Rising tuition, student debt: University president weighs in

College costs are rising. At the same time, a college degree is practically a necessity. So why is this happening?

A new report out from Sallie Mae (SLM), the largest private student-loan lender, and market research company Ipsos Public Affairs shows that fewer parents—48%-- are saving for college. That’s down from 51% a year ago. Also, the average total that Americans who are saving have racked up has fallen to $10,040 this year from $13,408 last year. That’s a decline of 25%.

Yahoo Finance’s Rick Newman caught up with Steven Knapp, president of George Washington University in Washington, D.C., at the Milken Institute’s Global Conference.

Knapp says what many people don't realize is that college is an industry where costs naturally grow and technological innovation doesn’t necessarily curb those costs. “You don’t get productivity gains in a very heavily labor-intensive business like education or frankly healthcare that you get in industries like manufacturing,” says Knapp, “and I think people have been looking for technology to make the difference in cost as it has in other industries.”

He says, “You still need to grade papers, you still need a number of teachers and facility members. Nevertheless, we are looking at ways to be innovative to reduce costs.”

Knapp says the biggest crunch is happening at public universities and community colleges where reduction in state support has put new burdens on families. But it is, of course, happening at private institutions as well.

Last year, tuition at public universities in the U.S. rose 2.9% for in-state students and 3.3% for out-of-state students. At private universities, that figure rose 3.7%, according to The College Board.

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George Washington University has been “like many institutions, aggressively trying to raise additional private philanthropic funding for student aid,” he says, “because right now, like most private institutions we are in a situation where we pay for student aid out of tuition so we have to raise tuition in order for other students to afford tuition.”

Some critics say a good portion of rising costs are due to administrative overhead which been slowly growing—not to the costs of employing faculty. “Colleges are being made to do a lot more in terms of variety of services,” he says. Parent services, counseling services, tracking immigration status of students, reporting on crime statistics in surrounding areas. “We are constantly having to hire people because we are being asked to take on burdens in the communities that colleges did not used to be asked to take on. So there is a driving upward of costs with compliance, regulation on research—much of that very well intentioned—is actually increasing costs all the time.”

The rising cost of education is leading to ballooning student debt.  Total student loan debt in the U.S. is now nearly $1.2 trillion.

George Washington University introduced a fixed tuition program 11 years ago in an effort to help families plan their finances and avoid accumulating debt. Students pay a fixed tuition rate and get the same aid as long as they remain in good standing and finish their degree in five years.

The education community, Knapp says, is concerned about debt "in part because we don’t want the burden of debt to affect the career choices students make." He says, "We don’t want them to stay out of teaching careers, or to stay away from public service careers because the feel they can’t afford to pay back their college debt."

 

Correction: An earlier version of this article implied GW's fixed tuition program was a new program in response to rising student debt. In fact, the program was introduced 11 years ago.

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