MONEY College

How Families Are Keeping a Lid on College Costs

Even though the price of a degree is steep, a new report finds that Americans are coming up with ways to limit the damage.

Despite the rising sticker price for a college education, American families are keeping higher education spending in check, according to Sallie Mae’s annual study of how students and their parents pay for college. One key reason: families are working hard to keep costs down.

This past academic year, families devoted an average of $20,882 toward a college degree, about the same amount they’ve paid for the past three years, and well below the 2010 high of $24,097.

“Even though we read stories about tuition going up, families are really holding the line on how much they’re spending,” says Sallie Mae’s Sarah Ducich, co-author of How America Pays for College. “They’re just not willing to write a blank check, and they are taking determined steps to make college affordable for them.”

They also relied less on debt. Borrowed funds covered an average of 22% of college costs this year, down from 27% the previous two years and the lowest level in five years. One of the main reasons for that, says Ducich, is that more students, especially low-income ones, were awarded grants and scholarships.

Overall, families are employing a number of cost-cutting measures, with the average family taking five different steps to bring expenses down, the report found. Among the biggest ways to trim to education budgets:
  • Enrolling in two-year schools: In 2014 34% of students were enrolled in two-year public colleges, vs. 30% last year. That let them spend $10,060 less than four-year public school students did on average, and $23,843 less on average than their peers at four-year private schools.
  • Shopping by price: Two thirds of families reported eliminating colleges because of high costs. “This cost curve is something we saw jump post-recession, and it’s stayed at this high since,” Ducich says. Another 12% transferred to a less expensive school, up from 9% who did so last year. (For help finding a good education at the right price, check out our new ranking of the best college values.)
  • Changing majors: One in five families admitted to swapping majors to pursue a field that is more marketable, a trend that’s been steadily rising since 2012.
  • Lowering “fun” spending: Two-thirds of students said they cut personal spending to help shoulder college costs, vs. 60% who said the same last year.
  • Staying local: A full 69% of students opted for in-state tuition to save, and more than half chose to live at home or with relatives to cut down on housing bills.

More on how to save on college:

 

TIME Newsmaker

TIME Newsmaker Interview: Spelman President on Small College Success, the Flawed Fed Ranking Plan and How to Meet Smart Spelman Women

The Atlantic Presents:"The Shriver Report Live"
Beverly Daniel Tatum attends the Atlantic Presents:"The Shriver Report Live" at The Newseum on January 15, 2014 in Washington, DC. Kris Connor—Getty Images

During an hour long interview with TIME, retiring Spelman College President Dr. Beverly Tatum spoke about race, Historically Black Colleges, and her plans after she steps down next June.

In June 2015, Dr. Beverly Tatum will retire after 13 years as the ninth President of Spelman College. During her leadership of the historically black women’s college in Atlanta, Tatum, 59, raised annual alumni giving to 41%—one of the highest among historically black institutions. Tatum will leave the school having led a 10-year campaign that raised $157.8 million and garnered the support of 71% of the school nearly 17,000 alumnae.

Spelman is an exceptional school in more ways than one: it’s one of the oldest Historically Black Colleges and Universities (HBCUs) in the U.S., and it has an endowment of $357 million—the average private HBCU endowment is around $38 million. In 2014, Spelman ranked number 65 on U.S. News and World Report’s annual list of the nation’s top liberal arts colleges, the next highest ranked HBCU—Morehouse College—comes in at number 126.

But because Spelman is an HBCU, it’s often mentioned in discussions about the overall fate of black institutions, which face dire financial situations, declining enrollment and questions about their relevance in the 21st century. Tatum says the comparisons aren’t always fair. “Just as we as individuals tend to be stereotyped, lumped together as a group, in the same way the institutions that are serving African Americans are lumped together and are stereotyped as a group. We have to work very hard to penetrate that bias,” Tatum tells TIME.

In an hour-long wide-ranging interview, Tatum spoke about why we should not consider HBCU’s as a monolith, the problems with the Department of Education’s plan to marry financial aid and graduation rates, and what’s next for her post-retirement. The following interview has been condensed and edited for space.

 

You’re retiring in June of next year. Why now?

In the life of a college president 12, what will be 13 years is a long time. The average span of a college president is about 6 or 7 years. It’s a very demanding job—I’m just ready for a new chapter. But I think it’s also a great time to pass the baton. If you think about being a president as like running a relay race, you get the baton from one person and when you get it you run as fast as you can to make as much progress and then you have to pass it to somebody else. I wanted to pass it while there was a lot of momentum.

