The college search process is completely backwards. This is a fundamental cause of the $1 trillion student loan debt crisis.
Picture yourself house-hunting. You are shown 20 different homes, all of which fit your basic criteria -- four sturdy walls, a roof, and modern amenities. Undoubtedly there will be one you fall in love with for any number of reasons, tangible or intangible. You've found your dream home. But here's the catch: at no point were you shown the prices of these homes, and the prices vary wildly. With the cost revealed, your dream home is one you cannot afford.
Would you buy it anyway? Not if your mortgage lender had any sense. But if you replay this scenario and replace "home" with "college," Americans have proven -- to the tune of $1 trillion in outstanding debt according to the Consumer Financial Protection Bureau -- that they'll buy the college they can't afford anyway.
When students start their college search they typically begin by matching colleges with their desired location, size, major, extracurricular activities, and where their friends are going. One by one, they eliminate schools that don't make the cut -- their reasons ranging in significance from the level of academic rigor to the success of the football team. But one key characteristic has not yet found its place in the early college search criteria: price.
By designating price as a key criterion at the earliest stages of the college search process, families can avoid taking on excessive debt to pay for college. It's simple. It's sensible. And it's not at all the way it's done now.
In the fall of their senior year in high school, most students will submit applications to 5 to 10 schools (some up to 20 with the ease of the Common App) -- each one costing an application fee of up to $90 -- before they know the real price of their college options. Many will look at the "sticker price" provided by some colleges, but that won't help because it fails to factor in grants, scholarships, and student loans that cause the net price of college to vary according to your situation. Students receive award letters from schools in March or April. It is not until this moment that families will discover the real cost of their choices. For some, these letters bring great news, the opportunity to attend their first-choice school. For others, acceptance raises a serious problem: what to do if you cannot afford the colleges of your choice.
With final college decisions due by May 1st, these families' options are limited. One choice is to borrow for more than they can afford. The other is to attend a local community college. While community college can be an excellent alternative, students have likely set their hearts elsewhere, making this last-minute change of plans a great disappointment. So families choose the debt option, which has helped make the current national average of student debt a startling $26,600, according to The Project on Student Debt. When combined with parent debt, the average family's burden will soon eclipse $60,000.
Unfortunately, this scenario is the norm -- but it is avoidable. Every family can find the right college at the right price, but we need to completely reframe the way Americans undertake their search. Responding to a recent federal mandate, colleges and universities have added "net price calculators" to their websites. These calculators allow families to estimate the actual (or "net") price of each college -- taking potential grants, scholarships, and student loans into account. When coupled with a realistic figure of what parents and students can afford, families can finally find colleges that fit their price range before narrowing their list by personal preferences. Students can focus on visiting and applying to affordable schools and spend less time and money on colleges that are out of reach.
Excessive college debt is often rationalized by the idea that there will be a bigger return on the investment in years to come. Parents and students also tell themselves that surely Dream College offers a higher quality education than Affordable U. But the price of a college and the quality of the education have little correlation. Moreover, when factoring in grant and scholarship money, some of the best schools in the nation have relatively low net prices. Even the earning power of students after graduation is not improved by attending pricier, "higher quality" schools. After more than a decade of research, economists Stacy Dale and Alan Krueger concluded that elite colleges did appear to have more graduates generating higher earnings over the course of their working life. However, they contended that this may have more to do with the students than the schools. After comparing students with similar academic and personal profiles from "perceived top schools" and random colleges across the country, they found no difference in earning power.
No family -- that's right, no family -- has to borrow excessive amounts of money so that their child can receive a college degree. And by focusing on affordability at the earliest stages of the college search process, we can ensure that students have a life after college. A life that is not only enriched by the value of a college education, but is also filled with opportunity, unconstrained by the burden of debt.