Anyone who has a kid in college knows that August can be the cruelest month. That's when the bill for the fall semester is due and usually it's higher than the bill for any previous semester.
Over the past decade college tuition and fees have been increasing
much faster than the rate of inflation. The average annual cost for
tuition, fees and room and board is $38,600 for a private 4-year college
and $17,000 for a public 4-year college (for out-of state residents
it's $30,000), according to the College Board.
These rising costs coupled with a sluggish economy are driving more
students and their families to borrow for college. Outstanding student
loan debt now tops $1 trillion, exceeding the amount of total credit
card debt in the U.S.
An increasing number of those borrowers come from middle to upper
middle class households, with incomes between $94,000 and $205,000.
According to a Wall Street Journal
analysis of recent Federal Reserve data, 26% of those households
borrowed for college in 2010, up from 19.5% in 2007. They owed an
average of $32,900 in 2010 — 24% more than they owed in 2007.
"The middle class is getting squeezed on college costs," economist
Gary Shilling tells The Daily Ticker in the accompanying video.
At the same time, college graduates are having a tough time finding
work. A recent analysis of government data conducted by Northeastern
University and the Economic Policy Institute for the Associated Press
found that roughly 1.5 million, or 54% of recent college graduates, were
either unemployed or underemployed — working at jobs that do not
require a college degree. That compares to 41% in 2000.
"Going to college doesn't guarantee a good job," says Shilling, president of A. Gary Shilling & Co. "A lot of people are coming out of college with huge student debt yet have no marketable skills."
Given the rising cost for college and the smaller payoff, families may ask: Is college worth it? Many say it is.
Earnings for college graduates are more than double that of high
school graduates over a lifetime, according to the Georgetown University
Center on Education and the Workforce. The unemployment rate for people
25 years or older who graduate from college is 4.3% compared to 9.3%
for high school graduates, according to the latest data from the U.S.
"We may be in a state now where people looking at the costs are
beginning to say is this really worth it?" Shiller asks. He says expect
an "agonizing reappraisal of going to college."