Your 10-year fundraising campaign raised $157.8 million, with contributions from 71% of alumnae. Forty-one percent of your alumnae give annually. Can Spelman be a model for other small liberal arts colleges and other HBCUs, specifically?

When I started in 2002 [annual giving] was about 13%. I knew that the future of the college really depended on strong alumni support on an annual basis because when you go to foundations, corporations, and other donors outside the alumnae community one of the first questions they’ll ask you is, “what is the level of support from your graduates?” If your graduates aren’t supporting you, why should anybody else? But, I do know that it’s very labor intensive. When you think about a donor who hasn’t been regularly giving to the college and you call her on the phone or you meet with her in person, the first gift she makes might be a small gift. Maybe $25, $50, or $100, but it’s not necessarily going to be a big check. And you spend a lot of time and energy just to get her to write that first check. There are schools that will likely say it’s not worth my time to focus on that little gift, I need to focus on those big gifts that are going to really help sustain me. What we did, which I think was really helpful, was we got one of our trustees to essentially match the gifts that we got from small donors over a period of time so that we knew we’d be able to build up the level of giving, knowing that there was a safety net, so to speak, of this other donors’ match. I think every school has a trustee who would, if you ask them to, help grow alumni giving by matching.

What does the future of Spelman look like?

I think the future of Spelman is bright. Strong philanthropic support, great students, a wonderful tradition of excellence that I’m sure will continue into the future. But I think the next President will certainly need to be thinking a lot about the impact of technology in terms of this rapidly changing world we live in. There are lots of conversations in higher education right now that any new president should be thinking about. I often say when I’m asked what the characteristics of that new president should be—and obviously it’s the board’s decision to choose— but it should be someone who can be a really fast runner; someone who can take that baton and just go with it.

What’s next for you?

It has been tremendous honor to serve as the President of Spelman College. It’s been a high point of my career and I’m looking forward to this coming year. Before I became the President of Spelman I was a professor, but I was also a writer. I want to return to writing. So my first project will be to work on my next book. One of the books I want to revisit is “Why are all the black kids sitting together in the cafeteria?” which was written in 1996. I want to reflect on the last 20 years and figure out what I will say differently, but I don’t know the answer to that question yet.

How has the overall college landscape changed during your time as the leader at Spelman?

I think the concern about cost and affordability has really gotten more intense. How can we provide [an education] in a cost effective way so that students can afford to come—whether that’s providing more financial aid or figuring out a way to offer it less expensively. Because we know that everyone needs an education, but a lot of today’s students can’t afford it. And I think that that conversation has really gotten more significant for everyone, not just at HBCUs, in part because the vast majority of today’s high school students are coming out of low to moderate income families and are often first generation college students. It’s not just an HBCU question. Everybody has to figure out, how do we make this more affordable?

I know that’s something First Lady Michelle Obama has been focusing on, increasing access to higher education, particularly among African American students. But at the same time the Obama Administration is working to distribute funding based on graduation rates, which have long been a problem for HBCUs. What do you make of that?

There’s an irony there. When you are serving low-income students there are many barriers to their completion, some of which have nothing to do with the school. There are all kinds of circumstantial situations that make it hard for students to persist. If you are providing services to students who are coming from high-risk backgrounds, the odds of their completion are going to be lower. One of the things we take great pride in at Spelman is our ability to graduate students at a high rate, but even at Spelman we have found since the Great Recession it’s become more difficult for us to maintain that graduation rate. More and more students are having to step out because of financial concern. I think when the Department of Education says to an institution that we’re going to judge you by your graduation rate— I hope that they will compare apples-to-apples. If you’re a well resourced institution serving a high-income student body, that graduation rate better be high. You have no reason for it not to be. But if you are looking at the performance of schools that are serving the most underserved student population, you should compare apples to apples to make sure that you are holding all of those variables constant.

Do you think that proposal will have an adverse impact on HBCUs in particular?

HBCUs have historically served those students who are most at-risk. Every HBCU is different. If you’re a school that has more open enrollment, more selective and students who are financially challenged you are hopefully going to transform their lives through the education you provide but your graduation rate is not going to be as high as someone who is dealing with a different socio-economic demographic. Graduation rates of institutions serving high percentages of under-served students should be evaluated in relationship to predicted retention rates for low income first generation students.

In previous interviews you have said people often talk about HBCUs as if they’re monolithic, as if they’re the same school. Where do you think the disconnect is in understanding HBCUs and addressing issues that face them?

