Is college just for the rich?

June, 09 2015 by Eric Linden

I remember back in 1997, when I graduated from college in Minnesota, my mother disclosed to me that my 4-year degree cost my parents $55K. This included room and board (guess that is a bit of an old-fashioned phrase - shall I say, housing and food instead?). Toss in a few spring break trips to Mexico (yeah…I was a very lucky kid), and you get this $55K figure. Fast forward to the post-2008 economic disaster, and you see a completely difference college price. Now, $55K is no drop in the bucket at all. (Of course, it did not hurt I lived in Northern MN…which is a bit cheaper than, say, Berkeley, CA.)

Since 2008, college costs in the U.S. have risen 30%. Many folks’ salaries are not keeping pace, and, since tax revenue has plummeted in the last decade, states are unable to subsidize higher education like in the past. My mother just attended her 50-year college reunion and the dean made an interesting statement in his speech. He stated that 50 years ago, states subsidized college tuition by paying 70% of the full amount while the student picked up 30%. Now? It is the reverse. Students pick up 70% and the state 30%. Of course, this varies by state, but you get the grim picture.

Hopefully, over the next decade, state tax revenues start to rebound and this trend reverses itself. In the meantime, students continue to be saddled with massive school loan debt that, for many, will not be offset much by the student loan interest tax deduction that is currently available.

I never realized how much tax revenue played into higher education costs…that is, until post-2008. Will college ever be the same? Will it just be for the wealthy - spreading the income gap even wider? Technology could possibly fill the void. Coursera is a FREE online education website that partners with major universities and institutions from all over the world (including UNM, my alma mater) and offers everything from algebra to classes on bioelectricity. Granted, we are probably a ways from a company accepting a degree from Coursera, but it is a start.

Taxes play a huge role in higher education. Hopefully, our tax base will continue to improve and America can rebound and bring costs back down. My guess is that will be a while before this happens, though. Meanwhile, be sure to investigate the existing tax breaks that are available for higher education, both at the federal and level and in your state of residence.