It's hard to miss talk about rising college costs these days. It's plastered all over newspapers and websites, and has been at the center of much political debate over the past month, especially in response to President Obama announcing a new plan to help grads better cope with student debt. And it's not a discussion that's likely to go away soon. Over the past few decades, college tuition has been rising at a breakneck pace, almost three times as fast as inflation. Incomes haven't kept up with college costs, and that's made it a challenge for many students to pay their way through school, often accruing tens of thousands of dollars of debt in the process.
The effect these rising costs have had on young adults hasn't always been predictable, however. Here, we explain some of the more surprising ways higher tuition is affecting the way current students and recent grads work, play, and live.
Enrollment in two-year colleges has risen.
Rising college costs haven't necessarily driven students away from pursuing a degree, but many are chasing that goal in a new ways. Community colleges have seen a steady increase in enrollment as economic troubles and sky-high tuition fees have put traditional schools out of many students' reach. Two-year colleges are often much cheaper and offer students more flexibility in working while they attend classes. For some, they're a great way to get basic courses out of the way before moving on to a bigger, more prestigious school. Whatever the reason, community colleges are playing an increasingly large role in higher education, a fact highlighted by President Obama in a 2010 speech on education and an accordant $12 billion dollar program to fund two-year schools.
Fewer young people are able to afford to buy a home.
When you're carrying tens of thousands of dollars in school debt, saving up the money to buy a home often just isn't a possibility. As tuition rises and students are forced to take out bigger loans to pay for school, fewer young people are able to fulfill the long-standing American dream of home ownership. Only 57% of people between 25 and 44 own a home today, a 4% decrease since 1980. While overall ownership has increased, young people are increasingly unable to purchase a home, and the current economic crisis and the income uncertainty it brings haven't helped matters. Add to that the nearly $30,000 in debt many college grads carry and you have a recipe for an extended period of renting.
Fourteen percent of college grads delay marriage because of financial concerns.
There is no way around it: weddings are ridiculously expensive. Slap the word "wedding" on something and the price goes up tenfold. They are so costly, in fact, that many young college grads are delaying having one until they're older and more financially stable. Playing a big role in this choice to wait is college debt. Sixty-five percent of college students leave school with debt, with 25% owing more than $25,000. That debt means weddings often have to wait until they are paid down and money can be saved.
College grads are having fewer children, later in life.
A recent survey found that debt, largely from college, was causing 20% of young adults to delay having children, even if they wanted them. Kids can be pricey, and college debt may mean that many young couples have to hold off on adding to their family until they can get loan debt under control. While waiting to have children may be part of a larger social change, it's clear that college debt (and the recession to boot) hasn't made it any easier to start a family, with the average age of having a first child at about 30 for college graduates.
More students are starting businesses.
Can't afford an expensive business degree? That's OK, because you don't actually need one to start a business. While young adults still start businesses at lower rates than other age groups, their share of entrepreneurship has been growing steadily. It's not hard to imagine why. With tuition debt running tens of thousands of dollars and jobs scarce, young people have to make ends meet somehow. Many young grads even start businesses before they graduate, working on their degrees and a business endeavor at the same time. In a survey of 1,000 recent grads and current students, the Young Entrepreneur Council found that 36% started a business while in college and 21% started a business because of unemployment.
More students than ever are applying to college.
One of the most surprising realities of rising tuition? It hasn't stopped students from applying to colleges. In fact, applications have reached near record levels at many top schools this year, with big names like Harvard and Yale receiving in excess of 30,000 applications. While college costs are high, it seems that most students still see school as a good investment and are willing to go in debt, sometimes to the tune of $100,000 or more, to get a degree they think will help them get ahead.
More young people work outside of their majors.
Today's college grads often don't have the luxury of waiting for a great job in their field to come up or taking on a wealth of unpaid internships. Loans generally start needing to be paid after graduation, and more students are feeling the pressure to get into the working world any way they can to make ends meet. With a job market that's already tight, this often means taking on work that's in a different field or sometimes accepting jobs that don't even require a college degree. It's a phenomenon that many, though not all, young adults find frustrating and can have significant impacts on their career prospects, dreams, and finances for years to come.
