Ablang
December 9th 06, 05:07 AM
Rising cost of college smacks the middle class
By Eric Stern - Bee Staff Writer
Published 12:00 am PST Wednesday, December 6, 2006
Story appeared in MAIN NEWS section, Page A1
Angie Platt of El Dorado Hills has two children, ages 2 and 4. By the
time they go to college, it will likely cost more than $600,000
combined for both children to get a four-year education at private
schools, according to the investment firm managing the state's
college-savings program.
She figures she and her husband better start saving as much as they
can.
"We've got a while, but you know it's always good to be well prepared
when college tuition is going to go up year after year," said Platt,
35, who recently started a "529" college-savings fund. "I do not want
my kids to walk away from school with loans."
For middle-class families like the Platts, that's becoming increasingly
difficult. Not only are more students taking out loans, the number of
parents taking on extra loans has doubled in the last 10 years -- and
that's just for a California public university, once known for its low
cost.
"If you make more than $60,000, you're probably not going to get any
need-based aid," said Murray Haberman, executive director of the
California Postsecondary Education Commission, which advises lawmakers
on higher education issues.
The annual cost today of attending a University of California school
tops $20,000, after expenses are added for dorms, meals and $100-plus
textbooks. It's about $16,000 at the California State University.
Private schools like Stanford University run about $47,000.
Over the next 20 years, those costs could easily double, according to
the College Board, which analyzes college pricing.
Several private, elite schools have been ramping up financial aid
packages to moderate-income families. There's free Stanford tuition for
families earning less than $45,000. Harvard is waiving the total cost
of attendance for families earning less than $60,000.
The state's college systems, with rising fees and housing costs, aren't
keeping up, Haberman said. He said families are taking on too much debt
to cover the gap. The average student who borrows is taking out about
$18,000 in loans.
The Postsecondary Education Commission is meeting next week as part of
an ongoing effort to draw more attention to the problem of rising
college costs and what Haberman calls the "middle-income squeeze."
The commission's panel of business leaders, community members and
representatives from the state's college systems have been advocating a
five-year freeze on public-university fees, a new low-cost loan program
subsidized by the state, and tax credits to lessen the impact of
college costs.
An affordable college education was once considered an entitlement in
California; now it's a privilege, Haberman said.
"It's so contrary to California," he said. "We can keep saying we have
that commitment. ... To middle-income families and even lower-income
families, it's not affordable and accessible. In fact, it's expensive."
Many families face "sticker shock" when they learn the true costs of
college, Haberman said.
Others are bracing for it.
Platt, who graduated from Whitworth College, a private liberal-arts
school in Washington, wants to give her children the same opportunity
she had, even if the college they choose is expensive.
The family probably won't qualify for financial aid. She works in
public relations and her husband is chief financial officer for a chain
of Jiffy Lube shops. They hope to save up to half the cost of sending
their children to college.
The Platts recently opened a 529 college-savings account. The 529 plans
-- named after a section of the federal tax code -- allow parents,
grandparents or other family members to set up investment funds to help
pay for college.
The earnings in the state's 529 program, the ScholarShare College
Savings Plan, are not taxed, as long as the money is withdrawn for
college expenses.
"We just found that this was the best and smartest way to do it," Platt
said. "We want to really focus on keeping this for the kids and for
their schooling."
The 529 programs have been around since the late 1990s and are growing
in popularity nationwide. But California families haven't been
contributing as much as families in other states.
While the state's assets in 529 plans total more than $2.2 billion,
California ranks 10th in total assets -- below Arkansas, according to
the Financial Research Corp.
Other states allow tax deductions for contributing to the savings plan.
California does not.
Despite efforts to change that, state officials are making a renewed
push to promote the 529 plans, which can be opened with a $50 deposit
or a $15-a-month contribution.
Last month, the state changed its fund manager to Fidelity Investments
from TIAA-CREF, which has led to lower fees and more options on
investing the money.
Fidelity says a $50 a month contribution could be worth $26,000 in 20
years, assuming an average annual return of 7 percent.
State Treasurer Phil Angelides, whose office oversees the 529 program,
said there's an increasing awareness among families to start saving
early for college - and avoid loans as much as possible later on.
"We want to make it clear, of all the things parents face, there's
nothing more important then making the sacrifice of investing in their
kids' education," he said.
http://www.sacbee.com/101/story/88386.html
By Eric Stern - Bee Staff Writer
Published 12:00 am PST Wednesday, December 6, 2006
Story appeared in MAIN NEWS section, Page A1
Angie Platt of El Dorado Hills has two children, ages 2 and 4. By the
time they go to college, it will likely cost more than $600,000
combined for both children to get a four-year education at private
schools, according to the investment firm managing the state's
college-savings program.
She figures she and her husband better start saving as much as they
can.
"We've got a while, but you know it's always good to be well prepared
when college tuition is going to go up year after year," said Platt,
35, who recently started a "529" college-savings fund. "I do not want
my kids to walk away from school with loans."
For middle-class families like the Platts, that's becoming increasingly
difficult. Not only are more students taking out loans, the number of
parents taking on extra loans has doubled in the last 10 years -- and
that's just for a California public university, once known for its low
cost.
"If you make more than $60,000, you're probably not going to get any
need-based aid," said Murray Haberman, executive director of the
California Postsecondary Education Commission, which advises lawmakers
on higher education issues.
The annual cost today of attending a University of California school
tops $20,000, after expenses are added for dorms, meals and $100-plus
textbooks. It's about $16,000 at the California State University.
Private schools like Stanford University run about $47,000.
Over the next 20 years, those costs could easily double, according to
the College Board, which analyzes college pricing.
Several private, elite schools have been ramping up financial aid
packages to moderate-income families. There's free Stanford tuition for
families earning less than $45,000. Harvard is waiving the total cost
of attendance for families earning less than $60,000.
The state's college systems, with rising fees and housing costs, aren't
keeping up, Haberman said. He said families are taking on too much debt
to cover the gap. The average student who borrows is taking out about
$18,000 in loans.
The Postsecondary Education Commission is meeting next week as part of
an ongoing effort to draw more attention to the problem of rising
college costs and what Haberman calls the "middle-income squeeze."
The commission's panel of business leaders, community members and
representatives from the state's college systems have been advocating a
five-year freeze on public-university fees, a new low-cost loan program
subsidized by the state, and tax credits to lessen the impact of
college costs.
An affordable college education was once considered an entitlement in
California; now it's a privilege, Haberman said.
"It's so contrary to California," he said. "We can keep saying we have
that commitment. ... To middle-income families and even lower-income
families, it's not affordable and accessible. In fact, it's expensive."
Many families face "sticker shock" when they learn the true costs of
college, Haberman said.
Others are bracing for it.
Platt, who graduated from Whitworth College, a private liberal-arts
school in Washington, wants to give her children the same opportunity
she had, even if the college they choose is expensive.
The family probably won't qualify for financial aid. She works in
public relations and her husband is chief financial officer for a chain
of Jiffy Lube shops. They hope to save up to half the cost of sending
their children to college.
The Platts recently opened a 529 college-savings account. The 529 plans
-- named after a section of the federal tax code -- allow parents,
grandparents or other family members to set up investment funds to help
pay for college.
The earnings in the state's 529 program, the ScholarShare College
Savings Plan, are not taxed, as long as the money is withdrawn for
college expenses.
"We just found that this was the best and smartest way to do it," Platt
said. "We want to really focus on keeping this for the kids and for
their schooling."
The 529 programs have been around since the late 1990s and are growing
in popularity nationwide. But California families haven't been
contributing as much as families in other states.
While the state's assets in 529 plans total more than $2.2 billion,
California ranks 10th in total assets -- below Arkansas, according to
the Financial Research Corp.
Other states allow tax deductions for contributing to the savings plan.
California does not.
Despite efforts to change that, state officials are making a renewed
push to promote the 529 plans, which can be opened with a $50 deposit
or a $15-a-month contribution.
Last month, the state changed its fund manager to Fidelity Investments
from TIAA-CREF, which has led to lower fees and more options on
investing the money.
Fidelity says a $50 a month contribution could be worth $26,000 in 20
years, assuming an average annual return of 7 percent.
State Treasurer Phil Angelides, whose office oversees the 529 program,
said there's an increasing awareness among families to start saving
early for college - and avoid loans as much as possible later on.
"We want to make it clear, of all the things parents face, there's
nothing more important then making the sacrifice of investing in their
kids' education," he said.
http://www.sacbee.com/101/story/88386.html