Colleges will fail?

[BuzzSucksSucks]

According to Gerald Celente (http://www.trendsresearch.com/journal.html), colleges will fail. 

College Crash
As the economy and the country unravel — closely following our forecast schedule — there is not a single major mitigating factor to forestall, much less reverse the process. Following the commercial real estate and retail cave-ins: College. Most will downsize, many will fail..... 

[mu_hilltopper]

Honestly .. I think college prices are 8-10 years ahead of household income, if not more.  With this recession, and huge drop in net worth, college tuition is probably 12-15 years ahead of where they should be to be sustainable over the long run.

So a sharp drop in demand, making the colleges go on a mission of cost cutting, would be good in the long run.

In short, in 20 years, when MU's cost is $88k/year but incomes haven't risen anywhere near enough to keep up .. I don't see that as a viable future, for MU or any private institution.

[jmayer1]

Honestly .. I think college prices are 8-10 years ahead of household income, if not more.  With this recession, and huge drop in net worth, college tuition is probably 12-15 years ahead of where they should be to be sustainable over the long run.

So a sharp drop in demand, making the colleges go on a mission of cost cutting, would be good in the long run.

In short, in 20 years, when MU's cost is $88k/year but incomes haven't risen anywhere near enough to keep up .. I don't see that as a viable future, for MU or any private institution.

I agree.  Fr. Wild stated in that State of the University address that the 3.5% increase in tuition next year was the lowest in 30 years.  I'd imagine that trend will continue for a few years.  I also think you'll see some downsizing of the staff at MU.  Hopefully some of the lesser professors will leave rather than some of the the best ones who might happen to make more $ but its hard to weed out people once they have tenure. 

[Chicago_inferiority_complexes]

Either Fr. Wild never took a math class, or that statement I keep seeing bandied about is completely disingenuous. Basically, he is saying that for the last 30 years, Marquette University has had tuition increases of over $1,000. What was the tuition in 1979-'80? Negative $10,000?

I realize that he is thinking "percentage increase," but a 6% increase on $25,000 is simply not the same thing as a 6% increase on $5,000 or $10,000 and implying that it is is completely arrogant for a guy taking about $40,000 out of incoming freshmen.

[mu_hilltopper]

Indeed .. "just a 3.5% increase" which equals $1,000 was irritating.

Man, if you raised UW tuition $1,000 in one year, there'd be so many cars on fire and tipped over in Madison, you wouldn't be able to count them.

Private institutions have to start .. right now .. thinking "how can we have zero percent increases for the next 5 years?" and forcing it to happen.

[Marquette Mama]

I am an MU parent who pays the full load at MU... no scholarship, no financial aid.  Daughter is a junior now, so we are looking at our final year of tuition/housing/books etc.  And a cratering stock market (i.e. evaporating college fund) did not help the situation. To be honest, I was relieved that the increase was ONLY 3.5% -- on our local news this morning, it was reported that MSU is talking about a 9% increase.  (On the plus side, seeing your kid happy and thriving at a place like MU is priceless, and I picked up a basketball obsession along the way.)

Hilltopper, I know from reading the board that you are a young dad.  If you haven't already, start the college fund NOW! 
   

[Brewtown Andy]

Man, if you raised UW tuition $1,000 in one year, there'd be so many cars on fire and tipped over in Madison, you wouldn't be able to count them.

The difficulty lies in figuring out which cars are on fire because of that, and which ones are on fire just because.   

That said, Marquette had it's highest application number ever for the 6th year in a row, so even if applications start going back down, we're still looking at losing 7K applications a year before MU starts getting nervous.

[mu_hilltopper]

Sure, app counts are going up .. and there are various debatable reasons. 

But in the end .. has MU succeeded or failed in their mission, when someone graduates with $30, 50, 90, 150k in debt?  Imagine a 10-15 years from now, when they graduate with $100-300k in debt, but salaries have increased at a third that rate.

They used to sell a product that could be afforded with 3-5-8 years of post-college debt.  In the future, they will sell a product that can't be afforded without 15-25 years of debt.  That's simply unsustainable.

In honesty, my wife and I will not be sending our kids (in 17 years) to a school that costs $88,000/year .. regardless of my income and savings, regardless of financial aid packages.  That 88k is MU's destiny at 4% increases for 17 years.