That really has to do with understanding African Americans in general. Just as we as individuals tend to be stereotyped, lumped together as a group, in the same way the institutions that are serving African Americans are lumped together and are stereotyped as a group. We have to work very hard to penetrate that bias. You don’t regularly read articles about predominately white institutions are in trouble. You know what I mean? You don’t. So why is that when an HBCU closes its doors because of a loss of enrollment or loss of accreditation we read articles in which all of us get mentioned? That is, I think, just consistent with the stereotypes that have permeated our culture about people of color and the institutions of color.

What about the question of HBCU’s relevancy? Is that the same issue?

It’s a very interesting question. Why do people ask this question? We know that the history of HBCUs is that they were created at a time when there was no opportunity because of segregation, at a time when there was no educational access for African Americans. When Spelman was founded in 1881 in the city of Atlanta, there was no other opportunity for black women to get an education. So people will say, well now those majority institutions are available so why do we need those other institutions? But that fails to acknowledge the other purposes of HBCUs. An HBCU not only provides an educational opportunity for those who have been underserved, but it does so in a context in which the culture from which they come, the history that they’ve experienced is affirmed and acknowledged in a way that’s very empowering. And so the need for empowerment is always relevant.

I had a really interesting conversation with a white male educator and he asked me about the relevance. He went to an Ivy League school and said he would have really benefitted from having women like the women who choose Spelman at my college. He said that would have really benefitted his education. I understood what he was saying, but he failed to realize the privilege in his statement. The parent who writes that check for their daughter to go to college is not thinking, “she’s going to help someone else get a good education.” They’re writing that check because this is the best possible experience for their daughter. And one of the benefits for American higher education is that there are a lot of different schools to choose from. If that guy really wanted access to smart, Spelman women he could have enrolled at Morehouse. [laughs].

 

TIME Innovation

Five Best Ideas of the Day: July 16

1. To upgrade the reliability of the wisdom of crowds, look instead to the wisdom of the confident.

By the Editors of the MIT Technology Review

2. Marketing departments for technology firms should take the radical step of functioning like an outside agency, complete with their own engineers.

By First Round Review

3. According to Peter Orszag, the radical financial relief from the falling cost of health care in America means “everything you think you know about the nation’s long-term fiscal gap would be wrong.”

By Adrianna McIntyre in Vox

4. Robots writing dead simple news stories means journalists can use human intelligence on real, robust news that are worth reading.

By Kevin Roose in New York magazine

5. Is the bottomless thirst for Wall Street profits driving the soaring cost of higher education?

By Lisa Wade in Sociological Images

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Education

More International Students Are Studying at U.S. High Schools

Students
Fred Dufour—AFP/Getty Images

Many students hope to earn admissions to U.S. universities

International students are increasingly attending high school in the U.S. in part to improve their chances of gaining acceptance to American universities, according to a new study.

More than 70,000 international students attended secondary school in the U.S. as of October 2013, the majority of whom were pursuing a U.S. diploma, the Institute of International Education (IIE) study found.

While a diverse group of students pursue high school degrees in the U.S, the study suggests that certain regions are differently represented; Asian students are more likely to pursue diplomas, and Europeans are more likely to enroll in short-term programs.

Rajika Bhandari, who oversaw the study, attributed this disparity to a difference in goals.

“Asian students are very invested in obtaining a secondary education that really makes them academically competitive to enter college, probably in the U.S.” said Bhandari, deputy vice-president of research and evaluation at the IIE. “They probably perceive that receiving a U.S. diploma will help position them better.”

On the other hand, Bhandari says students from elsewhere were more likely to pursue “social and cultural” goals.

According to private college counselor Amy Sack, whose firm Admissions Accomplished advises foreign students, “It really depends on what country they’re coming from, and whether English is their first language. For Chinese families, improving one’s English is important: when they get here and in terms of essays.”

In addition, international students provide an easy pool for colleges to boost diversity, and so Bhandari does not think universities will abandon their overseas recruitment programs anytime soon. “Institutions need to start thinking about a multipronged approach where they think about different ways to get international students,” she said.

TIME Education

Historically Black Colleges Are Becoming More White

Graduates stand for the anthem "Lift Every Voice and Sing" during 2014 commencement ceremonies at Howard University in Washington May 10, 2014.
Graduates stand for the anthem "Lift Every Voice and Sing" during 2014 commencement ceremonies at Howard University in Washington May 10, 2014. Jonathan Ernst—Reuters

An average of one in four students at traditionally black schools in the U.S. is a different race than the one the college was intended to serve

When junior Brandon Kirby brought home an award from a national biomedical conference, it was a nice boost for his small college in a dying coal town in the heart of Appalachia.

