Student Loans Raising More Questions from the Public

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Borrowing money to finance college expenses is raising more questions on the part of the public, in general, and especially parents and grandparents.

The accompanying research, by the Federal Reserve Bank of New York, outlines some surprising information.

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Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

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Surprising to me is the age of the student borrowers. See the section titled “Who Fell Delinquent on Student Loans.”

Concerning for me are questions I have about the tuition discount all colleges and universities offer incoming students.

College Board Research reports for the school year 2024-25, private nonprofit 4-year actual tuition paid was equal to a 62% discount from posted tuition rates. The national average for tuition was $43,350 but after the discount, it was $16,473.

The discount for public 4-year [in-state tuition] was equal to 78% with the average tuition actually paid around $2,530.

The discounts cited are purely reductions in price. They are not based on income derived from a source like endowments. It is not clear who receives discounts or how the discount is decided. But what is clear is that the tuition rates colleges publish are not what they charge. The assumption held was that only 10%-20% of incoming first-year students pay full tuition. The trend over the past 20 years has been that even fewer pay 100%.

I co-authored an article about 35 years ago that discussed the discount policies of colleges and universities. The publisher was a major financial magazine still running today. The publisher cancelled the story. They said I did not provide legitimate sources of data for my conclusions.

I have never forgotten the day when I learned my article would not be published. In some ways, the publisher was correct. My data cannot be confirmed by legitimate sources because colleges are not very forthcoming about their financial statements, and they are intentionally vague about the criteria they use to decide who pays and how much they pay.

The key point I made in the article was that colleges were, on average, discounting about 50% of the full tuition price. Today it is much higher.

What this means is most students who receive a discount could be paying more than their proportionate share. In other words, some people are borrowing to pay another’s proportionate share. When I authored the article, I said those paying more than 50% of the full tuition price were helping to pay tuition for other students. Some of them were borrowing to enable the college to complete their goal.

The discount policy begs a big question.

HOW MANY STUDENTS HAVE BORROWED MONEY TO PAY FOR SOME ONE ELSE’S EVEN BIGGER DISCOUNT?

I was on the Board of a not-for- profit at the time I drafted that article. About half the board were college presidents. Around the time I authored the article, we were engaged in an exercise that included the following question: What is your biggest nightmare?

One of the college presidents responded: Waking up to read a front-page story in the New York Times about college discount policies.

As some of you know, I have set up a foundation whose purpose is to promote financial education. The price we pay for all things needs to be understood. There are no exceptions. Perhaps the student loan problem would not have grown had we better understood. There is a reason we are reading about failing colleges forced to close their doors because they mismanaged their finances. To gain students, some provided bigger discounts resulting in inadequate tuition revenues.

We are living with the consequences today. There is the growing student debt problem that is proving to be a national embarrassment and failing colleges that are requiring government aid to survive.

If you have interest in learning about the Curran Center for Financial Education, please call me.

Sincerely,

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Tom Curran

Founder & Co-CEO

Curran Wealth Management