If ever there was a question that gets answered with a storm of finger pointing, it’s asking, “Why is the cost of college and student debt so high?”
Struggling to weather that storm are graduating students and their families in Oregon and across the nation who are often left with daunting college loans that linger for years.
In Oregon alone, students and their parents are borrowing more than $1.3 billion a year.
Where should we put the blame? Some would cite overpaid professors, lower state funding, fancy school amenities and increased federal aid.
Others argue that easier access to federal student loans simply opens the door for more borrowing. So universities, as the argument goes, permit costs to rise because they know that students can easily borrow more money to cover heftier college expenses.
David Feldman, author of “Why Does College Cost So Much?” argues, “Increasing federal aid will rarely change how high a college sets its tuition.” He adds, “A college’s sticker price is set by its wealthiest students’ ability to pay — and the wealthiest students never take out loans.”
Especially during this cantankerous election year, politicians have fired up this hot button issue with proposed legislation that appeals to students and voters.
Sen. Ron Wyden (D-Oregon) has signed onto legislation called The Red Act that would allow student borrowers to refinance debt at lower rates, would increase grants, and would pump more money into community colleges.
U.S. Rep. Suzanne Bonamici (D-Oregon) put her signature on legislation that would enroll student borrowers into affordable repayment plans linked to their incomes.
Presidential candidates have also ballyhooed college cost proposals that range from pumping more federal dollars into higher education — to putting America on a track to debt-free college.
The Institute for College Access and Success reported that nationally, seven in 10 seniors who graduated from four-year public and nonprofit colleges in 2014 had an average student debt of $28,950.
In Oregon, the average student debt after graduation:
The Institute’s survey also showed that while the number of students carrying debt after graduation rose only slightly during the previous 10 years (from 65 to 69 percent), the actual dollar amount of debt at graduation rose more than twice the rate of inflation.
Expressed another way, public college tuition has risen by nearly four times since 1974. According to federal statistics, that’s above the increase in household incomes.
Just since 2008, the number of Americans with at least one outstanding student loan has grown from $29 million to $40 million, pushing the overall debt well beyond $1 trillion. And the payoff falls partly on the shoulders of grandmas and grandpas. Grandparents who can afford it should feel good about gifting money toward colleges and college loans. They can also enhance their gifts with some preferred methods of giving.
To minimize federal gift tax implications, keep the gift under $13,000 a year for individuals or $26,000 a year if both grandparents give.
Send the gift directly to the college as tuition, because the amount is not considered a gift, no matter how large.
Create a 529 College Savings Plan that allows for grandparents to help reduce the education bill for their grandchildren and also enjoy tax benefits as they reduce their own estate.
Bottom line, the cost of college at both the undergraduate and graduate levels has been steadily rising and is likely to continue to do so — sometimes with financially staggering burdens.
Finger pointing and blame about the cost of hitting the books is easy. Footing the bill is not.