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College Tuition: What’s A Reasonable Amount to Borrow?

College Tuition: What’s A Reasonable Amount to Borrow?

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It’s important to have affordable college options. It’s equally important for everyone who’s capable of completing college to be able to attend college. It’s also natural based on the first two sentences to ask, “What should college tuition cost?”

Many of us would like the answer to the question “What should college tuition cost?” to be zero. However, colleges cost money to operate, and someone or some organization must pay for those college tuition costs, even if it’s not the students.

After several weeks of reviewing, analyzing, and writing about the costs of grad school, I opted to step back and take a different view of undergraduate and graduate college tuition.

My first approach was to reflect on the student loan balances I had after graduating from Duke University (AB – $2,100) and Tulane University (MBA – $1,800) in the late 1970s. They were National Student Defense Loans (NSDLs) at 3% interest per annum and were repaid in a timely manner over 10 years. I applied the standard Consumer Price Index (CPI) inflator to those loan balances and calculated $10,290 and $7,578 for CPI-indexed balances ($17,868) as of June 2021.

Thanks to the Common Fund, we have the Higher Education Price Index (HEPI), which is higher than the CPI. Using my graduation years of 1976 and 1978 as base years for my student loan debt, I calculated $12,814 and $9,663 for the HEPI-inflated balances ($22,477).

Reflecting on my college years, I remember that all three of my younger siblings in Maryland attended public colleges. None of them had student loans after graduating from college. They worked part-time during the fall and spring terms and full-time during the summer, so most of their earnings paid for books, room, and board. Our parents paid for any college tuition not covered by grants.

My choice to attend private colleges impacted some of my post-grad school financial decisions. I bought a used car instead of a new car to replace my very used car from college. I rented an apartment with a roommate for nearly six years until I saved enough money for a down payment on a townhouse.

My non-scientific process derived a theoretical student loan balance max for me if I were a student today of $25,000 for undergrad loans and $20,000 for grad school loans. Quite frankly, I would prefer to owe zero but working part-time year-round doesn’t go as far toward paying college costs as it did in the 1970s.

My monthly loan payment for both loans would be $522 assuming a 10-year repayment schedule and a 7% interest rate. My loan payments would most likely keep me in a used car as well as an apartment for a few years like in the past. I wonder if I would consider deferring grad school until my employer agreed to pay for it.

How do my college tuition numbers compare to reality? The average loan debt for a bachelor’s degree for a 2019 college graduate was $28,950. That’s not too far from my SWAG number of $25,000.

The alignment between my targeted grad school debt number of $20,000 and reality is far apart, however. According to the same source, the average grad school loan balances are:

  • Grad school – $71,000
  • Law school – $145,500
  • MBA – $66,300
  • Medical school – $201,490
  • Dental school – $292,169
  • Pharmacy school – $179,514

Since my last six blog posts were about grad school debts and college tuition, I’ll keep my comment(s) short. If I were graduating with my bachelor’s degree today and with the same family finances as I had in 1976, my choices for grad school and profession would be based on my estimate as to what I could afford to borrow. If the average debt for these grad school options were added to my targeted undergrad borrowings, I would have some tough decisions to make.

Looking at the major differences in average borrowings between undergraduate and graduate programs, you can’t help but think that the undergraduate loan caps have helped to keep costs down and the graduate loan programs lack of caps have not.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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