College May Cost Much More in 2009-2010

College Costs Likely To Rise Because of Wall Street Greed

Dec 28, 2008 Barbara Pytel

The recent financial crisis will have an effect on retirement portfolios but will also affect the affordability of college for students.

Wall Street greed has unknowingly affected millions of college students that rely on financial aid to attend college. The funds may not be there for them next year. Why?

College Endowments

Colleges take in donations from donors. These donations are placed in investment funds for the future and the profits become the source for scholarships and grant funds. Without this funding, the majority of college students from the lower and middle class could not afford college.

How the College System Works

Colleges do not exist from students making full tuition payments. They can’t because most students can not afford to pay full tuition. Families making $45,000 per year can not afford college fees totaling $30,000 per year. The federal government has a formula in place to equalize the availability of college to everyone. The FAFSA, Free Application for Federal Student Aid, decides what a family can afford to pay for college. The college dips into its investment funds to offer grants and scholarships to fill in the gap. The sliding scale that the FAFSA provides is how so many students and families can afford college.

The FAFSA is not accepted the same by every college. The more endowments a college has the more it can afford to accept the FAFSA results. Some colleges accept the FAFSA at 100%. Others accept it at 90-95%. Many accept it at 80-90% and some colleges meet the FAFSA at even lower levels because they don’t have the endowments to support higher financial aid.

The Principle

Many colleges have large endowments and are financially set far into the future for giving aid. Many of these schools are Harvard, Yale, and Princeton. These institutions are blessed with such large sums in endowments so that money is not an issue. Many of these colleges are now offering college at no cost to families with incomes of $60,000 or less.

Less endowed colleges that do not have $2 billion socked away are feeling the squeeze. They have funding but do not dare dip into the principle. They want to just tap into the interest. This is the problem. Because of the worldwide financial crises, they are afraid they will not be able to meet the financial needs of students.

If colleges cut into the principle to give the financial aid students deserve, the colleges could be jeopardizing their financial stability. It is a Catch 22. If colleges give students what they need, they may not be able to exist far into the future. If they don’t, they will lose students and may not be able to exist far into the future.

State Tuition Grants

States are feeling a budget crisis, as well. Many are in the process of cutting funding to many programs with everything on the table. States rely on taxes for income. If businesses make less money, they pay less in taxes. If states cut funding to colleges in the form of state tuition grants, that is going to add yet another burden to students attending private colleges.

College Crisis

When more students are seeing college as an option, especially minority students, it is a shame that this dream will not be an option. The greed of a few has affected so many. Many are watching what president-elect Obama will do about this crisis in education.

Related Article: Predicting the Cost of College

The copyright of the article College May Cost Much More in 2009-2010 in Educational Issues is owned by Barbara Pytel. Permission to republish College May Cost Much More in 2009-2010 in print or online must be granted by the author in writing.

Colleges are in Crisis With Wall Street Plunge	2009 Graduates May Receive Less Financial Aid	Wall Street Greed Affecting High School Graduates
College Students May See Less Aid

What do you think about this article?

---

NOTE: Because you are not a Suite101 member, your comment will be moderated before it is viewable.

post your comment

What is 5+4?

Comments

Dec 30, 2008 7:39 AM

Guest :

The comment that "Colleges do not exist from students making full tuition payment" is interesting....if Colleges can't survive as a business model, then maybe they need to fold up shop. We need to demand that colleges look for ways to run a successful business model. We need to demand the best education at the lowest possible cost. Government aid is important, but colleges and universities have relied on that money flow for so long, that they have not focused on theri own internal business model.

As the president of a for-profit, accredited university that does not offer financial aid, I have had to focus on running a successful school with a successful business model. My students have to be able to afford the full cost of tuition.

What we've done is to learn from other industries, to review their business models and apply it the business of education. For example, we spent a lot of time studying Southwest Airlines to find out why they've been successful in an industry where almost every other major company has gone bankrupt.

Today - we are leading the charge and creating the new model of education that solves all these problems.

Don Kassner
President
Andrew Jackson University
www.aju.edu

Jan 5, 2009 9:27 AM

Guest :

My son's college has already sent us a letter stating just this. They don't know how endowments will perform by this spring when the letters go out. We are braced for the worst. Hard to not get angry with those on Wall Street that caused part of this problem. My son's education may have to go on hold.

Jan 6, 2009 9:20 AM

Guest :

We recently visited three colleges with our daughter. All three colleges hedged the finalcial aid question so this piece is right on. All they could mention was how the college given aid in the past and how uncertain next year is. We are wondering if our daughter should just hold off on college for this coming year. She falls right under the scholarship ranges at these colleges. We are blue collar workers and don't know if our hours will be cut because of the declining economy.

Jan 13, 2009 12:37 PM

Guest :

I got a letter from my daughter's college saying the same...financial aid situation is unknown at this time. Be prepared to possibly pay for college next year. That is difficult since I am already working three jobs as a single parent. I just make enough to disqualify me from free lunches and PELL grants...by $80 this past year. An increase in tuition would be a disaster.

4 Comments