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Can Obama Do Anything About the Cost of College?

Obama's plan for reforming college

Student loans. Say that word and you’re sure to get a range of responses. Many of those responses would likely point towards the burden that student loan debt can be. Knowing that, many would argue that some change might be needed in terms of the cost of college and how the reliance on loans can be lowered. With that somewhat in mind, President Obama went on a bus tour of the Northwest recently to kick off a proposition to find ways to lower the cost of college as well as offering various potential rewards to colleges and universities. As with anything political, Obama’s plan has had its share of both criticism and support. With that in mind, my desire really is not to be political with this post, but to take a brief look at the plan – with the knowledge that this is a bigger problem that many will have to work on in order to tackle.

Information is Key When Making a College Decision

As is the case with any major decision, when looking at the cost of college, information is vital. The ability to gather information critical to the decision making process, explore that information in a clear and concise fashion, and compare different variables simplifies the decision. That’s part of what I love about the Obama plan for higher education. It seeks to make to create college scorecards which will include such things as percentage of students receiving Pell Grants to graduate rates and earnings plus a bit more and would start in time for the 2015 school year. This sounds like a great resource to help look at the cost of college and narrow down the options for prospective college students, doesn’t it? It is, but the problem is much of the information is already publicly available in a variety of forms and avenues. True, it might make it a little more streamlined, but I feel that while it may be communicated as a way to help make a college decision easier for students and parents that it falls short in delivering on that promise.

Should the Federal Government Step in?

One of the major proposed tenants of the Obama plan is to supposedly tie the results of this scorecard to the amount of financial aid – both grants and student loans a school receives. Not only can this potentially impact the college or university, but it can also impact a student as they could get either less or more depending on the school they choose to attend. From what I have read, this is somewhat uncharted water where the government would be saying how much a school could get. Essentially this would bring Congress into determining what kind of money schools could get when it has only administered financial aid in the past. In addition to this, the Obama plan would also seek to potentially cap the student loan payments to 10% of income for recent college graduates. This, in my opinion, potentially, can open a major can of worms when you look at the role of the government and what their role is in terms of attending college, and that’s not to mention the cost of all these proposals. I am all for looking for ways to lower the cost of college for many, but anytime the government gets into the picture I get leery of what could happen. At the end of the day, the devil is in the details on this plan in relation to government involvement and how it would be implemented.

Is Higher Education to Blame?

It would be easy to look at the cost of college and think that higher education is entirely to blame. I’ll tip my hand a bit and argue that, to a certain extent, higher education does play some role (how big I don’t know) in terms of the cost of college for many. I hear regularly from family members as they wax poetic about how things are different now than decades ago and one of the preeminent topics is the cost of college and how many schools have essentially become a business today. I look at my Alma Mater, which I love and follow regularly, and they’re making major pushes to build more research facilities, they just finished a major expansion to the football stadium and are in the process of renovating dorms. Those things are all fine and well, but what do they require to become reality? Money and a lot of it! We see that in articles like the one I read in NPR recently about how colleges are building palatial dorms in an effort to attract more students. All of that costs money. Add that to the felt need that ALL must go to college and it can lead to a lucrative business.

The Cost of College will Continue to Increase – We Must Deal with it

Whether we like it or not, the cost of college is an issue that we’ll continue to deal with. While I admire the desire of the Obama administration to try and curtail the cost and make it easier for those in the middle class and below to attend college and not be burdened with the issue of major student loan debt, I believe it’ll likely fail to stem the tide of college costs. What does this leave us with then? It leaves us pretty much where we’re at now and that’s the need to take the college decision seriously and to look at all the variables – cost, how it will be funded and the likelihood of a decent paying job, amongst others, in order to make an informed decision. As I’ve said before, college should not be an exercise of “discovering yourself” or going because it’s “expected” of you, but because it’s right for the student who has a fairly concrete idea of what he or she wants to do, specifically, with his or her college degree. I know this is easier said than done, but it is possible if it’s made a priority and thought and effort is put into it. As I look at the cost of college, I can’t help but look at it from a somewhat consumerist mindset – what is going to give me the best value, what will I get the most out of and where will I get what I want? Whether this means you take a year off before going to college, going to a trade school, starting out at a community college or going to the traditional four year college, it’s a question that behooves us it be asked and one that we’d be well served to help prospective college students navigate.

