Those Scary College Costs

THESE ARE THE TIMES THAT try the souls of high-school seniors all over America-the moment, after months of anxious waiting, when you find out if you Got In. The mail carrier comes and leaves the envelopes, some fat and others thin: a fat one means you made it, a thin one means you didn't. In late March, Eli Strick, a senior at Nottingham High School in Syracuse, N.Y., got a welcome batch of fat envelopes from schools like Brandeis and The American University. On April 5, Eli chose Brandeis, partly because of its academic program and partly because it's close to college-crazy Boston. "The atmosphere in our house has become a lot more relaxed," says his mother. "After four years of hard work and months of pressure and anxiety, there's a tremendous sense of relief. Eli is lightening up."

Congratulations, Eli, and may your college experience be Extreme. But for those who pay the bills, like Lisa and Peter Strick, the anxiety is only beginning. Peter Strick is a neurophysiologist, and his wife is a freelance writer: their combined income is just over $100,000 a year. Next year the Stricks -will shoulder the load of putting two kids through college at the same time: Benjamin, their older son, is finishing his sophomore year at Bates College in Lewiston, Maine. Tuition, room and board at Bates cost $27,415 a year; the tab at Brandeis is $28,827. Since neither Ben nor Eli gets any kind of financial aid, the Stricks are paying full price-$56,242 a year -to send their sons to school. "I don't want to come off as poor-mouthing or whining," Lisa says. "But these next two years will be killers for us."

Divide the annual cost of a school like Brandeis by the number of weeks (28) in the college year, and you get $1,000 a week-which is more than the weekly income of about 70 percent of the nation's households. It is also, of course, a price paid by only a relative handful of affluent families whose children attend prestige schools-the Ivies and 30 or 40 big-name institutions like MIT, Stanford and Duke. The average cost of a year at a private college or university is significantly less ($17,631) and the average cost of attending a public four-year college or university is lower still: $6,823. Still, prices are rising in every sector of the $200 billion-a-year industry that is higher education in America. Despite a gradual slowing since 1990, the total cost of attending private colleges and universities has grown 95 percent, more than twice the rate of inflation, since 1984. Total costs for attending public institutions have gone up by 82 percent. These trends raise serious questions about the affordability of higher education now and in the future. And while a college degree has probably never been more necessary for the young, it has never seemed more burdensome to the American middle class.

The result is an epic case of sticker shock that is shaking the foundations of higher education (page 59). Consumer resistance is being felt by virtually every college and university in the country. Price-cutting is rampant, at least among smaller and less prestigious private schools, while the cumulative total of tuition loans--$100 billion since 1990--is soaring. College presidents are uneasily aware that the golden age of burgeoning budgets and mushrooming institutional growth is over, possibly forever. Employers, governing boards and budget-conscious state legislators are asking tough questions about productivity and faculty workload, while parents and students, to judge by the explosive rise in applications to elite universities, have never been more obsessed by the market value of a blue-chip college degree. To its critics, American higher education has never seemed more bloated and out of control-and to some, at least, it is a system that is losing sight of both its educational mission and its historically lofty ideals.

THE VIEW FROM WITHIN THE ACADEMY IS less alarmist. Higher ed in the United States is an enormously powerful institution that is arguably the best in the world--a diverse array of 2,200 four-year colleges and universities that now enrolls 8.8 million students, including 5.2 million full-time undergraduates. It is a prolific producer of new knowledge, a source of expert counsel to government and business, and the primary trainer of the nation's professional, managerial and technical elites. Its perennial problem, to those who know it best, is keeping these divergent goals in balance--to ensure that the educational needs of the young are met even as teaching techniques (and the very definition of what it means to be "educated") change. This is no easy task, and it is vastly complicated by continuing conflict over affirmative action, social and ethnic diversity on campus and "politically correct" curriculums. Still, as Stanford president Gerhard Casper says, "the quality of teaching at American colleges and universities is incredibly high--higher than in most other countries [and] higher than it was 30 years ago."

But pity the poor consumer. For most families, higher education will be the most expensive service they'll ever buy. It is also a marketplace full of snares and illusions. Consider this paradox. High as they are, the tuition and fees listed by most elite colleges do not cover the full cost of educating undergraduates (chart, page 61). Nevertheless, most schools use tuition-and-fee revenues to subsidize less affluent students: at Harvard, for example, about 70 percent of the undergraduate student body receive some form of financial aid. That means colleges and universities that maintain "need blind" admissions policies are quietly playing Robin Hood. This angers some parents, and university officials can only insist on their good intentions. "We don't do it as a social scheme to redistribute income--we do it to enroll the best class we can," says Ted O'Neill, dean of admissions at the University of Chicago. "Having said that, there clearly is a redistribution here. The question is how to do it right." The mechanism, as parents know, is a disclosure form that produces what is known as the "expected family contribution." For a well-to-do family with only one child, the bottom line will probably be the same as the listed tuition. But for less affluent families, and families with more than one college-bound child, the price break can be substantial.