It also seemed incongruous, given that the conference was for minorities, the college is historically black — and Kirby is white.

So are 82 percent of the students at West Virginia’s Bluefield State College, which nonetheless qualifies for a share of the more than a quarter of a billion dollars a year in special funding the federal government set aside for historically black colleges and universities in 2011, the last year for which figures are available. These schools, known as HBCUs, can also apply for federal loans through the Historically Black College and University Capital Financing Program. Last year, they got $303 million from that program, on top of $1.1 billion in previously approved loans.

The HBCU designation was created by Congress in 1965 to refer to any accredited school “established prior to 1964, whose principal mission was, and is, the education of black Americans.”

HBCU’s have always enrolled students of all races, but they are increasingly becoming less black. At some, like Bluefield, blacks now comprise less than half of the student body. At Lincoln University in Missouri, African-Americans account for 40 percent of enrollment while at Alabama’s Gadsden State Community College, 71 percent of the students are white and just 21 percent are black. The enrollment at St. Philip’s College in Texas is half Hispanic and 13 percent black, according to 2011 enrollment data from the U.S. Department of Education. Nationwide, an average of one in four HBCU students is a different race than the one the school was intended to serve, according to research conducted at the University of Pennsylvania’s Graduate School of Education.

Many HBCUs were started under segregation to provide African-Americans with higher education opportunities. After integration, they became seen as places for black students to overcome economic and educational inequities. Indeed, HBCUs have been instrumental in developing the black middle class, graduating substantial numbers of teachers, engineers and other professionals. But as schools that had been predominantly white opened their doors to other races, black students became scarcer at historically black colleges. To survive, the universities have had to market themselves to all students.

But George Cooper, the executive director of the White House Initiative on HBCUs, says such wild demographic swings are a testament to the modern-day flexibility of HBCUs. These schools still are, and always will be, legally considered historically black, he said.

“The definition is a federal definition,” Cooper says. “They’re living up to it.”

Congress has never stipulated whether an institution could continue to be considered historically black if it became mostly white. The legislation that gives the schools their largest pool of money says only that they have “contributed significantly to the effort to attain equal opportunity through postsecondary education for black, low-income, and educationally disadvantaged Americans.”

Not everyone agrees. Economist Richard Vedder favors eliminating special funding for HBCU’s on the grounds that all schools should receive money based on present realities, not historic mission. “If you’re going to give subsidies for institutions, you shouldn’t give it on the basis of some sort of historical [legacy],” says Vedder, director of the Center for College Affordability and Productivity.

At Bluefield, officials and students contend they haven’t strayed from their original mission for the same reason Kirby and his classmates are allowed to participate in the biomedical conference.

“We’re all considered minorities because we’re in a poverty state,” Kirby says, referring to West Virginia.

The university primarily draws rural students from Appalachia, many of them low income and the first in their families to attend college. “The students that we serve would not necessarily have other options for higher education,” Bluefield State President Marsha Krotseng says.

The schools, and many experts, are quick to point out that public HBCUs are often underfunded by their states. Even with the extra money they receive from the federal government, they argue, the schools get less than 3 percent of federal higher-education funding — slightly less than the proportion of students they enroll.

They also say there remains a need for historically black schools: to serve disadvantaged students of any color. Many of them are actively courting low-income students of all races. Their goal, they say, is unchanged: to help those who have few other college options.

HBCUs “are there to provide opportunity and avenues for education for people who were disenfranchised,” says Michael Sorrell, president of Paul Quinn College, an HBCU in Dallas. “Slavery has been over for a long time, so you can’t have such a narrow view point on this.”

Anthony Bradley, a professor at The King’s College in New York City who has written about HBCUs, disagrees. He says that broadly targeting disadvantaged students isn’t enough to merit continued special funding from the federal government, since many other colleges and universities also do this.

“That doesn’t set them apart from community colleges,” Bradley says. “Most colleges in the country have special programs to recruit and matriculate and graduate disadvantaged students.”

On a practical level, the increasing diversity of HBCUs has resulted from a need to fill seats to survive. Before desegregation, more than three-quarters of black college graduates went to HBCUs. Today, less than one-sixth of college-going blacks do, according to research by the Ford Foundation. (The Ford Foundation is a financial supporter of The Hechinger Report.)

