In an independent report by the National Center for Public Policy and Higher Education on American higher education all but one state - California - failed when it came to affordability.  And how badly did they fail? miserably, coming in with a grade of F.  A few years ago education costs were increasing at a 6-7 percent annual rate per year, which was twice  the overall inflation rate.  Now with the overall inflation rate of 5.5 percent the cost of paying for a four-year degree has increased even more dramatically.  The cost in Illinois, for example, measured in percent of family income spent for higher education costs, jumped from19percent in 1999-2000 to 35percent in 2007-2008.  For the same period in Pennsylvania the increase went from 29 percent to 41 percent.

Which families get hurt the most?  Nationwide families in the bottom fifth of family income average spending 55 percent for higher education costs.  The top fifth of family income earners pay only 9 percent.  And for those who least can afford paying for college, many schools now offer financial aid  to high-achieving students, regardless of need, to boost the school’s reputation.

Why have education costs gone up so much in the past few years?  The public institutions garner much of their aid from their state’s government budget, and with so many states facing growing budget deficits, the schools are getting less dollars.  So what do colleges and universities do?  They have 2 choices: They can cut programs, teachers, staff, non-revenue sports and/or they can increase tuition and fees to their underclassmen and incoming students.  Some schools are being forced to do both.  Based on the reduction in income from the State of Arizona, who is facing the largest budget deficit ever, my alma mater, Arizona State University, has done both.  The state regents recently approved a 5 percent tuition increase for 3 schools within the university - Engineering and Nursing are two of them - and a 10 percent increase to incoming students.  Along with that university president Crowe announced additonal budget cuts affecting departments, staff and teachers to balance the school’s budget.  Earlier in the year our athletic director dropped three non-revenue producing sports.  Luckily two of the affected sports were able to get commitments from alumni to fund the programs for at least the next several years.   But in times of a rough economy and dwindling 401ks and other individual funds donations are not so easily come by.

So with a worsening economy during the worst recession in a long time, loss of jobs, mounting foreclosures, increasing bankruptcies and dwindling savings, 401ks, IRAs, stocks and mutual funds, how are many of our children going to be able to attend colleges and technical schools?  Who is going to foot the bill.  We can’t have a growing nation of high school students graduating with little ability to get the skills and knowledge they will need to get a good job, raise a family, and retire in comfort.

And here is another “fly in the ointment:”  Consumer debt stands at record levels.  According to an article posted in Money-Zine.com from Consumer Debt Statistics, “The latest statistics from the Federal Reserve indicate that the total amount of outstanding consumer debt remained fairly steady in 2007.  In case you’re wondering the total amount of consumer debt in the United States stands at nearly $2.6 trillion dollars - and based on the latest Census statistics, that works out to be nearly $8,500 in debt for every man, woman and child that lives here in the US.  The article went on to say that if $8500 in debt for every person in America doesn’t seem all that daunting, the $8500 does not include mortgage debt.

Americans are swimming in a large cesspool called debt,  If we don’t get a handle on it, we will be in the same fix (if we are not already) as our government.  The solution is to make a budget and live within it, cut down on unnecessary expenses, eat home more often, eat out less, buy fewer electronic gadgets, cut back on entertainment: it costs less to rent a DVD movie and pop some popcorn in your home than go to the theater.  And just as important is to eliminate your mortgage and debt as fast as possible.  If your mortgage was paid for and you owed nothing on your cars and credit cards and other loans or lines of credit, what would life be like?  How much could you reduce the stress in your life?  Could you take more and better vacations? How much money could you save for your retirement?  How much for your children’s education and their future?  There are many MORTGAGE AND DEBT ACCELERATION PROGRAMS out there.  Some better than others.  Incorporate one of these into your overall financial plan so that you will have enough income and assets to retire comfortably and ensure that your children get the education they need to succeed.

Jeff Polhill

Tags: colleges, consumer debt, education, education costs, financial aid, mortgage acceleration