August 9, 2012
The current economic downturn has led to rising education costs for everyone. However, recently released data revealed that college affordability has become the greatest issue for those who are typically considered well-off -- the upper middle class.
Federal Reserve data analyzed by The Wall Street Journal found that rising college tuition and a declining economy are hurting upper middle class families the most. The data revealed that from 2007 to 2010, households with an annual income between $94,535 and $205,335 experienced the largest increase in percentage with student loan debt -- from 19.5 percent to 25.6 percent, compared to an increase from 15.2 percent to 19.1 percent for all households. The group also experienced a significant increase in the amount of average debt owed -- from $26,639 in 2007 to $32,869 in 2010.
Mary Beth Hofmeister, whose son was accepted to the University of Notre Dame and received only a small grant to help pay for tuition, described her situation as being stuck in financial purgatory between "people with lower incomes who have a lot of subsidy, and the truly affluent, for whom this isn't a problem." According to Sallie Mae, low-income families often send their children to lower-cost schools and receive a greater amount of financial aid, grants, and scholarships to help cover college costs.
Consequently, many upper middle class families are paying more attention to cost and value when selecting colleges. Rhonda Ker, a private-college counselor in the Los Angeles area, notes that some students of well-off families are considering applying to second-tier schools with much lower costs. Ker explains, "I've been seeing these more realistic calculations and choices, rather than families just going for higher-ranked schools." A survey of over 200,000 freshmen, conducted by UCLA's Cooperative Institutional Research Program, revealed that for students with family incomes of at least $150,000, the percentage that noted cost as a "very important" factor when deciding on a college rose by 20.7 percent, the largest increase for any income group.
As reported by Q13 FOX News, a study conducted by the Horatio Alger Association further reveals students' concerns regarding college affordability. According to the study, 75 percent of surveyed students, aged 14 to 23, are at least somewhat concerned about paying for college, and even students as young as 14 years old have major concerns.
"We're working with all these students that have great GPAs (grade point average), great SAT (test) scores, and they're getting into the school they want to go to, and then they realize when it comes down to it, they can't afford it," explained Keith Reid, an advisor at the Northwestern Education Loan Association Centers for Student Success.
The Wall Street Journal notes that higher-earning parents are shifting part of the cost of college to their children. Sallie Mae revealed that in 2012, students paid 23 percent of their college costs -- up from 14 percent in 2009 -- through loans, income, and savings. Parents' contribution to students' college costs dropped from 61 percent to 52 percent over the same time period.
To help alleviate the cost of higher education, as Reed tells Q13 FOX News, students and parents should start saving and research grants and scholarships. Dorothy Gallman, Coordinator of Guidance and Counseling Services for Richland County School District One, tells WLTX that students and parents should contact the colleges and universities in which they are interested to receive information about financial aid and campus jobs.
As Gallman points out, paying for college "takes a joint effort among the student, the parent, and the schools."
Compiled by Aneesha Jhingan
"3 of 4 students concerned about how they'll pay for college, survey shows," q13fox.com, August 8, 2012, John Hopperstad
"College Debt Hits Well-Off," online.wsj.com, August 9, 2012, Rob Barry and Ruth Simon
"Tips on Searching for College Money," wltx.com, August 8, 2012, Jennifer Bellamy