These institutions, in general, are also having trouble attracting students because of financial problems, low graduation rates, and other poor outcomes, and their enrollment is shifting along with broader changes in the demographics of incoming college students. The number of Hispanics and Asians in particular at HBCUs is climbing. Asian enrollment rose 60 percent from 2001 to 2011, and Asians now comprise about 1 percent of HBCU students, according to the University of Pennsylvania research. Hispanics make up about 3 percent.

“The reality is that if HBCUs — with the exception of maybe the top five or six — do not diversify, they’re all going to die,” says Bradley. “While they may continue in their mission in respect to providing opportunities to African-Americans on paper, in reality they’re simply going to have to become more like any university in the country.”

That’s what happened at Bluefield State. The transformation began in the 1960s, when falling racial barriers meant blacks could attend any university or college, and the school recruited returning Korean War veterans just to stay open.

In 1968, after a student set off a bomb on campus, the state closed the dorms. That turned Bluefield State into a commuter campus in a predominantly white area, which grew even whiter when the coal industry left town.

By the mid 1990s, black enrollment had dipped to about 6 percent, and there were no black faculty.

One alumnus, William White, who graduated from the school in 1968, said returning to the campus in the 1990s, when it had become overwhelmingly white, was “the worst feeling I’ve ever had in my life.” Even so, he thinks the definition of HBCU should be flexible. It is possible for an HBCU to be minority black, he says, and the schools should “educate anybody that comes through their doors.”

This story was produced by The Hechinger Report, a nonprofit, nonpartisan news outlet affiliated with Teachers College, Columbia University.

MONEY Ask the Expert

Avoid the Parent Trap: Why a PLUS Loan Isn’t the Best Way to Pay for College

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Robert A. Di Ieso, Jr.

Q: Would it be more beneficial to take out a Home Equity Loan versus a Parent PLUS to pay for a child’s college education?
—Lou M., Brooklyn

A: PLUS loans should be your last resort.

Sure, these federal loans allow parents to borrow up to the total cost of their child’s college education, minus any other aid the student may be receiving. But that’s where the good news ends: PLUS loans currently carry a 6.41% rate, and without Congressional intervention, that rate will jump to 7.21% come July 1. Plus, these loans also come with an “origination” fee of about 4.3% of the principal amount you borrow.

Additionally, the credit standards required for PLUS loans have gotten tighter in recent years, notes Fred Amrein, a financial planner who specializes in college funding, financial aid and student loan repayment. (Though there is one upside to this: If you’re denied a PLUS loan, your child can receive additional student loan money above the standard limit.)

Rather than you taking on a PLUS loan, Amrein advises pushing your child to take out the full amount they can in federal student loans—$5,500 to $7,500 annually for dependent students whose families weren’t turned down for a parent PLUS loan.

The interest rates for student loans are significantly less: After July 1, they will be 4.66% for subsidized and unsubsidized federal direct undergraduate loans and 6.21% for direct unsubsidized graduate loans. These loans have lower fees, too—about 1.1%. Students also aren’t subject to a credit check as parents are.

Students also have more flexibility with their repayment plans if they can’t keep up with payments than parents have with PLUS loans, says Amrein. And student loans can be forgiven or reduced through the teacher or public service loan forgiveness programs. Parents who take out PLUS loans can only have their loans discharged if the child dies, or if the borrower dies or becomes totally and permanently disabled.

Don’t want your child to be burdened with debt? You can treat the student loan in the same way as the PLUS—and you simply pay the bills for your kid.

If you need additional funds above the student loan limit, home equity financing is probably your next best move. Via a home equity loan or line of credit, you can borrow up to 85% of the equity in your home, with fees similar to those you paid when you financed your original mortgage. And in either case, up to $100,000 of interest you pay on home-equity debt is tax-deductible.

A home equity line of credit will have a lower initial cost of money than a home equity loan, but both have some drawbacks.

With a loan you are borrowing a single lump sum, usually at a fixed interest rate—currently averaging 6.22%, according to Bankrate. You’ll have to know upfront how much you’ll likely need to fund your child’s entire college education, since you probably won’t be able to take out a new home equity loan each year they’re a student. Also, once you have the loan, that amount becomes an asset and can reduce the amount of financial aid your child qualifies for by thousands of dollars, says Amrein.

A line of credit is similar to a credit card, allowing you to draw from a line in smaller sums as needed, up to a certain fixed amount. HELOCs typically only require you to pay interest for the first several years and have an average interest rate of 4.9%. But that rate is variable, meaning your monthly payments can change during the course of your repayment period. Borrowers should be prepared for their rates to rise since interest rates currently remain near historic lows.

