College Debt = Higher Tuition and less Merit Aid

The Wall Street journal posted an article today, “Tough Times for Colleges–and College Towns”, about the tough times that colleges are facing.

The outlook isn’t good. Bain, which markets its consulting services to universities, and Sterling Partners, which invests in education companies, examined the balance sheets from 2006 to 2010 of schools in their report. They found many schools operating on the assumption that the more they build, spend and diversify the more they will prosper. They have become overleveraged, with long-term debt increasing at an average rate of about 12% a year and average annual interest expense growing at almost twice the rate of instruction-related expense.

Schools have been trying to plug the gap by jacking up tuition at rates that aren’t sustainable. The result is a fiscal hurdle that dozens of second- and third-tier public and private schools won’t be able to clear. Hundreds of schools—including some of the most prestigious institutions in the country—have tightened their belts.

It looks like the colleges are struggling, much like the students and families. Unfortunately, you know that the financial problems that colleges are experiencing will be passed along to the students by either tuition hikes or reductions in merit aid. That is not good for students and their families, especially the ones who make too much to quality for need-based aid.

What does that mean for this year’s crop of seniors? You better investigate the financial outlook of your college choices carefully and do some digging on their past merit-aid distributions over the last several years, especially if you are counting on that to pay for college.

From the New York Times Education section today:

Education Life, the higher education quarterly of The New York Times, has published an interactive list of more than 600 colleges and universities that award merit aid. The list includes the sticker price of the institution’s tuition and fees, the percentage of freshmen who receive merit aid, and the average amount of money that they receive.

As a parent of a college-bound teen you owe it to yourself and your student to do your homework. Graduating with large amounts of student loan debt will burden your student after graduation. Be a wise consumer and set them up for a bright future.

Want to know which schools have frozen tuition in 2012? Follow this link below:

Colleges Freeze Tuition

 


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