College Loans, The Price Of Procrastination

By Michelle Singletary
Sunday, October 28, 2007

Every parent knows that college costs are painfully high, and yet so many people fail to save anything, even an amount that will get their child through one semester. Instead, they wait until their child is ready to go to college, panic and then turn to loans.

Many people can't handle the truth about the cost of an education. They don't put money away when their kids are young, and they take on more debt than they can handle: key ingredients in the recipe for financial disaster.

If you're a parent, you should be familiar with recent data on education spending that may inspire you to save more and be smarter about taking out college loans.

The College Board, which tracks education costs, reported last week that tuition and fees at public four-year institutions rose 6.6 percent from a year ago. At private four-year schools, the increase was 6.3 percent. Those increases far outstripped inflation, as measured by the government's consumer price index, which rose 2.8 percent over the past 12 months as of September.

"Here we go again," said a frustrated James A. Boyle, president of College Parents of America, in a statement about the College Board's latest figures. "Price increases at both public and private colleges and universities again outpace inflation by a significant margin while students and their families again wait for the answer to a simple question -- why?"

At public four-year institutions, in-state tuition and fees average $6,185. When you add room and board, the annual cost for an in-state student is $13,589. Tuition and fees for out-of-state students at public four-year colleges and universities average $16,640.

At private four-year institutions, tuition and fees average $23,712. With room and board, total charges for the 2007-08 school year come to $32,307.

As those costs keep rising, so does a family's reliance on debt to finance a college education. But because federal loans often don't come close to covering tuition, fees, room and board, families are turning to private student loans.

In fact, the College Board found that a declining portion of education loans come from the federally subsidized Stafford program. Private loans made up 24 percent of education loans in 2006-07, up from 6 percent a decade ago. Most nonfederal loans come from banks and other private lenders.

Subsidized Stafford loans, on which the federal government pays the interest while students are in school, declined from 54 percent of total education loans in 1996-97 to 32 percent in 2006-07, according to the College Board.

"For too long, parents have grimaced and borne the high price of college because they presumed that a higher education is key to their child's success in today's economy," Boyle said. "Surely, the day will come -- soon -- when parents say enough is enough."

Well, that day won't be today.


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