Because you are borrowing smaller sums over time and using those to immediately pay bills with a HELOC, the money is not viewed as an asset and won’t affect financial aid awards. But because these loans are variable, they’re considered a little riskier since your interest rates could rise over time, though they do have set lifetime caps of—gulp!—18% in most states.

 

TIME Higher Education

Fewer Students Are Working Their Way Through College

Students taking on more debt to handle rising costs

Fewer students are taking up part-time jobs in college despite the soaring cost of higher education.

Citing data from the Labor Department, the Wall Street Journal reports that just 44% of college students between the ages of 16 and 24 held down either part- or full-time work during 2013, down from a peak of 56% in 2000. The 2013 figure was the lowest since 1985. The overall unemployment rate for job-seekers in this cohort has ticked down steadily in recent years along with the broader population.

Though fewer students are working, college costs are rising rapidly. Over the last decade, the average cost for tuition, room and board at a public four-year university has risen 37% to $18,400 during the 2013-14 school year, according to The College Board. Private university costs have risen 24% over the same time period. Students are taking on these costs by assuming more debt. More than 70% of seniors graduated with student loans in 2012, up from 68% in 2008, according to the Institute for College Access & Success. Seniors’ loans totaled $29,400 on average in 2012, up from $23,450 in 2008.

MONEY College

Grandma’s Willing to Pay $50,000 of College Tuition—if Only You’d Ask

New survey finds that more than half of grandparents want to help with 529 savings, according to Fidelity. Here's hoping your folks are in that generous majority!

With college admissions season behind us, many high school seniors are eagerly anticipating heading to college in the fall—while parents, on the other hand, are likely be anxious about how they’ll pay for it. Fortunately, many of them appear to be getting help from their own parents: According to a new study by Fidelity Investments, many grandparents are contributing to 529 college savings plans to help finance the high cost of education.

The study found that 53% of grandparents are either already saving or plan to save to assist in paying for their grandchildren’s college costs. Among those who have been socking away money, the median contribution is $25,000, though 35% said they expect to contribute at least $50,000. That’s enough to cover more than two years tuition, room and board at an in-state public college, and more than a year at a private college.

The 529 accounts specifically are an attractive option for grandparents because of the flexibility they offer, said Keith Bernhardt, vice president of college planning at Fidelity. Earnings are not taxed as long as the money is used toward education expenses. Additionally, grandparents are free to change the beneficiary of the account or take the contributions back at any point should they find themselves needing the money for their own retirement. (They will, however, owe income taxes and a 10% penalty on any earnings withdrawn.)

While 529s offer many benefits, families should understand the difference between how parent and grandparent accounts are treated in financial aid assessments. Any distribution from a grandparent-owned 529 counts as untaxed income on the following year’s Free Application for Federal Student Aid (FAFSA). Parent accounts, on the other hand, are counted as assets on the FAFSA— not as income—and factor into determining the Estimated Family Contribution.

“Income is assessed much more heavily,” said Joe Hurley, head of Savingforcollege.com.

Because grandparent accounts have a larger impact on financial aid, he added, owners of these accounts might want to wait to use the account until the final year of college, or they could shift the ownership to the parent.

While the amount and frequency of 529 contributions depends on individual financial circumstances, Mary Morris, chair of the College Savings Foundation and CEO of Virginia529, said she’s seen an overall increase in grandparents getting involved education expenses. Anecdotally, she estimated that 20% of Virginia accounts are owned by grandparents. Many contributions are made as gifts on special occasions, a pattern Morris expects to see more often going forward

Despite the trend, however, “there’s a real disconnect” between generations when it comes to communication about finances, Hurley said. According to the Fidelity survey, 90% of grandparents said they would likely make a contribution to a college savings plan—if asked.

“Parents feel it’s their responsibility to help their children if necessary,” Hurley said. So they’re “reluctant” to ask for help.

But the price tag of higher education has made that conversation one worth having.

“Parents cannot save enough, on average, to pay the full cost of college,” Bernhardt said. “Grandparents recognize that and want to chip in.”

MONEY College

Law School Goes On Sale—Up to 20% Off!

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The University of Iowa reduced its law school tuition by 16% for fall 2014. courtesy University of Iowa

It's a happy hour for those headed to the Bar.

Law school applicants and students could be in for some sticker shock—the good kind—thanks to a growing trend of price slashing at schools.