[Chicago_inferiority_complexes]

Right -- apps are up everywhere. The ease of applying is ridiculous. I didn't do this when I applied 6 or so years ago, but you can now apply to dozens of schools instantaneously through "Common Applications" that schools have signed up for where students do an application, sign boxes (or whatever) about where to send it, and the school accepts it. Technology and the internet have made applying to 10 to 20 schools a breeze. I know people who did it. Even with the cost of each application, people are hedging their bets like crazy through applications.

Hilltopper is right ... private schools are pricing themselves out of existence.

[jmayer1]

Sure, app counts are going up .. and there are various debatable reasons. 

But in the end .. has MU succeeded or failed in their mission, when someone graduates with $30, 50, 90, 150k in debt?  Imagine a 10-15 years from now, when they graduate with $100-300k in debt, but salaries have increased at a third that rate.

They used to sell a product that could be afforded with 3-5-8 years of post-college debt.  In the future, they will sell a product that can't be afforded without 15-25 years of debt.  That's simply unsustainable.

In honesty, my wife and I will not be sending our kids (in 17 years) to a school that costs $88,000/year .. regardless of my income and savings, regardless of financial aid packages.  That 88k is MU's destiny at 4% increases for 17 years.

Agreed, eventually you would think there has to be some sort of market adjustment or these schools are simply going to price themselves out of a lot of student's reaches.

[Rollout-the-Barrel]

Any chance of the government eventually bailing out or subsidizing "private" schools?  Isn't a 3.5% increase actually less than the 3.85 inflation rate for 2008?(http://inflationdata.com/inflation/inflation_Rate/historicalinflation.aspx)
Not at all trying to defend >$1,000 increase, but it may be hard to bring tuition down without drastic cuts or eliminating  most scholarships.  When I started at MU 10 years ago, my tuition after scholarships was almost equal to most big ten instate tuitions.  Doesn't appear to be the case now, but I wasn't aware of any of my friends at MU paying full sticker price.  IMO I got very good financial aid/scholarships for coming from a middle class family. What's the actual price most students pay now after scholarships?

[The Lens]

Applications have skyrocketed across the country b/c America was on such a good ride.  Many blind people love to tell you how MU was becoming the Harvard of the Midwest all the while ignoring how many other schools were becoming just as selective.  It's easy to have a better group of freshmen when more apply. 

Now what happens when applications go down, is MU a worse school?  Is it b/c Tom Crean left (he has been given credit for increased admissions / endowment / non-athletic fundraising?

To me the truth is MU will be the same school it is now, which is the same school it was in 1993 that let in my 2.7 GPA (without having to do Freshman Frontier). 

[ChicosBailBonds]

I am an MU parent who pays the full load at MU... no scholarship, no financial aid.  Daughter is a junior now, so we are looking at our final year of tuition/housing/books etc.  And a cratering stock market (i.e. evaporating college fund) did not help the situation. To be honest, I was relieved that the increase was ONLY 3.5% -- on our local news this morning, it was reported that MSU is talking about a 9% increase.  (On the plus side, seeing your kid happy and thriving at a place like MU is priceless, and I picked up a basketball obsession along the way.)

Hilltopper, I know from reading the board that you are a young dad.  If you haven't already, start the college fund NOW! 
   

www.upromise.com

Earns "free" money for your kids.  It takes awhile, but we've earned several thousand dollars for our kids in the last 7 years really doing nothing but buying the products we already buy.  Every little bit helps.

[THEGYMBAR]

Private high schools are beginning to struggle as well. A parent paying $10-15K for high school might opt to send child to public school and save the private school tuition for college. All I can say is that we have two kids in college and two in private high school currently and plenty of discussions are going on every week at our house on this topic.

I stated on this site months ago that this would ultimately happen. How many kids went to private colleges the past 10 years on grandparents money or home equity money? Both of those cash options are on the back burner for most people. The loss of wealth in America that past year will knock schools out of action. The playing fields are being leveled and the strong will be around for a long time.

[GGGG]

Right -- apps are up everywhere. The ease of applying is ridiculous. I didn't do this when I applied 6 or so years ago, but you can now apply to dozens of schools instantaneously through "Common Applications" that schools have signed up for where students do an application, sign boxes (or whatever) about where to send it, and the school accepts it. Technology and the internet have made applying to 10 to 20 schools a breeze. I know people who did it. Even with the cost of each application, people are hedging their bets like crazy through applications.