 

What are your thoughts on the Obama higher education plan? What would you do to stem the tide of the cost of college?

 

Photo courtesy of: BeckyF

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally

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40 Comments

  • I feel like this is akin to NCLB. And if time has taught us anything, it’s that it doesn’t work. Community colleges, one of the most affordable ways to get an education, could get potentially screwed with their notoriously low graduation rates. But there’s a readon for that; many of its attendees have to put school on hold for a minute while they take care of real life.
    femmefrugality recently posted…Why I’m Not Buying My Wedding Dress From China (Even Though It’s Cheaper)My Profile

    • John says:

      That is a great point, I had not thought of that at all. It could have a negative impact on community colleges which would be a real shame in my opinion.

  • While I haven’t looked at his plan very closely, I am pretty staunchly in the camp that thinks government intervention in student loans have actually driven the cost of college up. The fact that you can finance a college education through as many loans as you want is definitely a cause for concern; why wouldn’t colleges charge more and more if they know they will probably always have students willing to pay? Peter Schiff has a video about this subject that I really like.
    DC @ Young Adult Money recently posted…True Life: I’m a Recovering Design EnthusiastMy Profile

    • John says:

      That’s a solid point DC. My wife actually brought that up to me last night. I think you’re definitely on to something there. Why wouldn’t I try and charge more if my “customers” had the ability to borrow as much as they could?

  • jim says:

    There is absolutely NOTHING Obama does that I approve of. Keep the frickin gov’t OUT of my life. For those of you who don’t get it – read a frickin history book.

  • Matt Becker says:

    I don’t know much about the plan beyond what I’m reading here, but I think the idea of rewarding schools/teachers/hospitals based on standard quality metrics is well-intentioned but problematic to implement. There are just so many variables involved that trying to determine a single set of quality scores is usually too simplistic and leads more to gaming the system than to actually improving quality. If anything, I think the government’s main role should be on making sure student’s don’t fall victim to predatory loan practices and maybe help educate people on alternative options. But trying to dictate majors or allocate dollars based on quality is, to me, a route to more wasteful spending.
    Matt Becker recently posted…5 Simple Questions to Ask Before Investing in AnythingMy Profile

    • John says:

      I agree Matt. I think it’s good intentioned, but very difficult to implement and very well could lead to schools gaming the system. That is actually a concern that has been raised and should be looked at.

  • Obama is a great man but I don’t think he could do something about that.
    Mark Ross @ Think Rich. Be Free. recently posted…Why Is Your Credit Score Important And How You Can Improve ItMy Profile

  • The cost of college – or university as we call it – is something that has been the subject of a lot of debate in the UK in recent years. I think it’s capped at around £9000 a year over here at the moment, not sure with how that compares to over there? Then there’s the cost of having to get by from day to day while you’re studying there, sadly it all adds up to a lot of debt from a very young age. Just makes it even more important to pick a course that’s going to have solid employment prospects at the end of it.
    Adam @ Money Bulldog recently posted…Car Insurance for the Batmobile & Other Famous Hollywood VehiclesMy Profile

    • John says:

      We don’t have a cap at all, though that would fit close to a low end of the average, as far as I know. I agree, it does make it more important to pick a course of study that’ll give you good job prospects once done.