The University of Arizona announced last week that it would be dropping nonresident tuition rates by about 30%, from $42,000 a year to $29,000. This is the second round of cuts for the school, which dropped tuition for the 2013-14 school year by 11% for in-state students and 8% for out-of-state students.

A handful of other law schools have made similar moves.

The University of Iowa reduced tuition by 16% for fall 2014. Penn State slashed tuition by nearly 50% for in-state students in the class of 2014 by offering annual $20,000 tuition discounts. Roger Williams University School of Law in Rhode Island reduced tuition by 18% for the upcoming school year and plans to freeze rates there for three years. Ohio Northern University cut its tuition by 25% this fall. The Brooklyn Law School will cut tuition by15% starting in the 2015-2016 academic year.

Plus, the University of Maryland and University of Massachusetts have both frozen tuition in the past two years.

“Law school is too expensive,” explains Judith Areen, executive director of the Association of American Law Schools and a law professor at Georgetown University Law Center. “Significant drops in enrollment, almost by a third in three years, have put pressure on schools to find the right balance between cost and quality. I applaud these schools for trying to innovate and offer their programs at the lowest price they can.”

Why tuition is dropping

Like any good sale, these new prices are intended to woo prospective customers—in this case, students—while turning up the heat on the competition. For many mid-tier law schools, change has become necessary as they deal with how drastically demand for their product has fallen off in the past three years.

First-year enrollment at U.S. law schools fell 11% from 2012 to 2013, according to the American Bar Association, bringing the total number of students enrolled down to 39,675 or where the figure sat in 1977, when there were far fewer ABA-accredicated schools.

And two-thirds of ABA law schools reported declines in the size of their enrollment in 2013; 81 schools experienced a decline greater than 10%.

The steep decline in enrollment over the past three years—in 2010 enrollment was over 52,000—highlights the lingering effects of the recession on the legal profession. Students are steering away from the traditionally high-salaried career as it has left many graduates loaded with debt and struggling to find work in the field. “The problem is contraction in the job market: The recession cut back the number of jobs and now fewer law graduates are needed,” says Areen.

Not every school will formally reduce its tuition, but that doesn’t mean you might not be able to get in for less. “I’m sure every dean would like to offer lower prices, but not all can,” says Areen. “Instead, we will likely see a greater range of tuition available across the country. And the greatest difference will be on an individual basis, which means more to students than just sticker price.”

For example, some schools have responded by offering more merit-based scholarships—as Villanova University’s law school has done. Starting this year, Villanova will cover tuition for high-achieving students with GPAs above 3.6 and LSAT scores of at least 157 for all three years of law school.

“These kinds of tuition cuts will certainly be an incentive to students to choose that school over another pricer school,” says Halimah Najieb-Locke, national chair of the National Black Law Students Association. “Students were already doing cost-analysis on different schools, and on the level of debt they would take on, but now I think we’ll see much more of this dollar amount comparison pulling kids away from what might have once been their dream law school.”

Of course, the true dream law schools aren’t joining the price-slashing revolution. Top schools like Yale, Harvard, and Stanford remain in high demand with applicants because of their brand recognition and graduate placement records. But savvy students may be able to use the cost-cutting of other schools as a bargaining chip with even these top schools.

How to use this trend to your advantage

A student who applies to multiple schools can use acceptance letters from cheaper schools as leverage to sway their top-pick school to sweeten its own offer. Simply let the school you prefer know you’ve been accepted elsewhere, and what that other university has offered you, says Areen. Ask your preferred school if they can do anything more for you, and you might come away with a better scholarship offer.

Najieb-Locke adds that when you do approach schools about increasing scholarship amounts, you should make sure you can make a good case for why you want to attend that school, what you plan to do with a degree from that institution, and why you’d make an attractive student and future alumn.

“If your desire seems genuine, and you’ve framed the conversation around how a certain lack of funding—always have a specific number in mind—is holding you back from achieving your dreams,” says Najieb-Locke, “schools are much more likely to grant your request than if you simply say ‘what more can you give me?'”

Even after students have made their law school selections, they could still be feeling the boon of the drop in demand three years later. As grads, they will potentially come out of school with less debt. And, says Areen, a smaller pool of graduates means less competition for jobs.

TIME Education

How American Universities Turned Into Corporations

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Barry Winiker—Getty Images

A profitable student loan market has fueled an arms race among colleges and universities, along with an astronomic rise in tuition that seeks to capture the student loan dollar through increasing fees.