Hilltopper is right ... private schools are pricing themselves out of existence.

The Common Application costs nothing for a student to fill out online and submit.  My son applied to five private schools simultaneously in one afternoon at zero cost.  The only application fee was charged by UW-Madison.  I read last week that UW-Madison received 25,000 applications...compared to MU's 17,000.  Yet their freshman class will probably be four times as large.

The tough thing to figure out is all the discounting that goes on at private schools.  With all due respect to Marquette Mama, less than 10% pay full ride at MU.  My son is going to Butler next year, and will scholarships, is only paying about $3,000 more per year when compared to UW-Madison.  The one thing that drives me nuts about public universities is the fees on top of tuition.  The UW-Whitewater type schools will in the end cost someone $12,000 per year. 

The schools that will go under aren't the Marquettes.  It'll be the Mount Marys, the Silver Lakes...and maybe even places like Ripon or Viterbo.  Schools that don't have the endowment to offer the scholarships that other schools do.

[GGGG]

Indeed .. "just a 3.5% increase" which equals $1,000 was irritating.

Man, if you raised UW tuition $1,000 in one year, there'd be so many cars on fire and tipped over in Madison, you wouldn't be able to count them.

UW-Madison saw a one year increase of about $800 earlier this decade...the smaller UW schools saw one of about $500.

A generation ago, state tax support made up almost 50% of the UW's budget.  Now it is less than a quarter.

[GGGG]

Sure, app counts are going up .. and there are various debatable reasons. 

But in the end .. has MU succeeded or failed in their mission, when someone graduates with $30, 50, 90, 150k in debt?  Imagine a 10-15 years from now, when they graduate with $100-300k in debt, but salaries have increased at a third that rate.

BTW, anyone who graduates now with $40,000 in debt, will have to pay about $277 a month for 25 years to pay that back.  And remember, most of the interest is tax deductible.  All in all, that isn't a bad deal considering the value you are getting in return.

[GGGG]

Private high schools are beginning to struggle as well. A parent paying $10-15K for high school might opt to send child to public school and save the private school tuition for college. All I can say is that we have two kids in college and two in private high school currently and plenty of discussions are going on every week at our house on this topic.

I stated on this site months ago that this would ultimately happen. How many kids went to private colleges the past 10 years on grandparents money or home equity money? Both of those cash options are on the back burner for most people. The loss of wealth in America that past year will knock schools out of action. The playing fields are being leveled and the strong will be around for a long time.

I agree with you here.  With the market collapse, the decrease in our college fund has been difficult...to the point where we are probably going to be taking out a PLUS loan toward the end of my kid's college career because I don't think we'll have enough money to cover the full four years.  And I don't want to touch home equity at this point.

[Marquette Mama]

Here is some info from Kiplinger's about MU's "affordability" relative to other private universities.  Average MU debt load at graduation is over $30K -- among the highest of the universities on this list.

http://www.kiplinger.com/tools/privatecolleges/privatecollege.php?schoollist=prv_univ&sortby=RANK&orderby=flip&states%5B%5D=ALL&myschool%5B%5D=none&outputby=table

Shankapotamus -- my husband and I often joke about being the ONLY parents paying the full rate at MU.  So if it's 10%, at least I know we're not alone!  Seriously, MU was a conscious decision, and we have no complaints and no regrets.  But per my original post, and your subsequent one, given what happened to the market in the last year, if we were enrolling our student next year as a freshman (instead of a senior), the financial picture would look much harsher.

[GGGG]

You (and hilltopper) also touched on the whole issue of whether or not MU is really fulfilling its mission if all these kids are graduating with such debt.

One of the problem I have with higher education today is the whole obsession with rankings and the "exclusivity" issue that makes up one of the components.  This encourages massive applications and high sticker prices...because the higher the price, the more valuable it is right?

Yet I doubt MU gives you a better education now than it did 25 years ago when I was there - despite its move up the ranks.

[spiral97]

Interesting.. read this thread and then went stumbling.. second page I stumbled across was this:
8 Tuition-Free Colleges (most are private)

[Marquette Mama]

I love the dude ranch college in California!  I am picturing my kid working on the alfalfa farm as I type this. Hahaha.
I think Cooper Union, though, is a seriously good college.

