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Lesson 9.9

Paying for College:
High Hopes and College Loans

Which is bigger, America’s credit card debt or college debt?

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Image: Credit Cards CC Sean MacEntee

About nine out of ten parents expect their children to go to college. Less than a third actually do so. Many of California's students who complete high school and start some kind of postsecondary program do not go on to earn a degree or certificate (see the previous lesson). This leaky bucket is a concern for the state and a focus for a wide variety of organizations. Why do students stop their education before they reach these completion milestones, when reaching them is so clearly in their interest?

Some of the reasons are financial. There's a good chance that a college degree will help you earn more down the road... but you can know for sure that it's going to cost you in the short run.

It's not just money

The financial strain is not the only discomfort of stretching for college. Applying, enrolling, scheduling, attending and obtaining transcripts are all logistical hurdles, each with their own opportunities to derail an education. Most colleges are not set up to provide support for these processes, and to a shocking degree when students fail to finish college the reasons have little to do with academics. In 2014, Starbucks began offering college scholarships as a benefit for its employees, expecting thousands to take advantage of it. In a widely read feature story in the Atlantic, Amanda Ripley describes the practical barriers that stood in the way, and how the company improved the benefit by providing counseling support.

Full Circle Fund grantee Beyond12 works with high schools and colleges to help them effectively provide students with the academic, social, and emotional support they need to succeed in higher education. Beyond12 acts as a data and service bridge between lower and higher education systems to help them support low-income students so that more of them persist and succeed in college. Other organizations, like the Career Ladders Project focus on helping students complete career technical programs in the state’s community colleges, preparing them for well-paid careers that don’t necessarily require a four-year university degree.

The concern about college completion has been particularly acute at California’s community colleges, in part because they are “open access” institutions that accept all comers. About 30% of California’s high school graduates go on to immediately attend a community college. When they take placement tests, however, a majority of students are found unready, particularly in math. Before they undertake college level work, they have to master high school skills. The longer it takes students to complete remedial course work, the more expensive college becomes and the less likely they are to complete a certificate program, a two-year AA degree, or to transfer to a four-year university.

Concerns about students taking years to get through community college, and the high cost of that for both the students and the state, prompted the development of the 2011 Student Success Task Force. This task force report includes a comprehensive set of recommendations to be put into place over a decade. The recommendations have prompted changes in how the community colleges assess and counsel incoming students.

...But yes, money matters. A lot.

Lest we forget, college is expensive and getting more so. The cost affects who attends and who is able to complete a degree.

In California’s public four-year university systems, tuition costs began rising at double-digit annual rates in about 2001. In 2011, the University of California (UC) system for the first time generated a larger portion of its revenues from tuition than it did from state funding. Tuition costs at California State University (CSU) campuses rose at a similar clip.

Tuition increases have slowed

Despite steady increases, California's college tuition and fees remain lower than those in most other states. But college is expensive, and tuition is only part of the price tag. (One colorful estimate pencils out non-tuition costs at about $23,000 per year, but that includes a beer budget.) College is a major financial burden for most families, many of whom must fund short-term college costs through long-term debt.

Despite steady increases, California's college tuition and fees remain lower than those in most other states.
LAO 2014 report LAO 2014 report "Analysis of the Higher Education Budget"

Faced with rising tuition and declining aid, students have taken on student loans in unprecedented amounts. In 2013, a study by the New York Fed found that the aggregate outstanding student loan balance in America has reached about a trillion dollars, exceeding the outstanding balance for credit cards, auto loans, and home equity loans. A 2013 report on student debt estimated that about half of California’s students graduated with at least some college debt. On average, these students graduated with about $20,000 in student debt in 2012, which was lower than 47 other states. More than one in ten college borrowers carries more than $50,000 in debt.

More than for cars /
or credit cards /
it's loans for college /
that stick like tar.

College loans make sense to lenders because earning a degree enhances a student's future earning potential. These debts are unlike home loans or home loans, in which an asset can serve as collateral to be forfeited in a default. If you take out a college loan, you are the asset. In order to encourage lenders to make loans to students, college loans have been made difficult to discharge through bankruptcy than other kinds of loans.

Federal financial aid for college costs is available to US citizens with financial need, if they can navigate the application for the Free Application for Federal Student Aid (FAFSA).

California officials, concerned about the rising cost of the state’s public universities, have looked for ways to help students afford those costs. The state’s Cal Grant program helps hundreds of thousands of California students from lower-income families pay for higher education. In addition, for US citizens the state has created the Middle Class Scholarship program, which is expected to be fully implemented by 2017-18. It will provide tuition discounts of up to 40%, depending on family income.

Under the California Dream Act (AB540), beginning in 2013 non-citizen resident students also became eligible for financial aid in California colleges. To qualify, they must graduate from a California high school after three full years of attendance and file a statement that they intend to apply for citizenship when the law allows it.

Clearly, college affordability is not just a California problem. The College Board tracks college costs in an annual report, Trends in College Pricing. Federal policy to encourage lower college costs became a campaign issue in 2012, centered mainly on reducing the financing costs associated with college loans rather than on direct tuition support. The Project on Student Debt provides resources to help families sort out this complex topic.

How Scholarships Drive Tuition... Up?

Scholarships, or discounted tuition rates, can play an important role in a student’s choice of which college to attend. In trying to attract the best students, colleges offer scholarships. Their use of these financial incentives has an unintended dark side: if Peter pays less, Paul must pay more.

Next Steps

Many organizations want to help boost the number of students who complete college. US Department of Education resources include these:

Resources from other sources include these:

  • The ACT web site provides an overview of the various types of financial aid and how to apply for them.
  • The California Community Colleges provide I Can Afford College!
  • The College Board (makers of the SAT and AP tests) provides tips on paying for college.


College is expensive. Are tuition costs and fees at California's public colleges and universities higher than those in other states?

Answer the question correctly and earn a ticket.
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Questions & Comments

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user avatar
Lisette October 4, 2017 at 12:42 pm
This was a great lesson! I had no idea CA secondary schooling was lower than most other states.
user avatar
Jeff Camp - Founder August 29, 2016 at 4:09 pm
The paperwork for obtaining financial aid is challenging, and takes time to figure out. Happily, the submission date for the FAFSA (the student aid form) has been moved EARLIER. It may seem weird that this is happy news (how can an earlier deadline be easier?) but it enables students to apply for aid using the prior year's tax return, and aligns better with the timing of when students are writing and submitting their college applications. This is a student-friendly change in policy.
user avatar
Jeff Camp - Founder October 13, 2015 at 6:48 pm
To make college affordable, in a way that can be sustained, will require bringing down the actual costs of college, argues Dr. Watson Scott Swail, President & CEO, Educational Policy Institute He also argues that Income Contingent Loans (ICLs) would be a better solution than tuition waivers.
user avatar
ellenm822 April 28, 2015 at 4:43 pm
Bring on the middle class scholarship program mentioned above!
©2003-2018 Jeff Camp
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