Category Archives: Increasing Student Loans

College Affordability Rating (CAR)

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On August 22, 2013, the regulator proposed to distribute federal financial aid such as Pell grant with a new rating system called College Affordability Rating or CAR.  According to the announcement, this new system which will be implemented by 2015 is the latest effort to curb college cost increases.  The rating depends on four factors:

  1. Average tuition.
  2. Graduation rates.
  3. Student loans debt and
  4. Average earning of graduates.

Except for point 4, colleges to some extend can affect the outcome of Factor #1, #2 and #3. Higher tuition, lower graduation rates and higher student debt potentially will lower the CAR. Higher rating (example AAA) perceived as better than lower one (example DDD).

Using the first three listed factors above and ten-year historical data, the Association has applied the IRI (education analytics) paradigms to calculate and complete a “proxy” rating studies by state for US colleges.  Please click the following LINK to read the complete ratings.  The results show that even with the least stringent conditions, rules or conditions, some colleges may potentially loss million of dollars on Pell grant alone if the CAR policy got implemented.  Please share your thoughts or comments?

List of Financially Troubled (Underwater) Colleges:

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Applying the IRI paradigms, AAEA recently finished a study on potential bankruptcy of US colleges. This study was triggered by the fact that college tuition kept increasing over many years in the past. What the driving factors of such increases are? This certainly a big question to answer. Therefore, the study is divided into smaller research projects. The first objective is to see how many colleges are underwater as measured by their Debt to Equity Ratio (DER). We found that about 8.20% (519 institutions) of total all type colleges in the US are underwater. The severity of the financial shortfall is different from one institution to the others. But, we did not attempt to classify them further. Rather, we let the readers to make that call. We then calculate the total liabilities and total net assets for the entire population of these financially and potentially troubled institutions. The research shows that the total liabilities are higher than the total net assets by $137 billion. Approximately 20% of the size 2008 bank bailed out money under the TARP (Troubled Asset Relief Program) program which was sign by President. George W. Bush on October 3, 2008. Please click on Research Results tab to find out more.

Let us not undermine the need of improving US Colleges operational efficiency and the power of Institutional Research Intelligence (IRI) paradigms, the new mindsets upon which US colleges need to be operated from. AAEA has identified Lambuth University falls under the RED group (DER greater than one and negative student enrollment growth). We found out later the following fact about the institution from the University of Memphis website on March 24, 2013.

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In July 1991 the historic liberal arts “college” became a university. During the school’s 168-year lifetime, it earned an outstanding academic reputation and was recognized as one of the nation’s top colleges by U.S. News and World Report and The Washington Post.

As a small institution, Lambuth fell victim to dwindling fiscal resources, and as a result, it was forced to cease independent operation in May 2011. However, recognizing the important role the school had played in higher education in West Tennessee, civic leaders and government officials worked to maintain the Lambuth campus as a part of the University of Memphis, a public four-year research university that is part of the Tennessee Board of Regents system. In August 2011 the University began offering classes at the Lambuth campus in Jackson.

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The End of College Tenure System and Matching Retirement Fund?

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Some say there are two culprits that are responsible for colleges tuition cost increases. These two factors are:

1. The tenure system which bounds the colleges into unbreakable work contract. This means, once a college professor gets tenured only his or her death or voluntarily retirement can terminate the employment agreement between the college and the professor.

2. Matching retirement (TIAA-CREF) system. Colleges will match any retirement that a faculty member puts into his/her retirement account. For example, if a faculty member sets aside ten percent from his/her monthly salary into his/her retirement account, then the college is obliged to match that.

Supposed what people say above are true statements.

The above two policies work fine in the past when economic resources are available. However, when resources are tight, colleges may turn to the students to generate more income to keep the old system works. Or may be because of the binding contract, there is no place to escape from it. This might partially explain why colleges tuition keeps increasing. The end result is that students have to take more loans to keep point 1 and 2 above to work. The statement above may not be true for schools that have large amount of endowment fund, such as the Ivy League.

Update!!!!!!!!!!!!!! The Association (https://www.aaea.us/) has completed a research on this topic.  Based on the statistical analyses we found intrigue results.  Please click here to read the whole article. Update!!!!!!!!!!!!!!!!

Do you guys think it is the time colleges need to think differently? Can colleges abandon the tenure system? If increase tuition meant to partially support point 1 and 2 above, should the students bear the burden by taking loans? Please write your comment below.

High Administrative Cost has Caused College Tuition Increased Uncontrollably?

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Guys: This information is taken directly from NCES (National Center for Education Statistics): http://nces.ed.gov/FastFacts/display.asp?id=76

Tuition costs of colleges and universities.  AAEA has recently finished statistical analyses which confirm the increasing in the administration cost is one of the culprits of college cost spikes.  Please click here to read more.

Question:
What are the trends in the cost of college education?

Response:
For the 2010–11 academic year, annual current dollar prices for undergraduate tuition, room, and board were estimated to be $13,600 at public institutions, $36,300 at private not-for-profit institutions, and $23,500 at private for-profit institutions. Between 2000–01 and 2010–11, prices for undergraduate tuition, room, and board at public institutions rose 42 percent, and prices at private not-for-profit institutions rose 31 percent, after adjustment for inflation. The inflation-adjusted price for undergraduate tuition, room, and board at private for-profit institutions was 5 percent higher in 2010–11 than in 2000–01.

SOURCE:U.S. Department of Education, National Center

With 42% and 31% increase, one may wonder why such phenomenal increase has happened? What are the stories behind such an increase? Do you guys know and wanna to share? Leave your comments!

Increasing College Tuition

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Many have said that there is a positive and direct relationship between increasing college cost and increasing student loans. The student loans will not as high as we heard they are now, if the US colleges did not keep increase the tuition every year. Do you guys think that the regulator bodies have to put a cap and a break on college tuition? and Why so?

Who are Responsible for US Student Loans Skyrocketing?

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Hello All:

In the past weeks we read, heard and saw many student loans discussions published in the media. Who do you think are responsible for student loans increases that hit $1 trillion mark? Some blame the colleges are charging tuition too high than they supposed to. However, colleges fight back by saying the students are not responsible enough with their education so that, they have to retake some of the classes which then increase taken loans. Let us know what you guys think and how to resolve these issues?

 

The Association (https://www.aaea.us) has completed a scientific study on this issue.  Please click here to read the whole article!