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Lesson 9.9

Paying for College:
High hopes and college loans

Are college loans good for students?

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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 obstacle to completing college. Applying, enrolling, scheduling, attending and obtaining transcripts are all logistical hurdles, each with their own opportunities to derail an education. Most colleges provide only limited support for these processes, and many of the reasons why students leave college have little or nothing to do with academics.

In 2014, Starbucks began offering college scholarships as a benefit for its employees, naively 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. (In 2023 the company celebrated its 10,000th graduate.)

Beyond12, a non-profit organization, 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.

California's Colleges for All

Compared to other states, California provides students with easy and inexpensive options to continue their education after high school. California’s community colleges are open access institutions — they accept all comers. About a third of California’s high school graduates go on to immediately attend a community college, which is by far the most economical option. When they take placement tests for transfer to a four-year institution, unfortunately, most students are found unready, particularly in math. Students can earn credit for remedial course work (thanks to a change in law), but remedial study can feel dispiriting, especially for students who dream of transfering to a four-year university.

...Yes, money matters. A lot.

Most California residents who attend a public college qualify to receive significant financial aid from state and federal programs. After taking this aid into account, the actual net cost for students to attend college varies significantly, largely depending on family income. This practice makes it hard to compare the cost of college in California with other states. The Legislative Analyst Office (LAO) periodically reports on this subject in its analysis of the state budget.

net cost of college in California varies

The cost of college is a topic of intense political interest, and there is enormous pressure to keep net costs low. In general, California has a history of holding tuition and fees flat for extended periods, followed by significant jumps when the budget faces a shortfall.

California's college tuition and fees are lower than those in most other states, especially for state residents. Even so, college is dramatically more expensive than it was a generation ago. Tuition is only part of the price tag — for most, the biggest challenge is the cost of housing. College is a major financial burden for most families, many of whom must fund short-term college costs through long-term debt.

California's college tuition and fees are lower than those in most other states.

Faced with rising tuition and declining aid, students have taken on loans in unprecedented amounts, especially for four-year degrees. In California, over half of students who graduate from a four-year degree degree program emerge with debt. For those who incur debt, the average burden exceeds $28,000.

As always, averages conceal extremes. Some students carry ruinous debt burdens. In 2022, aggregate, college loans in America surpassed 1.76 trillion dollars, exceeding the outstanding balance for credit cards, auto loans, and home equity loans. A 2019 analysis of US Department of Education data by the Center for American Progress (CAP) found that among those who borrow for college, one in three carries more than $40,000 in debt. The think tank published a blistering rebuke of the way that the US Department of Education measures student loan defaults under the title "The Student Debt Problem Is Worse Than We Imagined."

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

The challenges of college affordability are not limited to four-year institutions. In 2019 the California Budget and Policy Center released a "data hit" comparing the average cost of attending community college in California on a full-time basis with 2018-19 financial aid. Even though California's community college costs are lower than other states, they are still a real stretch or out of reach for many:

Source: California Budget and Policy Center, May 2019. Assumes student earns $11 per hour and works 15 hours per week during school year and 40 hours per week during summer. Reflects deductions for taxes and some summer expenses. For more see the full data hit.

The problems of loan distress and student bankruptcy are substantially worse at for-profit private colleges than at public colleges.

When you take out a college loan, you are the collateral

College loans have become popular with lenders because earning a degree enhances a student's future earning potential. These debts are unlike home loans or car 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 collateral. In order to encourage lenders to make loans to students, college loans have been made difficult to discharge through bankruptcy.

Student loans can provide necessary assistance for students looking to pay for college, but the debt problem is real. Students who take out large loans may remain in debt for decades. Such financial struggles tend to hit students of color and students from low-income backgrounds the hardest. Among students who began college in 2011, the default rate for student loans among white students was approximately 13 percent by 2017. Among Latinx students, the default rate was approximately 20 percent, and among Black students, it was approximately 34 percent. Default rates remain especially high at for-profit institutions, which disproportionately serve poor and minority students.

The Biden administration made a policy priority out of college debt in 2022, extending the timeline for students to repay federal loans.

What is FAFSA?

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).

These applications are complex, but they are also standardized, and there are a lot of people who can help fill them out. Today's students should take at least some comfort in the knowledge that the process is much easier than it used to be. The state’s Cal Grant program helps hundreds of thousands of California families pay for higher education, incorporating federal and state sources of support.

The availability of financial aid varies from year to year depending on federal and state budget choices. Aid programs tend to favor students who are willing to make a commitment to work as teachers in high-need communities.

Under the California Dream Act, non-citizen resident students also became eligible for financial aid in California colleges in 2013. 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.

To encourage college-going, some American school districts decided to make FAFSA submission a high school graduation requirement. This simple policy change boosts college enrollment rates so strongly that in 2021, California passed a bill to require all high school seniors to fill out the FAFSA, though they can opt out. Adding the requirement boosted California's FAFSA completion rate from among the worst in America to among the best.

How Scholarships Drive Tuition… Up?

Scholarships, or discounted tuition rates, are a cherished dream for college applicants. Selective colleges offer them to snag particularly attractive applicants. These financial incentives have an unavoidable dark side, of course: if Peter pays less, Paul must pay more.

