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Who Can Fix Higher (Cost) Education?

August 1, 2004

It is tougher than ever to get into college and a whole lot more expensive when you're there. Therein lies a major issue for this presidential election.

President Bush and Sen. John Kerry have been talking tirelessly about education, and it's no wonder. With unemployment still high, many Americans are convinced that a college education is the best guarantee of a good job.

But just when a college degree seems to be needed the most, it also is harder to get. A U.S. Department of Education advisory panel says that 170,000 qualified students couldn't afford to attend even a community college this year. This means that college is now such a complex equation that whoever wins the election will find it easier to talk about than to actually fix.

Thanks to immigration and the 1980s baby boom, record numbers of young people are seeking college admission. The education department predicts that college enrollment, now about 16 million, will grow to almost 18 million by 2012. Already, colleges in high-growth states are turning away would-be students.

At the same time, college tuition has leaped in the past two years as states struggled to close budget deficits by paring back the amount of money they give to their universities -- and forcing schools to pony up the difference.

The New York-based College Board says that in this academic year, tuition rose 14% at public four-year universities, which educate the vast majority of U.S. students. A year at the average State U., including tuition, housing, board, books and other expenses, cost $13,833 this year, College Board says, while a year at a private college averaged $29,541.

One bright spot: A record $105 billion was available in student aid in the 2002 academic year, the latest for which numbers are available. A growing share of aid is in loans, however, and it is less generous than it once was, even for students who receive federal grants.

Last year, the government provided 4.8 million students with $11.7 billion in Pell grants, which are Washington's major commitment to student grant aid. But because more students than ever are clamoring for the aid -- one million more than four years ago -- each of them received an average of only $2,421, or about enough to cover a half year of tuition.

It hasn't been lost on either Mr. Bush or Mr. Kerry that middle-class voters feel squeezed by college costs. Economists estimate that the number of 18- to 24-year-olds who go to college drops by three or four percentage points for every $1,000 increase in tuition.

So Mr. Kerry is proposing a $13 billion, 10-year program to partially repay the college costs of 500,000 students who take part-time or full-time public-service jobs after they graduate. The Democratic nominee is promising up to $4,000 in new income-tax credits to "families having trouble with the costs of college and to young people who are paying their way through school." And he is pledging $25 billion to states to help them support their universities in tough budget times.

The promise to help pay for college is finding an audience among students and their parents, who seem aware that more tuition increases are ahead. But Mr. Kerry also is counting on his call to public service to help excite and motivate young voters, whose turnout at the polls is notoriously low.

The big problem for Mr. Kerry's education program is that he plans to pay for much of it by rescinding President Bush's tax cuts for upper-income earners. The public-service program would be paid for by trimming the profit that commercial banks now earn when they originate and service the federally subsidized loans that are available to all students.

Both moves would require Congressional approval, though, and that's a long shot if Republicans retain control of both houses in November.

Mr. Bush, meanwhile, has largely played defense on higher-education costs. His campaign argues that the federal government hasn't any control over college costs -- that's up to state governments and private institutions, it rightly points out. Generous tuition tax credits that are available to many middle-income families generally aren't included in analyses of the cost of college, even though they reduce the final bill, the Bush campaign adds. And it argues that most students don't pay full tuition -- over 90% receive some financial aid, with much of that coming from the federal government, it says.

In his State of the Union message, the president proposed modest expansions in those government aid programs. He proposed a $1,000 increase in Pell grants to about 33,000 low-income students who take certain college-prep courses in high school. He also proposed allowing freshmen to borrow $3,000 a year from the government, up from the current $2,625, and raising loan limits for sophomores by $1,000 to $4,500 (juniors and seniors each have slightly higher limits that wouldn't rise under the Bush proposal).

But the president offered no increase in Pell grants to the majority of students. Far more student aid is in the form of subsidized loans rather than grants, the Bush campaign fails to point out. And raising loan limits, students complain, means that they graduate with even more debt. As it is, the average student now runs up an average of $17,000 in student loans, and even then works an average of 23 hours a week, says the American Council on Education, an education trade group.

The president's predicament is that student-aid programs are so huge that even minor changes are expensive, and the White House must make cuts in other programs, or raise taxes, to pay for them. Raising Pell grants enough to cover even this year's average tuition increase would cost another $4.6 billion. And raising a student's lifetime borrowing limit to $30,000 from the current $23,000, as Mr. Bush also proposes to do, would cost the government about $20 billion over 10 years.

Meanwhile, neither the president nor Mr. Kerry is saying much about that other college problem: There aren't enough seats for everyone who wants an education.

Washington helped pay for new classrooms and dorms when World War II veterans and baby boomers flooded the schools in the 1950s and 1960s. But it doesn't pay for campus construction any more, and neither candidate is even talking about that, although the law that defines the federal role in education is up for review this year. Instead, the Bush administration has been promoting online education and for-profit schools such as the nationwide University of Phoenix as one way to get more people into college.

That's unlikely to be enough to handle the surgerepay the loan, and each month add the interest charges to it. For example, for $30,500 to be paid back over eight years (96 months), you would have to pay at least $317 a month toward principal. Add to that the monthly interest charges (those should be written in your statement) each month and this amount should be your payment. Keep in mind that, as interest rates rise, so will your interest payments.





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