In an Age of Constantly Rising Tuitions, This College Gives Full Scholarships to Every Student

Skyrocketing college tuition costs shackle students with more than $29,000 in student loan debt on average. Berea College is providing a Foolish alternative, offering full scholarships to every student.

Feb 12, 2014 at 7:35AM

Rising student debt represents a major barrier for college students and new graduates to start a lifetime of smart money management. There is one college, however, supporting all of its students financially while offering a quality education curriculum.  

First, the problem 
CNN Money reports that the average student loan debt of the Class of 2012 was $29,400. A survey from Fidelity suggests that college-related debt for students increased to over $35,000 for the Class of 2013; 71% of 2012 college graduates had student loan debt. "More than 600,000 federal student loan borrowers who entered repayment in 2010 defaulted on their loans by 2012," according to federal data as reported by the Project on Student Debt. 

In other words, after spending several years in college, students are typically saddled with debt that could potentially take decades to fully pay off. Not the strongest start to a life of Foolish financial independence.

Bloomberg reports that the price of college tuition increased 1,120% between 1978 and 2012, far outpacing price increases in medicine, housing, and food over the same period. As college tuition skyrockets, so does student loan debt. So non-Foolish. 

Enter Berea College
Berea College is probably not a name widely known by most people. This relatively small liberal arts school -- I am presently one of Berea's 1,600 students -- has been nestled in the foothills of central Kentucky since the 19th century. 


Berea College offers full tuition scholarships to every admitted student. These are full four-year tuition scholarships, valued at approximately $100,000, given to each student. Students pay a portion of room and board, as well as other semester-to-semester costs for items such as textbooks. These expenses over four years pale in comparison to the average student loan debt incurred by students across the U.S. Berea students on average graduate with $7,600 in student loans, a third of the average student loan debt in the U.S. Approximately 25% of Berea students graduate without a lick of debt. 

Berea, however, takes it one step further. The college only accepts students with "strong academic potential and financial need." Berea offers full scholarships to students with limited economic resources who otherwise would have few (if any) chances of pursuing higher education opportunities without incurring substantial debt. 

Unlike most colleges, the majority of Berea College's revenue is not generated through tuition. Rather, nearly 80% of the college's operating budget is covered through interest income from the endowment, with the remaining gap filled by annual gifts and federal and state education grants. This model, possible thanks to the accumulated donations of thousands of generous donors over decades, enables Berea to offer full four-year scholarships to every incoming student. 

Berea's model could be replicated by other colleges and universities over time, but requires a focus on saving (rather than immediately spending) the majority of funds donated to the institution. Berea's large endowment of over $1 billion places the college in the top 10% in endowment size of U.S. colleges and universities. "The school uses its considerable endowment to lower costs to students," observes Richard Vedder of The Chronicle of Higher Education, "not shower resources on the other major claimants of resources within the college community." 

A noble mission rooted in practicality 
Berea College was founded in 1855 by John G. Fee, an abolitionist minister. Berea was the first interracial and coeducational college established in the South; not only were black and white students educated together, men and women learned alongside one another as well. Before the Civil War. This, coupled with the college's long-standing commitment to the Appalachian region and lower-income students, helps Berea stand out in the world of higher education. 

Berea is one of only seven colleges in the U.S. classified as a "work college." Every student is required to work at least 10 hours per week in the college's nationally recognized labor program, which includes student positions with facilities management, groundskeeping, the wood shop, campus life, and a myriad of other labor positions. This structure enables students to gain practical skills while learning that "labor, mental and manual, has dignity as well as utility." 

And no, writing this article does not satisfy my labor requirement as student government president! I am writing this article because Berea deserves to be more widely known, especially in a time when student loan debt is crippling a majority of college graduates. 

Why Berea is so Foolish
It is often quipped in the Berea community that Berea offers the best education that money can't buy. Some might assume that because the college offers full tuition scholarships to every student, the quality of the education must be diminished compared to other institutions. Quite the opposite.

Not only does Berea offer a rich experience through its forward-thinking history of racial and gender acceptance, labor program, and full scholarships for students from lower-income families, the college consistently ranks among the top higher education institutions in the country. Best Value Schools ranks Berea #1 among all best value colleges in the U.S. Kiplinger includes Berea in the country's top 100 best value colleges, ranked in terms of academic quality and affordability, and ranks Berea as the top value in private colleges with average net costs under $20,000. Washington Monthly consistently ranks Berea in the top 5 liberal arts colleges in the U.S. 

Welcoming students from "all nations and climes," Berea typically admits international students from over 50 countries each year, with alumni from 72 countries. You will be hard-pressed to find a more "motley" college determined to enrich the lives of students without shackling them with debt. 

Foolish bottom line
Berea College may indeed be the best kept secret in the world of higher education. Berea offers an attainable -- and very affordable -- quality college experience for lower-income students. So long as the majority of college students fund their college degrees through extensive student loan debt -- digging themselves into a financial hole just as they reach early adulthood -- it will be an uphill battle to help the world manage money Foolishly. 

Berea, on the other hand, is an inherently Foolish institution offering affordable education to promising students who otherwise would not have the means to attend college. By helping students avoid student loan debt, Berea enables students to retain control of their financial lives. The world needs more purpose-driven, Foolish colleges like Berea College. 

David Kretzmann is the Student Government President of Berea College. You can follow David on his Foolish discussion board, Pencils Palace, on CAPS, or on Twitter @David_Kretzmann. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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