College Tuition: Out of Control

A recent article in NJ Advance Media compared the tuition costs of NJCU ( the old Jersey City State), St. Peter’s University and Stevens Institute of Technology, and projected out tuition costs through 2037. The results are disturbing, to say the least.

The study deals with tuition and fees only, and assumes a 2% increase each year. The study does not include room and board which could add another $10,000 to $20,000 to the equation. For 2019, NJCU has tuition and costs of $12,386. St. Peter’s, $37,677 and Stevens, $52,598. If you add in $15,000 for room and board, we are talking over $52,000 per year to go to St. Peter’s.

But, there are projected increases. In this study, they assume 2% per year (although colleges have raised their tuition over the last 20 years more than twice the inflation rate). So, by 2037, you can expect tuition and fees to be $31,390 for NJCU, $83,740 for St. Peter’s and $107,349 for Stevens.

So, what is going to happen? Well, we see many presidential candidates saying that all student loan debt will be forgiven. But “forgiven” means that the taxpayers foot the bill. Frankly, that is not feasible. College grads earn significantly more than non-college grads over their lifetime. How can you have people earning less money subsidize people who earn more money? Also, people who sacrificed to avoid student loan debt will be subsidizing those who took the money. I may be wrong, but I do not see the American people buying into that scenario.

Something has got to give. I do not have a crystal ball, but I see a combination of initiatives that can reduce the cost of college to the student.

Administrative expenses at colleges have grown exponentially over the last 40 years. Much of that is the result of the government becoming more involved. A balance has to be found which will insure that fundamental student rights are fostered but without having a dean and staff for every group on campus. Belt tightening is in order.

529 programs have to be expanded and modified. Although 529 plans originate in the Internal Revenue Code, in practice it is a federal/state program. Each program is specific to your state. Currently, most investments in education savings plans allow earnings to grow tax free, and allow the taxpayer to withdraw up to $10,000 per year for a qualified educational expense. Given the current tuition rates, qualified withdrawals need to be increased.

Most colleges and universities (private and public) have endowments. Ivy League colleges are using some of their vast endowments to provide grants to their students whose family earns less than $100-125,000 per year. Now, very few colleges have the endowment of a Harvard or Columbia, but colleges can be required to set aside a fixed percentage of the earnings on their endowments for financial aid in the form of grants. To insure that colleges actually follow through on this initiative, failure to comply with set asides could subject the endowments to tax.

Finally, the Bankruptcy Code was modified in the late 1990’s to make student loans non-dischargeable except in cases of undue hardship. Undue hardship is very difficult to prove in court, believe me. However, before the 1978 Code, student loans were dischargeable. Under the 1978 Code, you could discharge the balance on your student loans if you made payments for 5 years. In the 1980’s, the law was amended so you had to make 7 years of payments to get a discharge. Congress should look back to the future and come up with a rational compromise to assist our students in debt so they can move on with their lives.

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