Why is paying for college so complicated?

Why is paying for college so complicated?

Saving for and paying for college is an endurance test, often a forced march on a 50-year-old parade, where strange numerical codes and an absurd jumble of letters mark a path that Waze can’t map.

Start at age zero or earlier with a 529 college savings plan for your child, whether he or she is born or not yet born. Consult with colleges as children reach adolescence’ net worth calculator (NPC) to see how much financial aid they can get.

Then, fill out the FAFSA, which stands for “Free Application for Federal Student Aid” and determine your student aid index (SAI). The primary FAFSA output was known as EFC, or “Expected Family Contribution”, but a recent legislative effort aimed at “simplification” replaced one abbreviation with another.

Got into a great school? Good, but this grant amount is provided on the basis of that SAI or other data or any other form of data css profile, burping probably isn’t enough to make college affordable. So you can apply for federal plus loan For parents, that may take you 25 years to repay.

As the acronyms pile up, parents may feel the urge to chime in and ask a perfectly reasonable question: Why does it have to be this way?

The complexity comes from the countless number of well-intentioned people – inside and outside government – ​​who have enacted gradual reforms over decades to expand access to higher education. because a college degree can add a lot As for a person’s lifetime earnings and wealth if they’ve completed their degree and haven’t taken on a lot of debt, it’s good public policy to try to make it more affordable for more people.

But as income inequality grows and college costs rise, each new collection of new students needs more help. More counselors, programs, rules and relief almost inevitably leads to conflicting advice, new rules, strange loopholes and bad actors.

“We don’t have anything remotely resembling a coherent system of higher education in this country,” he said. Brian RosenbergPresident Emeritus of Macalester College and Visiting Professor at the Harvard Graduate School of Education.

To wit: Unlike many countries around the world, the United States lacks large, easily accessible national public universities. Instead, states developed their own major schools and regional branches, and the extent to which they subsidized their residents fluctuated with changes in political opinion and fluctuations in the economy.

So even though Americans have plenty of options — including community colleges that will let most people enroll — they aren’t necessarily affordable. A major reason (though not the only one): “As more people wanted to move, it became more expensive because states were not willing to put up enough money to make it happen for everyone,” said sandy bombA higher education economist and non-resident senior fellow at the Urban Institute.

Private colleges first appeared in the United States in the 17th century, and as they grew, they had to invent and refine financial aid. Some extended their generosity to some low-income students who were not able to pay anything, while many others used tuition dollars from wealthier students to cross-subsidize those with lower incomes.

It helped, but not enough. An extensive menu of federal assistance developed, including Loan For both parents and students; money for campus jobs, and lump sum Grant For low-income and other students.

States developed their own loan and grant programs. Each also created 529 savings plans (often two plans per state) and tax incentives different types Motivating people to use them.

As tuition fees increased, people started having trouble paying their loans. The federal response was all over the map – it became harder to repay the debt in bankruptcy, while it became easier to cancel the debt by working in public service or if your income remained low.

Easy on paper at least. The Department of Education hired outside loan servicers to collect loan payments and counsel confused young adults who made millions of calls. servants gave a lot bad adviceSuch as telling people they had to keep making loan payments during the early pandemic years to remain eligible for the Public Service Loan Forgiveness program.

One-time grants from the federal government – ​​money that families don’t have to repay – were never especially generous, This left most schools struggling to assess applicants’ ability to pay the additional amount and their willingness to do so.

To gauge ability to pay, many of the more expensive schools require a second form, the CSS Profile, which asks for information about things like a family’s home equity, if they own a home.

complicated? Sure. painful? Perhaps. But schools are at least striving for fairness when, say, figuring out whether that home equity was an asset a family should use for college.

“Two families with similar incomes, one renting and the other owning, are not equally well off,” Ms Baum said. Schools will then ask for a portion of that home equity each year — or none at all, if they can afford it without asking them to meet a family’s financial need.

As list prices increased, fewer households who had the ability to pay the full price (or the ability to borrow) were willing to do so. Now, all but the 35 or so schools, which reject the highest percentage of applicants—and thus are mostly protected by the laws of supply and demand—must offer financial incentives to at least a few affluent admitted students so they can advance. Can come.

Schools refer to this as merit aid – Presidential Scholarships, Academic Scholarships and so on. You may get nothing, or you may get more than $100,000 in four years, but unless you pay the application fee and wait months for an offer of admission, you often won’t. Know what it will be – and a price quote.

“I don’t think colleges are incentivized to simplify merit aid,” said Mr. Rosenberg, who has worked at three colleges that offer much of it. “The reason they don’t want to do that is because it feels weird. ‘We will give money to students who don’t need it‘Because if they choose to come, it will be beneficial to their bottom line.

But he hardly blames them, given that without it a school could not get enough students. people like expensive things, so a private university might keep its list price at $70,000 and then discount it an average of 50 percent. If this can motivate a student to say yes to a $15,000 merit aid offer, that $55,000 is $20,000 better than her average of $35,000.

However, no one needs to know this. “What sounds much better is: ‘We’re giving merit scholarships to great students,'” said Mr. Rosenberg, author of.Whatever It Is, I’m Against It: Protesting Change in Higher Education,

It is not that only private colleges create these problems. Talk of the mess — multistep applications, lots of debt — gets spread around, and many students who could benefit most from college never bother to apply. “Low-income students can basically already go to community college for free,” said beth acress, Senior Fellow at the American Enterprise Institute. “So complexity becomes a barrier.”

Without any kind of federal regulation or new laws, opaque pricing and steep discounting will continue. And yet some existing state laws encourage bidding for students. The University of Alabama, for example, has proven adept at using merit aid to lure out-of-state students at net prices that still work well for the school. Eventually, the Illinois legislature grew tired of him and created a new program Preventing the smartest teens from taking their talents to Tuscaloosa.

However, when schools band together to try to bring more order to price gouging proceedings, other branches of the federal government may step in to stop it. In an infamous meeting in 2013, A group of private college presidents considered On voluntary surrender on the basis of merit assistance, so that such low bidding is not done. The Justice Department got wind of this and sent a letter Attendees were asked to keep all documents safe for antitrust investigation. No one went to jail or anything like that for this, but discussions like this don’t happen anymore in big rooms with lots of people.

Reasonable proposals do not get a hearing in Congress, or they languish for years in various committees. For example, there is no universal net worth calculator. A proposed law This will allow people to enter their data once and get the results of each school.

Applicants who get into college often receive so-called award letters – term sheets, in fact, explaining the prices. Over the years, he has included 100 different terms For unsubsidized federal student loans, there is no law or regulation that would standardize communication. “It would be a good thing to be comprehensible rather than incomprehensible,” said katherine bond hillFormer president of Vassar College and managing director of Ithaca S+R, a consulting firm.

Any effort to simplify things and stop scaring people is welcome. But the efforts may also be insufficient for Mr. Rosenberg. After all, complexity is the result of millions of people trying to pay for hundreds of different types of degrees from thousands of schools – nonprofit, religious and secular, state and private. The choice is all American, and there is no need to shorten the menu much.

However college can be cheap, and it can solve many problems. “If the cost of producing education continues to rise, you’re chasing a rabbit you’ll never catch,” Mr. Rosenberg said. “Making it less expensive is the only way to make it more accessible.”

Ron Lieber is the Your Money columnist for The New York Times and most recently the author of “”.The price you pay for college,

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