The Road to Hell is Paved with Good Intentions

Recently, the University of Notre Dame's Facebook page (yes, I follow their fan page) posted several articles regarding the "worth" of a college diploma. Of course, they chose articles in which they were featured and spoken of in a good light. But anyway, the first article that caught my eye was from PayScale. They determined the worth of a school's diploma based on the average net return-on-investment (ROI) after thirty years (Notre Dame ranked 9th, MIT took 1st). The ROI is basically how much money you make after graduation in comparison with how much you paid for your education. Also on the Top 10 were the California Institute of Technology, Harvey Mudd College, and of course, the usual Ivies.

Pretty good advertisement, right? Well, yesterday they posted something from The Chronicle entitled "Are Colleges Worth the Price of Admission?". At first, I had problems accessing the article, so I decided to research the topic on my own. The best article I found was the one I posted on my Facebook, "Some Debt-Laden Graduates Wonder Why They Bothered With College" from abc News. It addresses the common belief that the best way to make money is to start off with the best education. But today's economy offers a limited number of jobs to all of these well-educated college graduates. So what does that mean? Not all of them are going to get good jobs. And so we see an increase in the number of people who took out loans to pay for college, only to graduate and find that they don't have enough income to pay it back. A Bachelor's degree will still get you more than a high school diploma - but it'll also set you back more as well.

Of course, the ever present question still stands: why is college so expensive? CNN's Money Magazine offers a few answers: supply and demand, marketing strategy, and a "luxury arms race".

The luxury arms race is the most obvious - schools are using the money to build state of the art dorms, classrooms, fitness centers, etc., essentially competing with other schools in an "arms race" of who has the more attractive campus. Personally, this doesn't really bother me since the students are the ultimate beneficiaries.

The other two, however, while understandable and clever, can also qualify as devious and avaricious if you ask me. I remember a while ago, Katy said that if it's becoming more common for people to want to get a college degree these days, why don't they make said education more affordable? Answer: because they know that people want education - and so they'll charge whatever they want knowing that someone, somewhere is willing to pay it. It's kind of like that concept about expectations we learned in economics: when a natural disaster is expected, the prices of flashlight batteries and bottled water will increase just enough to make a profit on public hype.

Additionally, comes the idea of strategic pricing. This is one I never really thought about. Obviously, the Ivy League schools are a bit pricier than say, state schools. But while the quality of education remains without a definitive price tag, people still have a subconscious respect for universities that charge more for tuition. CNN referenced Ursinus College in Pennsylvania who increased their cost of tuition and fees by 17.6% and were met with 200 more applicants than the previous year. Within eight years, the freshman class was 56% larger. It's like profiling - the way you would judge a person by just by looking at them. Stereotypically, racially, culturally, etc. - making assumptions without exchanging a word. The same goes for colleges; prospective employers will generally look at a Harvard diploma with admiration and a community college diploma with apprehension. Obviously, other things would be taken into account in a job interview, but you can't doubt that in the back of his/her mind, they're making a judgement - despite who may be better qualified in the end.

Does This Make You Feel Safe?

Last week, I officially sent my enrollment deposit to the University of Notre Dame. Somehow, I thought everything after making the decision would be all down hill - however, there still lies the question of "how am I going to pay for it?".

When I wrote the first blog entry while filling out federal aid papers, I didn't fully understand exactly what I was doing. I think I was under the impression that receiving federal aid meant the government would give me money because I needed it - it didn't really occur to me that they would, but I'd have to pay it back, i.e. student loans - I just didn't make the connection.

On Friday night, I had to complete an online loan counseling session that taught me what my federal loan is and when I'm expected to pay it back. I'm getting two kinds of loans, a federal direct loan for $3,500 a year, which is from the U.S. Department of Education, and a federal Perkins loan for $2,400 a year, which comes from the university. In total, I'm borrowing $5,900 annually as of right now - I may have to borrow less depending on variable expenses like transportation and books, etc. The total estimated cost of a year at Notre Dame is about $53,000. For the first year, I'm getting about $32,000 a year on scholarship. Depending on if I decide to do the work study program for another $2,000 a year doing odd jobs for the university, we have to pay the balance of whatever's left.

However, my parents definitely don't have some $20,000 just laying around every year. So how do we make the difference?
Get another loan.

The loan process is actually rather efficient. It sounds rather scary to owe so much money, but the payment schedule is pretty reasonable. Upon graduating from Notre Dame, I'll owe about $24,000. After graduation, I have a six month "grace period" before I have to make my first payment within 60 days of the end of the grace period. I can choose from a range of payment plans that spread the total over 10-30 years. According to the chart, if I choose the standard plan, with my total I'll pay about $300 a month and be done in less than 10 years.

However, I'm not entirely sure where I'm going to get the money for med school...but I think we're just going to have to worry about that later, considering the idea of coming up with another $200,000 is not a very pretty idea.