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Uncle Sam Picks Up the Slack As Colleges Raise Costs

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The National Center for Education Statistics released a report earlier this week that revealed a startling fact about college education: More than half of U.S. students are depending on federal financial aid, the most since scores of returning American soldiers went to school on the GI bill. 

According to the study, 71% of all undergraduate students took out some kind of financial aid in order to pay for their educations, and 57% relied on federal funds. This represents a 10% increase from the 2007 to 2008 school year. In that year, less than 66% of all undergraduates received some kind of financial aid.

Why is the need for financial help -- particularly federal help -- escalating in such a fashion? There are several reasons, but one stands out: College costs are soaring, threatening the ability of many to attain that coveted four-year degree.

Costs rising higher than inflation
Tuition and fees are increasing at a much higher rate than the current 1% yearly inflation rate would seem to warrant. According to College Board, an education support organization, average tuition and fees rose for in-state students at public colleges and universities by 4.8% for the 2012 to 2013 academic year, with a commensurate 3.7% hike in room and board charges. The price acceleration rate for private, for-profit colleges increased less, but still clocked in at a hearty 3%.

As colleges and universities begin to reopen their doors for the fall semester, President Barack Obama has called for a slowing of the uptick in college costs. Ratings agency Standard and Poor's has released a report noting that most students can't attend college without "significant" aid.

Federal money takes up a bigger portion of the student aid pie
As parents are less able to help their college-age students defray costs, many more turn to other forms of help. Just as the number of students receiving aid and the amount of that assistance has been growing since the 1991 to 1992 school year, the percentage of money coming from federal coffers has increased, as well. College Board notes that, as federal grant aid has increased, other forms of assistance have been moving in the opposite direction.

For example, institutional grants have dropped by 4% since the 2007 to 2008 school year, and private and employer funds have decreased by 7%. The money states kick in has fallen by 3%, as well -- while federal aid has jumped by 13% in the same time period.

Similarly, the amount of federal loan dollars have increased since 2007, too, as has the default rate. Last year's data on this metric showed that the three-year default rate for students who had begun paying back their loans in 2009 was 13.4%, with 47% of the defaulters having attended for-profit colleges. Though the government is usually able to collect 90% of these loans, estimates regarding the expenses incurred in order to do so could top $38 billion for the 2012 to 2013 academic year.

Students and taxpayers pay for astronomical college costs
As college expenses continue to rise, the amount of college debt that students carry will become more weighty. And, as more students default on their college loans, the taxpayer will have to pick up the tab.

It's doubtful that colleges will begin reining in costs just because the president encourages them to do so. But, as S&P infers in its report, these institutions may be in the process of putting themselves out of business, as the costs of an education begin to outweigh the benefits.

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  • Report this Comment On August 25, 2013, at 10:16 AM, JePonce wrote:

    More illusion that government wants to help students who have loans. It is a pre-2014 election rhetoric. The program is only for those currently in school.

    The tens of thousands that have graduated and cannot find a job have been left out to dry.

    Nor is there any assistance for parents with their loan+, which is usually larger than the student's debt. Additionally, parents pay a usury rate.

    I have two loans for my 2 children, which, combined cost $511.04 a month. One loan has an interest rate of 8.0% and the other at 7.23%.

    I am well into retirement, so the expense hurts. On the up side I will die owing a large balance. I have already instructed my children to tell government to go to h*ll when they come around and try to get them to pay it off, which they will.

  • Report this Comment On August 25, 2013, at 11:01 AM, luckyagain wrote:

    This is just one of the many affects of the huge military/industrial complex of the US. The US spend more on defense than the next 14 largest spenders. The US has been in a wartime economy since 1940 and can no longer afford to be the world cop. The US has over 700 military bases in over 100 foreign countries. Defense spending has been crowding out other expenditures.

    Spending on education is an investment in the future of the US. Without an educated workforce, a modern society cannot be maintained. Defense spending is given such a high priority, that it has led to cuts of college aid to the states. The states in turn have cut aid to colleges. And so more and more of the cost of education is being put on students. Do a search of "Students get cheated, on many level" and you can read about what is happening to college students and their parents.

  • Report this Comment On August 25, 2013, at 11:41 AM, CharlieTX wrote:

    Student loans, like other loans, promise a hamburger today for a dollar tomorrow, relying on people's need for low cost, instant gratification. Instead of taking the bait, students should work summers and outside of class time and pay their way through school. Graduating $100,000 in debt is crazy, but of course most students are too naive to know, and the banks making the "guaranteed" loans don't care. If student loans were treated like other consumer loans, as they should be, they would dry up overnight.

  • Report this Comment On August 25, 2013, at 11:53 AM, jessejr wrote:

    Another spin from the liberal media promoting the empty words coming from Obama to lure the youth for dems in 2014 & 2016. Obama can't take on the academe by the horns since majority of whom form their liberal base and are unionized. And the horn is the increasing cost of education brought by the escalating expense on salaries, health and pension benefits which now eats more than half of colleges'/ universities' expenses. Any reform will turn out later to be like Obamacare, only this time the milking cows will be publishers, school items suppliers, tax payers, big businesses, and working students. Just empty words from Obama and dems since future jobs will go to foreigners due to the immigration reform and amnesty by them. It's all politics for Obama & Dems and the media lie with them.

  • Report this Comment On August 25, 2013, at 12:39 PM, amysname wrote:

    If We the People (another name for Uncle Sam) are picking up the tab for a lot of these college students,are we making sure that OUR money is being well spent and that we are not just ADDING MORE to our welfare rolls?We should be sure that students have the ABILITY to do college courses and that they stay the course and get a degree that will be of use in today's world.In other words is it a HAND OUT or a HAND UP?

  • Report this Comment On August 25, 2013, at 1:23 PM, Eviltaxpayer wrote:

    Notice theres no effort to reign back the overpaid union democrat voting proffesors?

  • Report this Comment On August 25, 2013, at 1:56 PM, philthymcnasty wrote:

    This article is deliberately misleading, the numbers from this article include the GI bill, yet they have left any mention of that out.

    If they want college to be cheaper then they need to get rid of the gen ed requirement. Its not required in most European schools. that's partly why tuition in France for a good school can be as low as 600 a semester.

  • Report this Comment On August 25, 2013, at 2:29 PM, Dr56 wrote:

    What a skewed article.... Typical far left agenda,, starting the blender for 2014... It is a shame the costs of college have soared,, so many in debt,,, so many grads out of work... so many in the unemployment or welfare lines.. Just yesterday I read that 34 States say that being on welfare is more profitable than low income jobs..

    This article sorta reminds me of 2008 when there was a promise for Change,, then in 2012,, a change you change believe in.... rhetoric spins and hollow promises... to the young, the gulable and first time voters....

  • Report this Comment On August 25, 2013, at 3:01 PM, bahzing1 wrote:

    Thanks for the fact that when the parents that have the loans out for their kids educations, die, the kids aren't responsible for their parents debt......

  • Report this Comment On August 26, 2013, at 10:25 PM, GuessingFool wrote:

    I wish we would stop referring to borrowing money for education, that turns into the size of a house payment, as financial aid. It should be named for what it burden. It is a huge debt to take on for anyone much less for people trying to start out on their own. My concern is that these new workers will not live as financially secure as their parents.

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