As College Costs Rise, Worries Mount

By Paul Grondahl, Times Union, Albany, N.Y.

Feb. 4–Separate legislation that would cut interest rates on federal college loans and increase state grants for higher education can’t come soon enough for the O’Donnell family and their four children in college.

“My kids are all taking out loans, my husband and I are tapping into our home equity line of credit and doing everything we can to help them pay for college, but it’s killing us,” said Laura O’Donnell, whose daughter, Caitlin, intends to enter Union College in Schenectady as a freshman in the fall.

Tuition, room and board and fees at Union are $45,550.

That’s in between the going rate at Skidmore College ($46,750) and at Rensselaer Polytechnic Institute ($45,185).

It’s gone beyond a matter of sticker shock anymore. Call it college cost coma.

“It blows my mind how expensive it is,” said Ciara Robinson, a junior English major at Skidmore College from Charleston, S.C., who is editor of the student newspaper.

The worried discussion about paying for college that’s raging within the O’Donnell and Robinson households is typical of the growing volume in a national debate about the rising cost of higher education and the strain it’s placing on middle-class American families.

A bill passed last week in the U.S. House of Representatives would cut interest rates on need-based federal student loans in half, from 6.8 percent to 3.4 percent, over five years. The bill now goes to the Senate, which has signaled it will take up broader legislation aimed at reducing college costs and increasing Pell grants, fulfilling a promise made by Democrats when they won control of Congress in the November elections.

“We think the student loan interest rate cut on the federal level was good news for middle-income families,” said Terri Standish-Kuon, a spokeswoman for the Commission on Independent Colleges and Universities, which represents 110 schools across New York state.

The CICU schools are digging deep into endowments and other savings funds to help families afford their institutions. Standish-Kuon said CICU’s 110 private colleges now pay about $2 billion annually in financial aid to help families defray the rising cost of tuition. In 1980, they were paying $200 million a year in financial aid.

“It’s absolutely off the chart,” Standish-Kuon said.

In the next breath, CICU produces research that shows college graduates earn substantially more than people without college degrees and, over time, a college degree, despite its high cost, is still a sound investment.

Still, CICU’s lobbying priorities this year include increasing the maximum TAP award up from its current $5,000 and the maximum Pell grant up from its current $4,050 for low- and moderate-income families. Senate Majority Leader Joseph L. Bruno proposed a package of legislation last week that addressed CICU’s call to increase state financial aid for students.

In his executive budget released last week, Gov. Eliot Spitzer noted that New York leads the nation in funding for needs-based student financial aid and proposed $857 million for the state’s Tuition Assistance Program (TAP) in the coming year, a net decrease of $18.7 million.

While the politics of TAP are hashed out in the coming months, Standish-Kuon said the key is starting a college savings plan early. That’s why she began a college fund for her daughter at birth. She’s now 8 years old and contributes part of her own allowance to the fund because she wants to attend college.

“It takes a strong commitment and it’s a challenge, but it’s still doable for families to send their children to college and the payoff is tremendous,” Standish-Kuon said.

Ciara Robinson, of Skidmore, has another perspective.

“The price is over-the-top and it keeps going up every year,” she said.

Robinson’s family did not qualify for need-based loans. She is the middle of three sisters. The oldest just graduated and the youngest is a freshman.

Her dad is a commercial real estate appraiser who owns his own business. With an inheritance and his own contributions, her dad created a portfolio of stock investments as a college fund for his three daughters.

“It’s so much money my dad doesn’t like to talk about it, but he makes our education a priority,” Robinson said. “He’s 63 years old and he probably would have been able to retire by now if he wasn’t paying for our college education.”

A year of college at selective schools is now roughly equivalent to the price of a luxury automobile, a solid down payment on a house or a large chunk of a retirement fund.

Multiply the annual college cost by four years, or, in the case of the O’Donnells, four times four times four.