Next Steps

Many organizations want to help boost the number of students who complete college.

  • FAFSA (Free Application for Federal Student Aid)
  • The ACT web site provides an overview of the various types of financial aid and how to apply for them.
  • The California Community College system provides financial advice through its page I Can Afford College!
  • The College Board (makers of the SAT and AP tests) provides tips on paying for college.

Updated April 2018
June 2019
October 2021
May 2023.


Which ONE of the following is TRUE?

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Questions & Comments

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user avatar
Jeff Camp - Founder April 4, 2024 at 1:41 pm
Really useful Guide to Financial Aid by GO Public Schools. This well-written guide demystifies terms (e.g. FAFSA, CADAA, Student Aid Index) and explains the applications step-by-step. Bravo, GO!
user avatar
Carol Kocivar April 26, 2023 at 7:09 pm
Trends in College Pricing 2022 from the college board
The good news is that costs are not growing as fast as in prior years. I hope that's good

Lots of charts:
user avatar
Alisa Sabshin-Blek August 25, 2020 at 9:46 pm
The cost is absolutely prohibitive, effectively making an impossible barrier for so many children. The dream of a college degree is becoming less attainable.
user avatar
Jamie Kiffel-Alcheh December 7, 2019 at 4:09 pm
It would be very interesting to see a comparison chart between cost of education and potential salaries for various jobs.
user avatar
Sonya Hendren June 11, 2020 at 2:49 pm
Hi Jamie, Here is a chart comparing US salary range to education cost, for 50 different jobs. Zoom in to view
user avatar
Susannah Baxendale March 28, 2019 at 10:43 am
As a university professor I was frustrated by the number of students whose work/study jobs made it nearly impossible to come to office hours for the help they needed, even if I offered special appointments. They were clearly not getting what they should from being at university, not dissimilar from the student athletes who had so many practices and games that their education was slighted in the extreme. I know intellectually that work/study enables more students to attend university (I don't know where it falls in the student loan/debt situation but hope that it meant as they worked they were not accruing debt), but if you attend and can't benefit particularly, is that acceptable? Not to me as a teacher, not to me as someone who wants students to actually learn.
user avatar
Jeff Camp September 23, 2018 at 4:24 pm
Many teachers carry debt from their college degree, and some of them have had the expectation that they will receive loan forgiveness under the Public Service Loan Program, which was created under the Bush administration in 2007. According to the Consumer Finance Protection Bureau these programs have largely proven to be long on promise and short on forgiveness, denying relief to literally 99% of applicants.
user avatar
Gloria Lucioni January 6, 2019 at 10:56 pm
In CA high achieving school districts students with higher test scores and AP grades get ranked lower bc they are not the top 5 to ten in the graduating class in schools like UCLA. How much do you think extra AP grades and high test scores should matter for all CA graduates? Common applicants get higher rankings according to high school graduate rankings but these rankings rarely relate to past API scores for schools or newer standards to rate more competitive schools. Do you think this type of rewards is fair or just? I am not sure but curious what others think.
user avatar
Jeff Camp August 16, 2018 at 3:06 pm
Over 9 out of 10 students who transfer from 2-year to 4-year colleges do so without collecting a 2-year degree that they might be qualified for, according to a 2018 National Student Clearinghouse study on college transfer systems.
user avatar
Jeff Camp August 16, 2018 at 1:48 pm
High school graduates in poverty in California are guaranteed significant financial aid at California public colleges... but there's a catch. They have to advance to college directly after earning their diploma to qualify for the most important form of aid: Cal Grants. If they delay by a year (for example to work and save up money for college), the guarantee disappears. They remain qualified for "Competitive" Cal Grants, but as the California Budget and Policy Center explains, there's not enough money in the budget to support them.
user avatar
Carol Kocivar April 8, 2018 at 1:04 pm
The California Budget and Policy Center finds that State Spending Per Student at CSU and UC Remains Well Below Pre-Recession Levels. Their conclusion?
"This places a greater financial burden on students and their families and puts a CSU or UC education out of reach for many students from low-income households."
Read their brief
user avatar
Carol Kocivar April 8, 2018 at 12:46 pm
For policy wonks... Here are some ideas on how to create debt free college in California.

LAO Report
user avatar
CM April 2, 2018 at 11:49 am
I don't agree that middle class families in CA should pay high taxes and high tuition. Why do illegal immigrants get a free ride? I don't want my tax dollars to fun higher education for law breakers, while saddling our children with student loans.
user avatar
Gloria Lucioni January 6, 2019 at 11:00 pm
My boys are at out of state schools while out of state students come here to pay higher intuitions than we might at UC Schools. Should there be college tuition vouchers for tax payers for private or out of state university students for families who have students with high GPA's and test scores? Is out of state and higher tuition paying" diversity" part of the new CA funding formulas ? Tenure is not cheap!
user avatar
Jeff Camp - Founder March 27, 2018 at 12:01 pm echoes that California's colleges are LOW cost relative to other states, except when it comes to the cost of housing.
user avatar
Gloria Lucioni January 6, 2019 at 11:02 pm
Housing crunches you. Out of state students are well received bc they pay higher tuition rates. CA does not base costs on 2 or more years of legal residency like UVA or other state universities.
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!
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