Student debt: What's been driving college costs so high, anyway?

Aaron Marks graduates this spring with a business degree from a good college, Carnegie Mellon University in Pittsburgh, and, unlike many of his classmates, a good job.
He also has $191,000 in student loan debt.

Mr. Marks's debt is extraordinarily high, but stories like his abound. Two-thirds of students graduate with debt, to the tune of $25,000, on average.

Keeping interest rates low on federally subsidized student loans – a challenge that has lately occupied Washington – would make only a dent in what student borrowers owe. Hence, the conversation is beginning to shift to the other side of the equation: the rising cost of college.

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Between 1999 and 2009, tuition at public four-year colleges rose 73 percent on average, and tuition at private nonprofit colleges jumped 34 percent. In the same period, median family income fell by about 7 percent.

"One of the reasons we have a hard time wrapping our arms around [the college affordability issue] is that there's not one villain or one hero," says Patrick Callan, president of the Higher Education Policy Institute, a nonpartisan organization focused on higher ed issues. "It's kind of the perfect storm."

Among the contributing factors: state budget cuts, which prompted many public colleges to raise tuition and fees; a gradual shift of responsibility for payment from government to students and their families; and a "seller's market" in which colleges can raise tuition without repercussions.

Until relatively recently, a college degree was fairly affordable, especially if a student was willing to work and to attend an in-state public school. That started to change in the 1980s. But in the past decade, the cost of a college education has skyrocketed, rising faster than inflation – faster even than health-care costs.

Take the University of Washington. Twenty-five years ago, a student who worked half time during the school year and full time in summer could pay for college, says Mr. Callan, whose institute recently studied tuition rates there. "That's not true anymore," he adds. "You couldn't even come close."
Student and family response: borrow more

As a result, more students everywhere are taking out loans. Last year, cumulative student loan debt surpassed $1 trillion for the first time – more than is owed on credit cards or car loans.

In Washington, Congress has been struggling with legislation to keep rates on some low-interest student loans from doubling as of July 1, though both parties say they want to do so. President Obama, meanwhile, has touted the need for college affordability, holding a summit with some university presidents in December and pointing to the problem during his State of the Union message. Vice President Joe Biden met with more top university officials this month. The White House has urged greater transparency about the cost of schools and how much their typical graduates go on to earn, and has proposed withholding some federal funds from colleges that raise tuition too much.

"Higher education shouldn't be a luxury," Mr. Obama said in his January address. "It is an economic imperative that every family in America should be able to afford."

But so far, students remain willing to pay, concluding that to forgo a college degree would be worse for them in the long term. And many colleges, especially the best ones, are still flooded with applications.
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