  • I don’t like discussing politics too much, so I’m not going to get into detail on what I think of Obama. I can however say that I don’t agree with government intervention in schooling. We’ve watched as government intervention in medicine has caused insurance prices to go up. I think that the same thing would happen with the college prices if the government decided to stick their nose in it.
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  • I don’t think government intervention ever seems to help much. I think if the cost of an education is ever going to come down, the whole system will need to be revamped. I understand the point of a well rounded education, but if you know what you want to be, you should be able to take courses only related to that and not have to complete all the general ed requirements. I think there are a few universities that let you do this and graduate earlier, but not many. I could have finished undergrad in two years if they had let me take the science and math classes necessary to get into optometry school. I have cousin who is a very successful oral maxillofacial surgeon now, but he had to put off getting into dental school for two extra years because he kept failing French. Science and math were good, but the poor boy could not get the foreign language credit done. While I did enjoy taking aerobics and music appreciation, they really aren’t doing much for me now. Let people take what they need and not have to stay four years and spend thousands more dollars in the process.
    Kim@Eyesonthedollar recently posted…How Far Would You Drive to Save Money?My Profile

    • John says:

      I agree Kim, nothing good really ever comes out of government intervention. Wow, having to put off dental school because you’re not passing French? That just sounds crazy…unless he’s going to be a dentist in France. ;)

  • As others, I am not familiar with the plan, but I do think majority of the blame has to go to schools and student loans.. They are all just businesses. They are allowed to make as much money as they want. While the student loan problem has allowed people to get as much money as they want for education, it is on the school to charge what they want. If they continue to have people coming, then they can continue to charge for it. It is only when people stop coming and paying those high prices that they will have to fall back down to earth. We can’t say much about competition, because there is plenty of that.
    Grayson @ Debt Roundup recently posted…The Financial States of America – Interactive MapMy Profile

    • John says:

      That’s definitely a solid point Grayson and I’d tend to agree with you. College has turned into a business and why not charge as much as you can to your customers? Unfortunately, in this case, it’s on the backs of students that are saddling themselves with student loan debt.

  • “I can’t help but look at it from a somewhat consumerist mindset – what is going to give me the best value, what will I get the most out of and where will I get what I want? ” That is what matters! People look too much at name brand when applying to college and making their decisions. We have some great state schools that are incredibly cost-effective. If you don’t have a great state school, then students should be working hard to earn scholarships and applying to all scholarships available to them. There are some truly strange ones out there than can often go unclaimed. For example…

    American Fire Sprinkler Association Scholarship – This scholarship, for $2,000, is awarded to five high school graduates. After reading about fire sprinklers, applicants are required to answer a ten-question, open-book quiz on their benefits.
    Broke Millennial recently posted…The Ethics of Becoming WealthyMy Profile

    • John says:

      I completely agree Erin. Unfortunately, from my experience, many do not think about it in that way.

      That scholarship sounds awesome! Even I could do that. :)

  • In my opinion the primary reason the costs have risen at public universities is that voters elect politicians who have been scaling back taxpayer support for public universities for years. So no, I don’t think the Federal government should intervene–evidently the electorate is getting what it wants or they’d elect people with other priorities. You reap what you sow! :-)
    Kurt @ Money Counselor recently posted…Buy a Foreclosed Home?My Profile

  • Super Saver says:

    If Obama eliminates government guaranteed student loans, I would expect the cost of tuition to drop significantly :-)
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  • I agree that the plan sounds good but it won’t do much to stem the high costs. As you said, the information is already out there. Also, schools tend to find ways to “fudge” the stats. With law schools, there was a big uproar about the employment stats. Schools would say that X% of their students found full time employment within a certain time frame. What they didn’t say was that they didn’t care whether the graduate found a job at McDonald’s serving fries or at a law firm. Also, I do think that schools are spending way too much on things that have nothing to do with educating students. The student loan bubble will burst soon, much like the housing bubble…it just is not sustainable. Both my wife and I went to a State University where it is more affordable, though I do have a good amount of student loan debt from law school.
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  • Joe Morgan says:

    The problem with Obama’s plan is that he is really proposing to lower the cost of student loan debt, while total costs continue to climb. It’s a net loss for students, because they end up owing more and paying more in the long run.

    If Obama (or any government official/politician, etc..) seriously wanted to lower the cost of education, he would increase student loan rates or reduce their availability (the same with scholarships).

