How Expensive Should College Be?

It’s no secret that the price of college tuition has dramatically increased far past what it should be. I don’t believe that college should be free, but it shouldn’t be as expensive as it is now. I understand that, being a millennial, I’m a little biased on this end. Nevertheless, college tuition has gotten out of hand and needs to be dealt with soon.

NOTE: I don’t take out-of-state/non-resident tuition into account. It’s no secret that it costs two or three times as much to get the same overrated piece of paper everyone else gets, so there isn’t much sympathy on that end.

Why No Free College?

Thomas Paine once said, “That which we obtain too easily, we esteem too lightly.” There is definitely a direct relation with making college “free” and increased dropout rates. An article from earlier in this decade showed that 70 percent of California community college students fail their classes. Another article shows that community college dropout rates in California are worrying researchers. Community college in California tends to cost less than in other states, such as Oregon and Washington. If you think about it, K-12 schools, which are “free” to the students, tend to experience a lot of issues with student disinterest in the classroom. Thomas Paine seems to have been very right about education.

In order to understand what today’s college students are going through, we must first understand just how much money one would earn this year in the summer and compare it to tuition. This comparison should be done for as many summers as possible.

Working in the Summer

Something that most of us are tired of hearing is how previous generations before us were able to pay for their college education by working hard in the summer. I decided that it was time to see just how out of touch that statement is today. The graph below represents full-time summer income versus the tuition at the University of Oregon. The black curve represents the tuition at the University of Oregon. The blue curve represents the minimum wage summer income (pretax) at the current minimum wage in each year, on a full-time schedule of 40 hours per week..

The orange curve represents what is leftover from the summer income after tuition is paid. In a perfect world, the orange curve represents the amount that student loans would have to pay if the amount were below zero.

U of O Tuition vs Summer Income

“Since 1987, students have been unable to pay for their annual tution with a summer job.”

What about 2016? Earlier this year, Oregon’s minimum wage increased from $9.25 to $9.75 per hour, starting in July. Keeping in mind that the first two weeks of actual summer still had the $9.25 per hour minimum wage, the pretax full-time summer income in Oregon will be $5,420. Tuition is estimated to be around $10,288.50 for the 2015-2016 academic year. Thus, the summer income minus tuition would be -$4,868.50. Tuition increased again for the 2016-2017 academic year by $405.

As can be seen, the widening gap between the blue and orange curves suggest that tuition at the University of Oregon has been outpacing the ability to work a summer job in order to pay for tuition. Since 1987, students have been unable to pay for their annual tuition with a summer job. Therefore, it is imperative for today’s college students to take out loans to pay the remaining balance.

FAFSA: Taking Out Federal Loans

The Free Application For Student Aid (FAFSA) is how most college students apply for a federal loan and/or grant. My focus here is to show the amount that college students, both dependent and independent, are allowed to take out annually and in total. The following table is found on the Department of Education’s website.

Year

Dependent Students (except students whose parents are unable to obtain PLUS Loans)

Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)

First-Year Undergraduate Annual Loan Limit

$5,500—No more than $3,500 of this amount may be in subsidized loans.

$9,500—No more than $3,500 of this amount may be in subsidized loans.

Second-Year Undergraduate Annual Loan Limit

$6,500—No more than $4,500 of this amount may be in subsidized loans.

$10,500—No more than $4,500 of this amount may be in subsidized loans.

Third-Year and Beyond  Undergraduate Annual Loan Limit

$7,500—No more than $5,500 of this amount may be in subsidized loans.

$12,500—No more than $5,500 of this amount may be in subsidized loans.

Dependent students in their freshman and sophomore years are only able to receive $4,000 less than indepdent students. In their junior and senior years, this number increases to $5,000 less. Of course, this is only if the student’s parents are unable to obtain the PLUS Loan, which is a loan that a student’s parents take out and disperse to the student. More and more parents are refusing to help their children pay for college and understadibly so.

Normally, the cost of living would need to be factored in here. Let it suffice to know, for on-campus housing, that the most common option that the University of Oregon offers is over $11,000 per year.  This includes about two meals per day. However, this is changing next year with an additional two options for meal plans. The University of Oregon does not require it, but there are many schools that require students to live on campus during their freshman year (i.e. Lewis and Clark College).

That being said, even a freshman that worked a full-time job this summer, whose parents were unable to obtain the PLUS Loan, with a loan of $9,500 will not have anywhere near enough to pay for their first year of college once cost of living is factored in. After paying off the rest of tuition, the student would have $4,631.50 leftover. Factor in their $11,430 for living on campus and they now need an additional $6,798.50.

Time to work on campus? $9.75 per hour, for 20 hours per week, will earn $7,020 during the academic year. This leaves $221.50, but then we run into the issue of needing to purchase books. To give an idea of how much this can cost, some books that I will need (e.g. econometrics) will cost over $200 because a used copy sometimes cannot be found. Because of this, I tend to budget $500 per quarter for books just to be safe.

How Much Should College Cost?

I like the idea of only needing to work a full-time summer job in order to pay for college. Because student loans are now a fact of life, I believe that tuition at the University of Oregon would be reasonably priced at 1.25 times the pretax summer minimum wage income of $5,420. If this were in effect, tuition would then cost $6,775 rather than $10,633.50 for the 2016 – 2017 academic year. Of course, this is just for Oregon residents for now. But comparing how much the loans would cover makes a big difference.

Independent freshmen who received $9,500 plus a $5,500 pell grant, a total of $15,000, would have $8,225 to work with over the school year. Assuming they had rented a room somewhere for $650 per month, there is now $2,375 leftover. If the student’s parents paid for the phone bill, and assuming the student’s share of utilities were only $50 per month, the student has $213.89 per month for food and whatever else they may need. Minimal help from parents

Filling in the Gaps

We could always price discriminate. We could lower the acceptance rate and relieve the university of its “such high demand,” as University of Oregon Provost Scott Coltrane suggested it was experiencing. In all, we could easily tell the university to stop the financial waste that occurs on campus every day. Food venues don’t need to purchase as many organic or non-GMO products as they can (trust me, they do it here; I worked at one of them). Departments could be told to quit telling themselves, “Frankly, we need to figure out how to use the rest of our budget.”

Many at the University of Oregon blame the athletic department for getting so much money. The harsh reality is that the athletic department, for the most part, is self-sufficient. The university could also disburse fewer scholarships to out-of-state students. We could stop giving raises to tenured professors and give them a lower fixed salary with unlimited capacity to receive grants and money from publishers. While this may seem reasonable, too many professors wouldn’t be happy with it. In all, there’s more that colleges and universities need to honestly look into before we can solve this issue.

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