The right way to pay for college
Posted on September 18th, 2008 – 1:26 PMBy Kara McGuire
Some scholars released a report today outlining the changes they’d like to see in the complicated, expensive world of college costs. One of those involved is former MacalesterCollege President Michael McPherson, now president of the Spencer Foundation.
Here’s what the Rethinking Student Aid Study Group report suggests in a nutshell:
Get rid of the FAFSA, the cumbersome federal financial aid form that one must fill out to receive aid and get the information from the IRS instead.
Simplify the Pell Grant so it’s only based only on family size and adjusted gross income. Also, index the Pell Grant to the Consumer Price Index instead of going to Congress for increasees.
Create federally funded savings accounts for kids whose families qualify for the Pell Grant. Age 12 was mentioned as an affordable date.
Combine the education tax credits into one single credit to eliminate weighing which credit or deduction is most beneficial, and allow the tax credit to cover non-tuition expenses. That way if you get a grant for tuition, you could get a tax break for the cost you paid for room and board.
Eliminate the subsidized loan during school and help students in repayment instead.
Discourage private loans by making money available for parents at low interest rates.
Little data was included in the report about the cost and savings that would result from such measures, but it’s interesting food for thought.
5 Responses to "The right way to pay for college"
This seems to fail to tackle the underlying issue of why college is so expensive in the first place. Part of the reason is because the government has subsidized college with not only grants but also reduced cost borrowing, encouraging universities to charge more, and students to pay for it after graduation.
Do students really receive an education that much better than they did a generation ago when costs were much lower, or did they just become more willing to pay what the colleges ask?
-Ryan
You’re right Ryan. My title should have ended with a question mark!
I think their study focused more on how to make sure lower income students have access to college and how to make the financing process simpler.
But there’s a lot to question about the cost of college.
Kara, I’m surprised you haven’t blogged about the article in the Wall Street Journal part of the business section last Sunday that said if you start saving at the child’s birth with $20,000 and then save $800 a month going forward, you should be able to cover half of private school college tuition. Seriously, who can afford to do that? You do all that and you still only cover HALF of the tuition. Something will have to give. I can’t imagine anyone we know with small kids is able to do that. It seems like a good way to discourage people from saving anything at all.
llp - I did not read the WSJ article you mention, but the numbers do not work out. $20K initially plus $800/month for 18 years at a very modest 6% earning rate equals $368K (a realistic 8% equals $468K). Assume a private school tuition of $30K (I know some are more, but some are less) growing at 6% and you end up with $375K. Doing what you describe should cover the full cost of private tuition in 18 years rather than half, but still not realistic for most people with kids. I completely agree college is ridiculously expensive and agree completely with Kara and Ryan that costs cannot continue to rise like they have in the past.
I think the above comments are great. With children starting college in 5 and 8 years, I am getting increasingly concerned about how to pay for it all. I graduated from a private MN college 18 years ago. The costs since then have almost tripled. Based on my projections, to put both my kids through a private school will cost about $400,000 (money I don’t have). Even if I could pay for half–which I can’t– do I want my kids to graduate each owing $100,000 in student loans? Is that the best way to start out on your own? And how can I pay for the other half as I prepare for my own retirement?