    Higher education can continue to hike tuition because there’s always a hike in available debt to go along with it. Remove this incentive to hike tuition, and costs would become reasonable once more.
    Joe Morgan recently posted…33% of Americans Convinced U.S. in Recession or Depression.My Profile

    • John says:

      I agree, I was thinking the same thing. I am all for helping out with student loans, but the cost can be crazy. I also agree that higher ed can only continue to raise prices if they want – and why wouldn’t they if they’re looking purely at profit?

  • I don’t think Obama’s plan is going to fix anything but at least he’s trying. Sorry if this gets a little long, it’s a touchy subject for me. There’s a number of factors that have contributed to ever-increasing tuition prices and the student debt crisis: An uneducated consumer, predatory lenders, greedy colleges, and the Government all mixed together in this bubble. I think we really need to start a mandatory financial preparedness course for high school students with a lesson on choosing colleges and understanding student loans. Most of the people I know, myself included, didn’t even know there were different types of loans fresh out of high school and just went along with the financial aid department told them to do. Student loans are in a business of predatory lending. There’s no risk to the lenders without bankruptcy protections so they are willing to lend more and more while colleges continue to raise their tuition to fund campus advancements. When the Gov’t keeps increasing the Pell Grant amount, colleges are going to continue to raise tuition. If consumer protections were restored, the lenders would be less willing to lend massive amounts. Students would no longer be able to afford the tuition prices, so they drop out and colleges will ultimately be forced to lower tuition rates. I would personally love to see student loans completely wiped out and nationally, we take on a program like Oregon has been looking into. Basically, tuition is free for current students (they pay for housing, transportation, books, etcl) and graduates pay their college a certain percentage of their income for 10 years after graduating. Colleges would focus more on academics and job placement than stuffing their pockets and unnecessary renovations. For the time being, and until drastic changes are made in higher education, I would personally recommend high school graduates to spend some time (years) working various types of jobs fresh out of high school. Volunteer to gain experience and find their true passion in life, put off college until one is considered an independent student to get the maximum amount of federal aid.
    Kasey @ Debt Perception recently posted…I Have Been Nominated for a Liebster Award!My Profile

    • John says:

      “I think we really need to start a mandatory financial preparedness course for high school students with a lesson on choosing colleges and understanding student loans.” I could not agree more Kasey! I think that’s the best thing I’ve heard all day! :)

  • I guess I don’t understand the idea of colleges spending money on renovations and improvements to attract new students. Is there really a college that can’t get enough people to apply? I thought acceptance was more difficult than ever.
    Stefanie @ The Broke and Beautiful Life recently posted…“Oh Shit, Yeah That Thing” BudgetingMy Profile

  • Mackenzie says:

    I think our whole education system needs to be revamped, honestly. I shudder to think what the cost of tuition will be by the time my 3 year old heads off to college :(
    Mackenzie recently posted…Frugal Is As Frugal DoesMy Profile

  • Pauline says:

    Those costs are insane, and like you said, most people will try to find themselves for a couple of years, a $50K privilege. Go traveling, come back, be an adult, save $50K (send me 10% for the tip :) ).
    I paid for college so there was no messing around. Some of my friends took an extra year or two, I took it after college and went traveling for a year. Much more interesting than sitting in class for an extra year.
    Pauline recently posted…My path to financial independenceMy Profile

  • The federal government is the biggest reason why colleges cost so much. When you give a 18 year old kid access to tens of thousands of dollars of guaranteed loans with a signature, the colleges can raise the tuition knowing they will get paid. If the colleges thought student would default they would think twice about what they offer.
    Charles@Gettingarichlife.com recently posted…Forget The Latte Factor, What Your “Things” Really Cost YouMy Profile

    • John says:

      That is definitely a solid point Charles. Why wouldn’t a school just continue to raise tuition if they knew their customers had access to as much money as they could get their hands on?

  • I want to keep this one short and to the point-NO! I think the issues with the higher education system go far beyond politics. It is if they have entered there own rat race and are all competing for prestige. I’m kind of glad none of them have tried to file for an IPO. Not that I think that they could. There are so many “colleges” of all varieties right now, I can’t see there current economics working long term.
    Chad | The Stock Market and I recently posted…S&P 500 close September 30 2013 at 1681.55My Profile

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