The real-world effects are getting stranger as tuition costs go up. In New York, for example, the median family income of students in the state university (SUNY) system is rising--which suggests that affluent New Yorkers have caught on to the fact that their children get a whopping subsidy from the taxpayers if they attend one of the SUNY's excellent schools. Rising competition for enrollment among small private colleges, meanwhile, has led to widespread discounting from the listed price. Consider Lawrence University, a well-regarded private institution in Appleton, Wis. Tuition, room and board at Lawrence run about $22,000 a year, but the school offers a bewildering array of individually tailored financial-aid packages. The result, according to a computer analysis performed at NEWSWEEK'S request, is that the 1,227 undergraduates now enrolled at Lawrence are paying 755 different prices to attend.

SOME ECONOMISTS COMPARE THESE PRICING POLICIES to airline fares -- the plane is full, but virtually no one paid the same ticket price. Another metaphor is the "gas-war mentality." That means consumers, increasingly aware that different colleges offer different levels of financial aid, are aggressively shopping for bigger discounts. According to Barry McCarty, the financial-aid director at Lafayette College in Easton, Pa., some parents try to pit one college against another to get a better deal. "I've had people say to me, "I'm just not going to pay the tuition bill,' and that's regardless of how much money they make," McCarty says. "They'll shake you down--that's now the modus operandi. The fact is, they are going to maximize the deal."

The further truth is that "financial aid" increasingly means loans, not scholarships or grants. The shift from grants to loans is nationwide, and it has been going on for at least a decade; it has the support of Congress, the Clinton administration and many in higher education. The good news is that total student aid is rising as college costs go up. But more than half the $47 billion in financial aid that was available to parents and students in 1994-95, according to the College Board, came in the form of federally underwritten college loans. So while it is true, as many college officials maintain, that the vast majority of applicants can find the money to go to college, it is also true many students will leave college burdened with at least some debt.

Borrowing in moderation can be a smart way to stretch out the cost of a college education, but smart borrowing demands knowledge and and a bit of common sense (Jane Bryant Quinn's column, page 67). In 1992 Congress revised the federal tuition-loan program to allow borrowing without regard to family income. The predictable result is an explosion of debt--$24 billion during 1994 alone. Critics warn that the debt load will rise even more in the next decade, and some experts wonder whether students and their families fully understand the financial risks. Terry Hartle, vice president of the American Council on Education, says he is "convinced that a lot of students do not have a real good sense of what they're getting into" when they borrow. Hartle says he found that students who sought financial counseling frequently failed to understand basic realities, such as the fact that they were paying interest and were required to keep up with monthly payments after graduation. He also says the most commonly asked question from parents was "How can I make my child responsible for this loan?" Donald Stewart, president of the College Board, argued last fall that college is still "very affordable" for the average family, assuming a willingness to borrow. But, Stewart added, "as a nation, we should look hard at the growing imbalance between grants and loans and ask ourselves how much we can reasonably expect students to borrow. A college education should help people create a better future, not a deeply mortgaged future."

To many parents, the best measure of the value of a college education is what a particular school's diploma is worth when the graduate applies for a job--credentialism. That is why the Ivies and other big-name universities are enjoying a tremendous surge in applications. "If you're a young person or a parent, you want to go after the best insurance policy you can get," says former Harvard president Derek Bok. "The result is, we're seeing an increase in the number of applications and the quality of students. If we're seeing more interest in credentialing, it's because [students and parents] feel they need more of an edge in a world they can't feel complacent about."

DOES CREDENTIALISM PAY OFF? IS AN IVY LEAGUE degree worth $1,000 a week? The evidence, it seems, is mixed. A study by three economists at the University of Pennsylvania (an Ivy League school) compared the lifetime earnings of women who attended elite schools with those who didn't. "This study convinces me it's worth it," says one of the authors, Mark Rosenzweig. But caveat emptor: the conclusions were based on a sample of identical twins that included exactly 156 people, a very small database. Other recent studies suggest that attending a top-quality private college has only a marginal effect on future earnings--about $4,500 a year, according to one analysis. At that rate, it will take about 20 years for the average graduate of a blue-chip institution to earn back the extra tuition his parents paid. "If your object is to maximize income, you could send your child to the local state university and have him or her major in business and they'd do as well as at a private university," says Estelle James, an economist at the World Bank. "Going to a prestigious institution doesn't assure you of a high income."

No Ivy League parent will believe that, of course. Why should they? Economists ignore the intangible benefits of an elite education -- the world-class scholars, the bright and serious kids, the cultural tradition of the inquiring mind. And these studies share a common flaw of the dismal science, which is their reliance on the average earnings of an average graduate. There are no "average" students at Harvard or Smith or Stanford or Duke--for at $1,000 a week, how could there be?

In our April 29 article "Those scary college costs" (Society) we incorrectly described the sample for a University of Pennsylvania study on the value of attending elite colleges. The study used 156 sets of twins, not 156 people.