[reinko]

Hey everyone,
My profession is in financial aid, and have been working on college affordability for the past 4 years.  I agree with what a ton of people have said on here about some private schools "pricing" themselves out for a lot of families.  And Shanka is right, it is the middle to lower tier privates that will be hurt the most.  Many of these schools operate day to day on the cash flow from students who pay tuition and room/board.

I think debt at graduation is a serious thing, and I have personally seen many people who have just graduated crippled with it.  An encouraging trend is that even though schools are making cuts, have hiring freezes, and their endowments are have taken hits, I have read that many schools are actually maintaining or boosting financial aid.  And clarification, the term "financial aid" is a combination of grants, scholarships, loans, and work-study, not just grants and scholarships.

So what to do about all this?  A few tips...

~Having student apply to diverse amount of schools, including at least a couple "financial" safety schools

~Save save save.  Chicos bought upromise which is great, and states have 529 plans.  They are tax-deferred savings vehicles for college.  Some states also have Pre Paid Tuition plans, where you buy "credits" now and esentially lock in 2009 tuition prices for when your child goes off to school.  Read more about those here: http://www.finaid.org/savings/529plans.phtml

~What is your EFC?  (Expected Family Contribution)  This is a federal # that basically tells you how much the gov't think you can pay for one year of college.  After filling out the FAFSA it calculates this #.  Seniors in high school fill out the FAFSA, but last year the Fed designed the FAFSA4Caster for parents of younger students so they can see what this calculation will be.  Check out the 4Caster here: http://www.fafsa4caster.ed.gov/

~Outside scholarships.  I know parents always push their seniors (usually too late) to apply for these, and the kids are like...big deal it's like $500.  Many of the kids I work with have not properly built a scholarship resume for the past three years.  As soon as your student reaches high school, try to get them involved with service, sports, schools look favorably for those young people that hold steady jobs.  Every dollar counts.

~General financial aid tips:

-Always save in the parents name, never in the students
-If you own a piece of property other than your home, that will kill you in the financial aid calculation
-Don't marry.  A little joke here, but if a students parents are not married, even if they live together, technically only 1 parent's income needs to be put down on the FAFSA.
-Dialogue with financial aid offices, don't negotiate.  FA offices are filled with smart people, and every spring they get flooded with phone calls from middle income families that try to negotiate the offer.  Schools will make adjustments for a variety of reasons, but a sure fire way to tick them off is trying to squeeze them for a few extra grand.  When taking tours and making phone calls before you get in, talk to financial aid offices, build a relationship.  And circumstances occur where schools will adjust the offer, like an unforseen medical expense or a family member losing a job.

Good luck everyone, if you have any real specific financial aid questions, please don't hesitate to PM me.

[THEGYMBAR]

Reinko---Great post!!! You answered a ton of questions I have always had. My kids have never received any financial aid to this point and have no loans. Unfortunately barring a miracle I am looking at loans to finish up my oldest son's senior year next year.

Not saying I predicted the future but we actually had my son transfer from MU to UW in Jan. '08 strictly because of finances. The tuition at MU had gotten to the point that I could not to justify to myself that a MU degree was $80K better than UW.

Good news of the story is that my son hates UW even more now that he goes there. School he feels is tougher but everything else he says sucks. College and private high schools are going to need to be much more creative going forward to keep their head above water.

Earlier this year I talked about the endowments school's had and this have lost a ton of money. In addition, people are not going to be throwing money to charity at the same level as the past. The mental aspect of this economy has millionaires living like ordinary folks.

[ChicosBailBonds]

Right -- apps are up everywhere. The ease of applying is ridiculous. I didn't do this when I applied 6 or so years ago, but you can now apply to dozens of schools instantaneously through "Common Applications" that schools have signed up for where students do an application, sign boxes (or whatever) about where to send it, and the school accepts it. Technology and the internet have made applying to 10 to 20 schools a breeze. I know people who did it. Even with the cost of each application, people are hedging their bets like crazy through applications.

Hilltopper is right ... private schools are pricing themselves out of existence.

What's the alternative?  If you want quality professors, you need to pay them.  If you want quality programs, you need to support them (technology, buildings, infrastructure, etc).  Private schools do not get the same benefits that public schools do, as such the costs are there.