“It puts a lot of financial stress on all of us, particularly on my kids when they get out of college and have to pay back their loans,” said O’Donnell, of Camden, Mass. She’s an assistant manager at a Kohl’s department store and her husband is an engineer for Smith & Wesson. She said they’ve stopped going on vacation and have become frugal regarding all household expenses while their four kids — Caitlin is the youngest — are in college.

The oldest of the O’Donnell quartet is finishing a master’s degree in finance and will have to begin paying $600 a month to whittle down more than $25,000 he owes in student loans. Payments are due to begin within six months after graduation.

“Luckily, he’s got a job lined up, but it’s going to be a real struggle for him financially and I worry about my kids starting their working careers in such deep debt,” O’Donnell said.

She figures the total cost for her four children’s higher education — all four have chosen fields that require a master’s degree — will be in the range of $800,000.

“There’s been an inflation of degrees that makes it even more expensive,” O’Donnell said. “A bachelor’s degree is like a high school degree now. You have to get your master’s degree in order to get into a professional career.”

Various loans, partial athletic scholarships, work-study and other financial aid will leave her and her husband and her kids footing up to one-quarter of that total $800,000 cost.

Even at a 75 percent reduction, the tuition figure is staggering to Laura O’Donnell, and she is happy even for small relief such as the legislation to cut the federal student loan interest rate.

“It’s something, but I don’t think it’s significant enough to really help these kids,” O’Donnell said.

At least the interest rate cut is a move in the right direction after years without any relief, said James Nondorf, vice president of enrollment and dean of graduate and undergraduate admissions at RPI.

“I’m a big fan of anything the government does to make higher education more affordable,” Nondorf said.

About 90 percent of RPI’s 5,200 students receive some form of financial aid. The most common scholarship paid for by the school is the Rensselaer Medal, which is $15,000 a year.

“Anything that can reduce the shock for our graduates who have to begin paying back student loans is a good thing,” Nondorf said. “It looks like a really big number when you’re starting out right after graduation.”

Few families have to come up with the total cost of college.

At Union, slightly more than half of the college’s 2,100 undergraduate students receive financial aid and the average package — including state and federal sources and scholarships — is about $22,000. That leaves the average family to come up with $23,550 to pay the balance of the cost.

“Anything that helps families pay for college is positive,” said Laura Augustine, associate director of financial aid at Union.

This is the time of year that tries the souls of college admissions and financial aid counselors, who are poring over mountains of applications from prospective students seeking both academic acceptance into their schools and a package of assistance to help them pay for it.

Bob Shorb, associate dean and director of student and family finance at Skidmore, is buried in a pile of 4,000 financial aid applications. He brings a stack at a time to his Wilton home and reads through them off-campus, to avoid distractions.

“There’s a broad school of thought that more needs to be done across the board to address the cost of higher education,” Shorb said. “Unfortunately, there are so many programs competing for limited dollars on the state and federal levels.”

Shorb said his own daughter, Meredith, a junior at Vassar College, wouldn’t have been able to afford to attend college without the financial aid package she received. Even with various sources, the Shorbs were still forced to tap into their home-equity line of credit to help their daughter pay the $44,160 cost of Vassar.

Of course, the rising debt load for college students raises the possibility of a rising default rate on loans.

Richard Croak, an Albany attorney who specializes in bankruptcy cases, has to break the bad news with clients that a tightening of bankruptcy laws means college student loans are not forgiven even if a person succeeds in declaring bankruptcy.

Croak said he’s spoken to recent potential clients who piled up $90,000 and $140,000 in college loans. “They both have good jobs and one of them is an attorney, but they can’t earn enough money to pay back the loans,” Croak said. “Cutting the federal rate is going to help a little bit, but there are a lot of people out there who are in a desperate situation.”

Croak said he has filed some hardship discharge cases in bankruptcy court, but has not yet won one of those on behalf of a client because the standard is very high.

“Problems with college loan defaults are bad and going to get worse,” Croak said.

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