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Posted by Barbara Pytel Aug 8, 2008 |
College tuition has always been a struggle for parents. After receiving thirteen years of free education in public schools, price tags of $26,000 per year are staggering. However, recently there is a new crunch. Why?
Parents Are Older
Women are choosing to have careers first and become parents later. With the recent trend of women becoming first time mothers in their late 30's and early 40's, the college issues comes much later in life.
Student Loans Less Available
Private loan companies are cutting back in the loans they give for college. Many banks do not issue private students at all. And, in the recent low interest era, many companies will lose money if they issue loans. In the past year, 50 lenders have pulled out of the student loan business.
College Tuition Rising
While everything is rising in costs, college tuition has recently risen much faster than inflation and parent income. Over the last 40 years, incomes have risen 304% but college tuition has risen much more. Public college tuition has risen 844% and private college tuition has risen 778%. So, if it seems much harder for parents to pay for college--it is! In some cases, college costs have tripled from what their parents paid for their college expenses after allowing for inflation.
Age Factor
Now throw in the fact that parents are taking out loans at the age of 55 or 60 instead of 40 or 45 and we find a crises. The FAFSA does have an age factor built into it. The older the parents, the less they are expected to take out in loans. However, colleges are not obliged to honor the FAFSA's Expected Family Contribution. Parents are now being forced to take money from their retirement funds to pay for college, leaving them underfunded for the golden years.
Source: Sue Asci, InvestmentNews.com, June 30, 2008