Careers in high-demand fields are often impractical to pursue due to high costs that cannot be recouped.
Why aren't more college students choosing a degree in much-needed fields like social work, elder care and teaching? Because often they can't make enough working in these fields to pay back the loans they got so they could work in them in the first place. Public service jobs often pay little compared to private sector jobs, making it difficult, if not impossible, to keep up on loan repayments. In fact, nearly one quarter of grads from public universities carry debt that would be unmanageable with the starting salary of a public service worker. The numbers are even higher for those who went to a private college or university.
Growing numbers of grads move back in with parents after graduation.
Graduated in 2011? Chances are pretty good that you or someone you know is living with parents, despite four years of relative independence. A whopping 85% of this year's graduating class will be forced to move back home in order to help cope with student loan debt. Even more troubling is that often these moves back home are preceded by several months of unemployment, as a tough job market makes it increasingly difficult for new graduates to find work. Without a job, many must move home and get financial help from parents or guardians in order to make even minimum payments on loans.
Many parents may be even more ill-prepared for retirement.
Any financial planner would tell you it's a huge mistake to take money out of a retirement account to help pay for college, but that's just what many parents are doing these days. Unwilling to saddle their children with loads of debt, many are tapping into their own reserves to cover tuition. In 2011, four percent of parents withdrew money from their 401(k) or IRA, and another one percent took a retirement account loan to help pay for college. With many adults already woefully unprepared for the high health care and living expenses they'll face in their older years, this increase in retirement fund spending for college could have far-reaching ramifications.
College completion rates are falling.
High tuition rates may not have affected how many students head to college, but they may be playing a big role in how many students drop out partway through their college education. For many young students, the costs of tuition can often become too much to bear, especially if a parent or the student himself loses a job. A study by Complete College America found that more than 40% of public college students attend part-time (one assumes so that they can work while attending school) and only a quarter of these part-time students will ever graduate. Rates aren't so great for full-time students either, with only 60% completing their bachelor's degree within eight years.
Fewer students are heading to grad school, despite a tough economic outlook.
Usually, a highly competitive job market and high unemployment drive students in droves to getting more advanced degrees. While some are heading back to school, grad school application rates are actually on the decline, and part of it may be due to high tuition. Students who already have tens of thousands of dollars worth of debt often don't want to add to the problem by accruing more. Coupled with a poor economy, this factor is a big part of the reason that the number of students in grad school dropped for the first time this year since 2003.
Research shows that college debt may actually cause a jump in self-esteem.
While the results of this study have been hotly contested (if not outright mocked by others on the web), it raises some interesting questions about the unexpected positive effects of college debt. Researchers in the nationwide study found that instead of feeling stressed out about their debt, many students felt empowered, in control, and reported a boost in self-esteem. Critics of the study are careful to caution, however, that the results may simply be a reflection of the degree, not the debt, and that those with greater confidence are more likely to take out more debt to pay for school (with the belief that they'll be able to find a high-paying job after graduation, most likely).
Grads often delay medical or dental care.
Once grads are no longer being cared for under college health care plans or their parents insurance, the high cost of health care has left many putting off yearly physicals, getting dental care, or taking care of nagging medical issues. With many already tens of thousands in debt for college, there is little extra money for medical care or health insurance. In facts, 27% of college grads admit to delaying a medical or dental procedure due to financial concerns. As health care costs grow at a rate almost as fast as college costs, the grads of the future could be a pretty unhealthy bunch.
Fewer low-income students are going to college.
High college costs seems to be driving away low income students at greater rates than those in the middle and upper income ranges. Even with a wide range of aid programs from the government and private sources that can often cover much of the costs associated with going to college, low-income students are increasingly seeing college as something out of their reach. Enrollment at four year colleges for low-income students decreased 14% between 1992 and 2004, as the average price of attendance for low-income students grew from an average of $7,570 to $10,620 in that same 12-year period. This averages about 48% of family income, which already sounds like a lot, but is even more troubling when you consider that college costs for middle income families come out to only 26% of family income. Oddly enough, low-income students are much less likely than their higher income counterparts to take on loans, which many believe may be why numbers of low-income students are dropping at an alarming rate.