College graduation season is here, and that means students should be celebrating their hard-earned educations. But have you seen the headlines being made by many of our nation’s campuses lately?

On Monday, you could read about a new study of public universities showing that schools with the highest presidential salaries also had the fastest-growing student debt. That same night, Senator Elizabeth Warren was on the Colbert Report to bring attention to the nation’s student loan debt, which now exceeds $1 trillion. And over the weekend, New York University was the subject of a New York Times investigation detailing inhumane working conditions at its far-flung Abu Dhabi campus, the crown jewel in president John Sexton’s octopus-like plan to grow the university throughout New York City’s Greenwich Village and across the globe.

At their core, these stories reflect a fundamental change in higher education: universities act increasingly like big businesses that treat students as customers.

This transformation is part of a larger cultural shift that can be traced back to the 1970s and ‘80s, when policymakers began to view higher education more as a private good (benefitting individual students) than as a public good (helping the nation prosper by creating better educated citizens). In previous decades, public universities enjoyed robust support from state and federal government, and tuition at some of the country’s best universities was free or nearly free. But Republican governors like Ronald Reagan argued that states should not subsidize intellectual curiosity, while economists like Milton Friedman advocated against the notion of free education, claiming that students seeking a private advantage should pay for it themselves. Just take the example of the University of California at Berkeley, in Reagan’s home state: in 1960, tuition was free for a California resident; today it costs $12,872 with an additional $14,414 for room and board.

But how did policymakers envision that students would pay for that private good? Through student loans, of course. Under the theory that student debt was “good debt,” student lending limits rose during Reagan’s presidency, and a profitable student loan market emerged. This in turn fueled the rise in college tuition, as universities sought to capture the student loan dollar through increasing fees. In fact, since 1978 the cost of college has increased in absolute dollars by 1120%. All the while, universities have worked to convince students that their institutions are the most worthy of skyrocketing fees, perpetuating a cost disease at the root of higher education.

Flash back to 1636, when Harvard, the first American college, was founded. Clayton Christensen, a Harvard professor of Business Administration, argues that Harvard established the DNA of American higher education on the basis of constant improvement and expansion—seeking better academic programs, better facilities, better professors, better students. As this DNA replicated over the following centuries in colleges and universities across the country, it created a business model that Christensen describes as “massive in its scope”—one that must provide for research, instruction and a complex set of academic, athletic and leisure facilities, dormitories and dining halls. “That’s a tough game to keep playing,” Christensen says. For a university to compete with its peer institutions, it must engage in the arms race to expand operations, thus increasing its cost base. If, for instance, Stanford builds a new science lab to attract a star professor, Princeton will likely build a lab of equal or better quality to attract another star professor. And if NYU is going to invest in a global campus in Abu Dhabi, then Yale might just have to follow suit by building a campus in Singapore.

This competition for prestige has been further entrenched in the university DNA by numerous college rankings. While many parents look to the U.S. News and World Report, which relies on a complex variety of metrics, including research expenditure, admission rates and peer assessment, you can now find rankings in the Princeton Review on just about anything, from best library to best campus food.

This desire for constant improvement could in theory be all well and good, so long as the astronomical cost of the enhancements were not getting passed on to students. But given the recent disinvestment in higher education by the states and increase in student loans, young people and their families are left footing the bill. In the process, universities’ attempt to serve their academic mission is being perverted into an effort to attract students as consumers. Step onto a college campus today, and for every new science lab or classroom, you will likely find a new student recreation center, football stadium or luxury dormitory with swimming pools nearby. And, too often, those amenities designed to attract 17 and 18 year olds are being built with money the universities don’t actually have, leading the schools to take on debt themselves. The ranks of well-paid administrators have swelled as well, far outpacing the growth of full-time faculty, who are being replaced by low-paid adjunct professors.

As universities succumb to this cost disease, they begin to resemble businesses more than nonprofit schools charged with a public mission. The future of higher learning and, more broadly, our society hangs in the balance. If there’s any inspiration we can glean from the recent headlines, it’s that the laundry list of problems demanding solutions is becoming clearer. But it will be harder for us to effect change if we are unable to understand the broader cultural problem at play in the corporatization of the university.

Additional research and writing contributed by Andrew P. Coffman.

Andrew Rossi is an Emmy-nominated director of documentaries. His latest film, Ivory Tower, to be released theatrically in June, investigates the rising cost of higher education. His last documentary, Page One: Inside the New York Times, looked at the crisis in the newspaper industry through the prism of the Times’ media desk.

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