Higher borrowing for college

A worthwhile article.  Like long-term care, the difficult burdens are on the middle and upper-middle class.  The rich can simply afford to pay and the poor are more likely to get grants and/or go to less expensive schools (just as with long-term care, the rich can simply afford to pay and the poor go on medicaid).

My favorite part, though, was this:  A July 26 report from Moody’s Investors Service noted that reductions in net worth, lackluster job growth and stagnant incomes have “created the stiffest tuition price resistance that colleges have faced in decades.”

The fact is that colleges haven’t faced price resistance, well, pretty much ever.  Between vast loans and aid, and the fact that nowadays it’s nearly impossible to get a job without a college degree – causing a college education to be a necessity rather than a luxury, colleges have gotten away with not caring about price resistance at all.  Again, the similarity to another out of control cost is apparent – medical care.  And entirely unsurprisingly, the costs of medical care and educations have both been going up substantially faster – unsustainably faster –  than general inflation for decades.

Naturally, there are no easy solutions.  And just pointing out the crisis doesn’t pose any easy specific answer to the individuals we work with other than that we recommend that they should be price-sensitive in their selection of schools, they should save in the most efficient ways possible (not necessarily in college savings accounts like 529s, by the way), and they should start saving and planning as early as possible.


College Debt Hits Well-Off

Upper-Middle-Income Households See Biggest Jumps in Student Loan Burden

According to a Wall Street Journal analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available. That group also saw a sharp climb in the amount of debt owed on average.

The surge is leading many such families to look closer at cost and value when choosing colleges. If the new frugality continues, experts say, it could make it difficult for all but the most selective schools to keep pushing through large tuition increases.

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