College Costs: It’s More Than The Dollars Spent

 Paul Wrubel : Guest Blogger: pwrubel@collegecompany.com

We all know that college costs are rising dramatically. According to the College Board, the typical college price tag has increased by over 30% in the last five years.  But that tells only part of the real story.

A college degree should be attainable in four years or less but across the board it is taking longer.  Depending upon where you enroll, recent figures from the College Board suggest that it will take an average of 6.2 years at a public college and 5.3 years at private colleges. Too often as we assess the increased cost that accompanies extended college, we simply tack on the out-of-pocket costs to the extra years needed to obtain a degree but there is more, much more to consider.

In another recent survey, colleges were asked about the percentage of students who graduated within six years…six years!  Averages in the high eighty percent bracket or above were considered to be solid colleges but few in number.  But wait! What is so laudable about taking six years to complete a four-year program?  Whatever happened to the four-year standard?

Tolerance for a six-year college experience is in part the result of a faulty and incomplete accounting of costs.  When projecting the costs of college, add to the cost mix not just the cash outlay of another year or two but include “opportunity costs” as well.  Opportunity costs refer to the income the student could have been earning as a college graduate if he or she were not languishing an extra year or two at college.  Using this math, the cost of year five or six dramatically escalates.  Thus, as you look into various colleges, it makes sense to ask each college, “What percentage of the students graduate in FOUR years?”  If they respond by saying they don’t know, they do know but they just prefer not to tell you.

So when you are planning to deal with college costs, you would be well-advised to always consider opportunity costs.  That may make some low-cost, “knee-jerk” choices like community college or a local public, four-year college within commuting distance, actually more expensive in the long haul than colleges that may have higher sticker prices but a more predictable, four-year path to a degree.  Remember too, things are not always what they seem.  For instance, in California, with one of the nation’s largest community college systems (110 institutions serving over 2.5 million students), a report published widely in early November 2006, revealed that among those who entered community college with the intent of transferring to a 4-year college, only 1 in 4 actually did that and for those who made the transfer, the total time spent on the road to a college degree was in excess of six years or, put a different way, another $70-100 thousand dollars lost in opportunity costs alone.  This does not include the substantial out-of-pocket cost of college in years five and six.  Even more sadly, fewer than 1 in 10 who went to community college in search of a two-year (AA) degree ever got one.  In fact, the report noted that about 25% of the new students entering community colleges each year drop out before the second year.  Where’s the bargain in all of that?  (Despite the generally gloomy picture, there may be some downstream benefit.  Several studies have shown that a little college, even if it does not include a degree, seems to have some lasting social and personal benefits.)

The relatively painless remedy for such woes is to understand how you will pay for college before you even look at colleges. With that knowledge, college selection is more likely to be based upon fit and not cost and those of us with long experience will bear witness to the fact that students who are happy and well-adjusted in a public or private college setting typically get a degree in four years.

In an age where college costs are spiraling upward and where the raging bulls in the china shop are increasing student debt and the very real threat to parental retirement security, timing becomes more important.  College should take four years.  Students and parents electing to enroll in colleges that take longer should do so with their eyes and pocket books wide open.  Before you sign on any college’s enrollment dotted line, be certain that you are prepared to pay a premium for any extra semesters needed to attain your degree.  According to the Project on Student Debt, nationally, student indebtedness is averaging about $25,000 with an alarming number of students carrying much higher debt in the range of up to $100,000 or more and because that high-end debt undoubtedly includes private student loans, some are paying interest rates “as high as 19%”. The National Association of Student Financial Aid Administrators (NASFAA) reported in its daily bulletin of October 26, 2010, that the current total amount of college loans taken out in the academic year 2009-10 was $97 billion!  And that includes only public loans. Escalating student and/or parent college debt and opportunity costs share the same parentage, time.

Paul Wrubel is a college adviser and expert on college tuition and costs.