Consumer Bankers Association. Loans are available directly from the government (loanconsolidation@ed.gov) or from private lenders. . . .