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By MICHAEL MacDOWELL
Friday, September 17, 1999 Page: 8A
By the mid 1990s, the cost of at tending college had catapulted upward to
Americans’ third biggest worry, superseded only by the cost of housing and
medical care. The issue became so worrisome to the public that Con gress
formed a Na tional Commission on Cost of Higher Education in 1998, which
issued a full report.
Since 1993, the cost of attending college- including tuition, fees and
board- rose 38 percent in inflation-adjusted dollars. Why have college costs
increased so rapidly? The question is complex but the answers fall into three
main categories:
1. Technology, labor and maintenance costs have risen much higher than the
consumer price index, the goods and services which colleges and universities
buy, over the last 20 years. Plus, tuition and board were kept much lower than
the consumer price index during the 1950s, ’60s, and ’70s.
2. Education is a labor-intensive industry, so in spite of technological
advances, labor continues to make up as much as 90 percent of the cost of
running an average college.
3. The demand for a college degree has increased substantially in the past
20, and high demand always increases price.
The public still believes that higher education is vitally important, wants
it for its children and, despite the high cost, thinks it represents a good
value. According to a recent American Council on Education survey, the average
college graduate earns $30,000 more a year than does the average high school
graduate. The quality of life, the capacity to think critically, understand
global issues, etc., also expand significantly with a college education, but
are not measurable in pure monetary terms.
While the public feels the price of college is high, the price does not
cover the full cost of a higher education. In fact, everyone attending a
college or university receives some kind of subsidy from endowment earnings
and fund raising. At state supported and related institutions, the greatest
financial support comes from the taxpayers.
Despite the fact that parents and grandparents rightfully worry about the
cost of a college education, the financial assistance they give their children
and grandchildren has only modestly increased in the past few years, and, in
fact, has diminished in proportion to the average price of attendance. The
U.S. Department of Education reports that average cash gifts from parents
covered about 70 percent of the total price of college in 1986-1987, but only
52 percent by 1992-1993 and 17 percent by 1997-1998.
While parents are covering less of the cost of their child’s education, the
reasons they are doing so are not as clear. Parents may be faced with
increased consumer debt such as credit cards. They may not have started saving
early enough or their household incomes may not have grown in real terms at a
rate equal to that of the cost of college.
The U.S.A. Group Foundation, an organization founded by one of the largest
providers of student loans, also suggests there may be a lack of willingness
by parents to contribute to their children’s education because of the
ever-increasing availability of student loans. This method of financing an
education, however, often creates hardship on students as they struggle to pay
off their loans, usually at the beginning of their careers when their salaries
are low. And as Fortune magazine reports, some college graduates are finding
that student loan payments are onerous enough to deter any savings for homes,
retirement or their own son’s or daughter’s college education.
There are some good answers to the dilemma of rising college prices,
limited savings and falling financial support from parents.
Recently the Federal government has authorized educational IRA and prepaid
state tuition programs in certain states like Pennsylvania. In an educational
IRA, pretax dollars of up to $500 per year can be placed into a savings
account for a young child. By the time the child reaches college age, the
account will cover most of the cost of that student’s education.
Another promising development is that some private colleges, non-profits
and investment firms have banded together to form a savings program that
“locks in” the cost of an education. A parent or grandparent can put away an
amount equal to the cost of the current tuition at a participating college or
university and lock in that tuition as fully paid. Many colleges and
universities participate in these programs.
A college education is clearly one of the largest purchases a family will
make, but its return is far outpacing the initial investment. It is important
for parents and grandparents to think early about ways to make a college
education possible for the future college student.
Dr. Michael MacDowell is president of College Misericordia in Dallas.