Rising Tuition Getting Explosive Reaction

Remember when the pepper spray incident at the University of California Davis made the news last year?  Do you know what the students were protesting?  Most were protesting against the most basic of all discomfiture… having money removed from their wallets in the form of increased tuition.  The video of the incident went viral on the internet and showed a policeman calmly walking back and forth dousing the seated protesters with pepper spray.  The incident soon became a symbol of the Occupy Wall Street movement.

Whether the pepper-spraying was right or wrong isn't being debated here.  What is relevant, however, has to do with one of many people's largest lifetime expenses: college tuition. Tuition at the University of California system has doubled over the last five years, and is set to nearly double again by 2016. In 2006, tuition at a UC school ran roughly $7,000 a year. By 2016, it could be as high as $22,000 a year.

Along with health care, college tuition has undergone its unique brand of extreme inflation.  In the last 25 years college tuition has gone up nearly four times as much as inflation in the main.  In the decade between 1990 and 2000 the amount spent by the average American family almost doubled. How have families and students dealt with the increase?  More debt.  In 2010 student loans overtook credit cards as the largest debt source in the nation.  Well over $800 billion. 

Why is tuition rising?  It’s really supply and demand.  The wages that one with a college degree can earn versus those without one is growing.  So the price for obtaining a degree has gone up too.  There is also the decline in state, local and federal government assistance.  With subsidies going down and costs going up, the money comes from the general public.

One study said that between 1999 and 2009, the total funding of public research institutions increased by 11%, but tuition surged more than 50%.  Private colleges have also been forced to rely on increasing tuition for funds.  After the economic downturn which began in 2008, California’s huge University of California system saw state funding drom from $3.2 billion to $2.3 billion.  All the while enrollment rose.  This year, for the first time, the UC system collects more money from students than from the state. 

Rice University announced in 2010 that it was raising tuition “to compensate for endowment losses,” which were estimated to be off more than 18%.  According to The Washington Post, the endowments of Harvard, Yale and Stanford all fell more than 25% after 2008. 

What concerns us a bit at ABC College Planning is that it’s getting to the point where a good college education is only feasible for those whose parents are wealthy enough to foot the bill, or those willing to sell. 

How much will tuition be when your students go to college? Do you have a plan for the cost of college when your students are ready?