"The whole movement of life is learning" (Krishnamurti). "To be an act of knowing, then, the adult literacy process must engage the learners in the constant problematizing of their existential situations" (Freire). "Once you learn to read, you will be forever free" (Douglass). "I can learn anything I have the desire to learn" (White, S.G.).

Wednesday, February 19, 2014

The Real Cost of a VCU Education

Last night Jason raised the point from our reading that college graduates earn substantially higher incomes than those with only a high school diploma, so I wanted to find out how this played out in terms of wealth (income, assets, and debt). With skyrocketing costs of attendance, is a college degree really that profitable?

If you want to see just the actual cost of a VCU bachelor's degree with loans, skip to the bottom.

If you're interested in the usurious practices that add up to this cost, see the math below.

Assumptions: VCU's cost of attendance remains constant (it won't; it will increase)

Option 1: You're wealthy and pay for four years of VCU without financing:
VCU 2013-2014 in-state undergrad cost of attendance: $21,084.28 x 4 years = $84,337.12

Option 2: You're not wealthy and thus finance your entire degree:
Federal Stafford loan interest rate: fixed @ 3.86%
Loan origination fee: 1.072 %
[(cost of attendance) + (loan origination fee)] = [(21,084.28) + (226.0234816)] = $21,310.3034816/yr
x 4years = $85,241.2139264 ~ $85,241.21

Assuming that you can qualify for federal Stafford loans, you will have a fixed interest rate of 3.86% (much lower compared to '06-'08 interest when it was 6.8%). However, as a dependent student, you can only borrow $5,500 your first year, $6,500 your second year, and $7,500 your third and fourth year, and $4,000 after (at which point you will max out). This leaves the following deficit of funds for VCU's cost of attendance:

1st year: -$15,810.30
2nd year: -$14,810.30
3rd & 4th year: -$13,810.30

The remaining balance will have to be paid or financed privately – private loans do not qualify for any federal benefits such as public service loan forgiveness [partial or full] or income based/contingent repayment plans.

If you are an independent student/emancipated, you can borrow slightly more, but for our purposes that doesn't matter because for simplicity's sake, I'll assume that you are able to find a private lender with the same low fixed interest rate and origination fee as the federal government's (you probably won't).

Also, while you are in college, interest continues to collect on your loan which is capitalized each year.
So here's your new total:

Years of study
Cost of attendance & loan origination fee (Principal)
Previous balance
New balance without capitalized interest
Capitalized interest over a year while in school
What you now owe
1st
$21,310.30
0
$21,310.30
$ 822.58
$22,132.88
2nd
$21,310.30
$22,132.88
$43,443.18
$1,676.91
$45,120.09
3rd
$21,310.30
$45,120.09
$66,430.39
$2,564.21
$68,994.60
4th
$21,310.30
$68,994.60
$90,304.90
$3,485.77
$93,790.67

Total cost at the end of 4 years: $93,790.67

Using the loan repayment calculator at http://mappingyourfuture.org/paying/standardcalculator.htm gives the following results:

# of years in repayment
Principal
Interest paid
Total cost
Monthly payment
Minimum annual salary to handle these payments”
10
$93,790.67
$19,412.16
$113,202.83
$943.35
$141,503.00
15
$93,790.67
$29,904.71
$123,695.38
$687.19
$103,079.00
20
$93,790.67
$40,959.22
$134,749.89
$561.45
$84,218.00
25*
$93,790.67
$52,561.44
$146,352.11
$487.84
$73,176.00

*For the federal part of your loans, you can have them discharged after 25 years of payment [and even then you have to pay taxes on the forgiven amount as income], but this probably will only affect graduate students as you can borrow very little from the government as an undergrad.

Fun fact: Wall Street regularly borrows money from the government at a less than 1% interest. There are people trying to change this: http://act.boldprogressives.org/survey/warren_student_debt/

On the bright side, the banks can repo your car and foreclose on your house – but they can't take away your education!


7 comments:

  1. This explains why so many students work full or part time while in school, why so many of us in our class are VCU employees (tuition waiver) and why we keep having the same conversations within academia about the explosive cost of education. Here was my first question after reading your post: Do you know anybody with just a bachelor's degree able to make even the low range of salary in that loan repayment calculator?

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  2. No one. It is absurd. And unjust.

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  3. I agree, Seth. I've been thinking about the intersection of literacy, power, and wealth all week----I just wrote a brief post about it today, in fact. I don't have any answers (that don't involve the dismantling of capitalism) but, it's something I've been wrestling with.

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  4. Tuition costs are absolutely insane. Not only does this hold people back from pursuing their educational goals, but I think it has also been damaging to the integrity of a university education, as well as the student's perception of the university in general. As an academic adviser, I have witnessed a shift in the attitude of undergraduate students in the past few years toward their classes. On multiple occasions, I have heard students who failed a course claim that the grade was unjust, and that the professor did not pass them because the university just wants to "take their money." I have also seen students who felt entitled to pass just because they paid for the course and came every day, even though they did not necessarily do all of the work or meet course objectives. There is tremendous pressure on students to finish their degrees as quickly as possible in order to save money. There is also an increased burden on the university to give students "what they paid for." This leads to an identity crisis for schools across the country, and all must ask themselves, "are we really an institution of higher learning or a business?"

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  5. Here's another "fun fact": There was a time (not that long ago) when tuition at public universities was negligible, and most of the revenues came from State coffers. CUNY was free until the mid 70's. Back then the State was mistrusted just like it is today. But hardly anyone called welfare or low state tuition "socialism" or questioned the fundamental role of the state to protect the public good. Why is tuition so high at VCU? Well, one reason: in 2012, only 19% of VCU revenues came from the State. 38% comes from tuition. See:
    http://www.budget.vcu.edu/pdf/VCU%20Budget%20101%20March.April%202012%20for%20website.pdf

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  6. Great post, Seth! It really puts the privilege of education into cold, hard facts & figures. If you work at a university and get your classes paid for you pay in a different way. ;)
    One of my friends this weekend was talking about how her relative had a gambling addiction and declared bankruptcy, thereby wiping all her gambling debts clean. My friend (a lawyer, who has a ton of school debt) said she as frustrated because declaring bankruptcy does not wipe away student debt and that law did not seem fair to her. Ha!

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  7. Ahhh this post got me fired up Seth! I work for VCU so I'm lucky that my Graduate degree is being paid for, my under graduate degree on the other hand...I'll be paying for that for years to come. I was visiting England a few years ago and took a day trip out to Oxford University, during the tour the guide asked the group how much we thought it cost to attend Oxford. Everyone in the group was guessing 15,000 -25,000 pounds per year (come on, it's Oxford!). Nope, it was just over 1,000 pounds per year. Even now, in 2014 it cost 9,000 pounds per year to attend Oxford which is the highest allowable tuition rate set by the government. Sigh...

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Thank you for taking the time to share your thoughts on this post. Diverse opinions are welcomed.