Why Americans Are More Cautious About the Cost of College

September 6, 2018 Updated: September 6, 2018

CHICAGO—Since he was in fourth grade, Dennis Nolte’s stepson Jacob has been tacking Massachusetts Institute of Technology posters to his bedroom wall and dreaming of attending someday.

But now that Jacob is 18 and applying to colleges, Nolte has delivered an uncomfortable message: “If manna comes from heaven, and you get enough scholarships, you can go to MIT,” Nolte told him. “Otherwise, getting a good education that’s cheap and affordable in-state makes more sense.”

Nolte, who is a financial planner in Winter Park, Florida, compares the high cost of a private university such as MIT to Florida state schools, where the total cost of tuition, room and board, and fees comes in at less than a third of such elite schools.

MIT estimates total costs for its upcoming academic year at $70,240, while state schools in Florida come in at less than $20,000.

With massive media attention on the high cost of college along with lessons of the Great Recession, even people who can afford to pay “are much more circumspect about the cost of college,” Nolte said.

His impressions are borne out in a survey by student lender Sallie Mae released this month. Despite a strong economy, parents and students are far more cautious about paying for college now than they were in the throes of the last recession, according to How America Values College, the Sallie Mae survey of 1,907 parents and students.

About 90 percent of respondents consider college to be a good investment, but that does not mean attending at any cost.

Some 78 percent of families said they are focusing on the price of a college education. Even before applying for the 2017 school year, 70 percent of students said they discarded colleges because they were too expensive. That is a huge change from 2008, when only 42 percent of students limited pricier choices immediately.

Parents are also taking a tougher line, with 46 percent eliminating expensive colleges at the outset, compared with only 39 percent in 2008.

After the initial cut, the scrutiny continues as financial aid offers arrive. When scholarships and grants did not make a school cheap enough in 2017, 69 percent of students rejected the college. In 2008, just 38 percent of students used such rigor.

Parents, too, have become more discriminating, with 49 percent saying “no” to colleges after perusing financial aid offers. In 2008, only 30 percent did so.

Parents are still reluctant to say “no” to expensive schools, said financial planner Sean Moore, president of Smart College Funding in Boca Raton, Florida. “Parents say: My child worked so hard. How could we not send them?”

But increasingly parents are speaking up and “asking what is the return,” he said.

That change in mindset comes amid a time of declining enrollments and the closure of small liberal arts colleges—trends that reflect changing demographics and other factors as well as concerns over the cost and value of a college education. Some schools are cutting liberal arts programs while adding engineering and business programs for increasingly career-focused students.

Catering to Cost

Colleges are responding to cost sensitivities by decreasing sticker prices or offering free tuition.

Elissa Schimmel, 17, is beginning community college this fall at Harper College near Chicago, in a new program that will give her free tuition for two years, before she transfers to a public university for a bachelor’s degree.

“My friends went away to college and then ended up moving back home and stressed about their college debts,” she said. “My mother told me this would be a good option because I wouldn’t have to worry about money.”

Often, community college appeals to first-generation or older independent students. Schimmel, both of whose parents have college educations, is a motivated student focused on a business career.

Financial planners frequently urge strapped parents to have their children start at a community college. Brenda Knox of Rolling Meadows, Illinois is one: “Even the mass affluent can only hope to save a third of college costs.”

Still, financial planners warn about the need to be careful consumers. A recent report by the American Association of Community Colleges said that too many community colleges lack rigor and credits often do not transfer to four-year schools—creating more expenses and eating up a student’s time.

In the Sallie Mae survey, half of the families said they are getting the experience they anticipated, while half are not. The latter face shocks over quality, fees, travel costs, housing and living expenses. And after the first year, there are often unanticipated tuition increases and cuts in scholarships.

Later this fall, Sallie Mae will release its more detailed annual report, How America Pays for College.

By Gail MarksJarvis

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