Planning for College: A Consumer Approach to the Higher Education Marketplace

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The place of college in the lives of current and future generations of American families has fun­damentally changed. Once the privilege of a few, college is now a virtual prerequisite for joining and remaining in the ranks of the middle class. This economic reality means more students con­tinue their education beyond high school each year. Ironically, concur­rent with this trend of increased college going, the cost of higher education has become more difficult for Americans of all backgrounds to mange. Aside from a home purchase, a college degree is now the most significant investment many families make.

State and federal governments are doing more to help families pay for increasingly expen­sive college degrees. Combined with funds saved and borrowed by students and parents, these public resources support the growing number of Americans pursuing postsecondary education. But with mounting pressure on both public and family budgets expected in the coming decades, the system faces increasing stress.

While controlling the cost of college is, and has been, the subject of much attention, the ris­ing price of higher education is tied to forces that are difficult to control without impacting quality. Helping families become more con­scientious consumers is another way to stretch limited higher education resources. The advan­tage of this approach is it has the potential to enhance quality rather than detract from it.

Unfortunately, families are not well-positioned to make smart investment decisions as they negotiate this pro­cesses. To provide leaders and policymakers with an understanding of why students and parents currently have great difficulty getting the most out of their col­lege dollar, this report documents the complex choices that families with limited information face as they save and pay for college. In what we call the “College-Bound Decision Tree,” the anal­ysis outlines major decision-points for families as they save for college, apply for college, attend college, and pay for college.

Foremost, this report shows how families have taken on greater risk and responsibility by borrowing increasingly large sums to pay for college. Like in other areas of American life, this shift requires sophisticated family financial skills and reliable information to make informed decisions about the price and quality of the educational experience they are purchasing. Because most families have not developed these skills, and even those with some sophistication lack access to the requisite information, too many students and families make choices that reduce return on their own investment and other public and private dollars that support them.

This report supports those calling for increased transparency about price and outcomes. More readily available information will not solve all problems, but it can make a difference in a family’s abilities to make informed choices. By doing so, these policy innovations can also help expand the menu of options available to families and force competing institutions to provide high-quality educational experiences more efficiently. Together, these outcomes would increase return on both private and public investment, leading to more productive graduates and an economy less burdened by families struggling with college debt.

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