As the leader of Wells Fargo’s Personal Lending Group, which includes Education Financial Services business, I’ve always associated higher learning with societal progress, opportunity, and hope for a better life. Yet in the homes of college-bound teens, more conversations are focusing on college tuition “sticker shock” when families calculate college expenses.
The national discussion about the $1.2 trillion (and growing!) in student debt gets louder each year. With no end in sight for rising college costs, it begs the question, “Is higher education still a symbol of opportunity, given the expense of a college degree?”
State funding to support public colleges has been falling for some time, and students and families are making up the shortfall. During the 2014–15 academic year, using current dollars for comparison, the average annual cost of tuition and fees at a public, four-year university was $9,139. That’s up from $428 in the early 1970s. At private, nonprofit four-year universities, tuition and fees went from $1,832 to $31,321 during the same period.
If tuition costs continue to increase faster than the rate of inflation, we’ll see students with no other choice than to take on more debt. Already, student loan debt increased from $15,000 to $27,000 between 2004 and 2014, according to research from The College Board.
Given the cost of college, more parents than ever are asking, “Is a four-year college best?” Consequently, more teens are enrolling in community colleges or professional schools after high school. A report from the National Student Clearinghouse Research Center showed that 46 percent of students who completed a four-year college degree had been enrolled at a two-year institution at some point over the previous 10 years.
How students are paying for higher education is also changing. Falling interest rates are contributing to an increase in the refinancing of student debt, allowing for the combining of multiple student loans into one monthly payment at a lower cost. The private student loan marketplace has been quick to respond with more financial product offerings and promotions to drive down the cost of college.
This includes Wells Fargo’s Get College Ready program, which offers interest rate discounts on new and refinanced private student loans on top of other rate discounts available to customers. We also are offering a newly designed, interactive website that helps students plan and prepare for college.
Of course, it’s nearly impossible to estimate what college will cost decades from now. So we’re also committed to investing even more in financial education resources to help families plan and prepare. For example, in addition to Get College Ready, our current resources include the CollegeSTEPS emagazine, the Student LoanDownSM blog, and an army of team members who volunteer their time each year to conduct college planning workshops at high schools.
Still worth the cost
Despite balancing the rising cost of college, low interest rates, and a changing student loan marketplace, is college still worth it?
I believe the answer is yes. Statistics continue to show that the benefits of earning a college diploma outweigh the investment. An adult with a bachelor’s degree will earn on average $56,700 ($27.26 per hour) annually, or $2.3 million over a lifetime. Bachelor’s degree holders also typically earn 31 percent more than workers with an associate’s degree and 74 percent more than those with a high school education.
Want to know more?
Listen to a Wells Fargo-recorded podcast of a media briefing about rising college tuition, financial aid, and the way forward featuring Rasmussen, Wells Fargo Senior Economist Eugenio Aleman (author of the report, “A Demographic Look at Student Loans”), and Johnny Taylor Jr., president and CEO of the Thurgood Marshall College Fund: