Beyond highlighting the overwhelming burden of student loan debt, the last few years of economic turmoil have also shed light on the sky-high cost of college.
"Sometimes students feel the sense of 'My parents are going to make it work,'" said Jennifer Finetti, director of student advocacy at ScholarshipOwl. "I think a lot of students don't realize the financial reality: A lot of them can't."
In fact, college has never been more costly than it is today. That's largely due to a convergence of factors including inflation's sudden impact on the tuition tab, risinginterest rates on student loans and the market decline's effect on investments families were relying on to cover college bills.
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Inflation drives college tuition prices higher
During the pandemic, increases in tuition and fees largely held steady, according to a report by the College Board, which tracks trends in college pricing and student aid.
For the 2021-22 academic year, average tuition and fees rose by just 1.3% to $3,800 for students at two-year schools; 1.6% for in-state students at four-year public colleges, reaching $10,740; and 2.1% for students at four-year private institutions, to $38,070.
Now, some colleges are hiking tuition as much as 5%, citing inflation and other pressures.
"We have increased undergraduate tuition 4.25% for the coming academic year, our largest increase in 14 years," Boston University President Robert Brown recently said in a letter to the community.
"We are caught in an inflationary vise between the institutional pressures and the impact on our students and their families," he wrote.
Rising rates make borrowing more expensive
Many students must borrow to cover the cost of higher education, and loans are also getting more expensive.
The interest rate on federal student loans taken out for the 2022-23 academic year rose to 4.99%, up from 3.73% last year and 2.75% in 2020-21.
Private student loans may have a fixed rate or a variable one tied to the Libor, prime or T-bill rates — and that means that, as the Federal Reserve raises rates, those borrowers will also pay more in interest. How much more, however, will vary by the benchmark.
Although recent graduates have an extended break on their federal student loan payments, college debt remains a substantial hurdle for nearly everyone with a degree.
The more than 40 million Americans saddled with student debt have been anxiously awaiting news after President Joe Biden said he'd be sharing his plans on federal student loan forgiveness in the next few weeks.
"There's a collective holding of the breath among everyone with a student loan," Finetti said. "No one knows what's going to happen."
Stock market losses erode college savings
Meanwhile, escalating concerns about inflation and a possible recession have taken a toll on most people's investments, including any college money tied up in the markets.
"All of a sudden, they have less money than they thought," Finetti said.
The average 529 account value was $28,954 as of March, down from $30,652 in December, according to the College Savings Plans Network.
If you are reeling from recent market losses, colleges are likely receptive to appeals for financial help, according to Kalman Chany, a financial aid consultant and author of The Princeton Review's "Paying for College." However, he added, "they generally can't adjust for assets," which already matter less when it comes to determining your aid eligibility.
A better strategy is to shift your portfolio allocation to be more conservative as college approaches, he advised.
Generally, 529 plans offer age-based portfolios, which start off with more equity exposure early on in a child's life and then automatically adjust so as the start of college draws near, the portfolio will be weighted toward more conservative investments, such as bonds.
Affordability fears turn some students away
Between the rising cost of college and ballooning student loan balances, nearly half, or 44%, of currently enrolled undergraduate students with federal or private loans have considered dropping out of school due to the financial burden, according to a survey from BestColleges.com.
Fewer students are also choosing to go to college at all, according to a separate report by the National Student Clearinghouse Research Center based on data from colleges.
While the U.S. Department of Education has not yet confirmed whether broad student-loan forgiveness for federal borrowers will happen, the Biden administration announced it is setting new limits on the accrual of interest, among other changes to make college more affordable.
"We are committed to fixing a broken system," U.S. Secretary of Education Miguel Cardona said in a recent statement.
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