While it’s certainly foolish to rush into committing to college, it’s just as foolish to dismiss it without thought. That's why when I turned 18 I decided to take a ‘gap year’. I did this because I wasn't sure what I wanted to do, and it seemed like common sense to gather more information before making any irrevocable, life-altering choices.
Lots of my friends were having graduation parties, which is where the topic came up the most (and was the least avoidable). This is what you talk about at that age. You talk about it with parents, friends, friends’ parents, teachers, guidance counselors, admissions officers; almost anyone you happen to be making polite small talk with. I even wound up defending my decision to my doctor during a check-up.
Eventually, I started to doubt. Was I taking a huge risk by not going, or even by waiting a year to consider my options?
Now that I have more perspective on the situation, it seems absurd that this sort of pressure is heaped upon so many high school graduates every year. It comes forcefully and from all directions. But the urgency is the most confusing part: what real penalty can I expect for waiting a year? Will the job market cease to be there? Is it a race, where the job goes to whoever gets there first? If that’s true, what does that mean for the people who graduate a year after me? And whatever the downsides, how do they compare to rushing into a major life decision (and lots of personal debt) with little idea of what you want out of it?
When you slow down and examine all the incidental costs associated with college, it becomes clear how much money can be lost by rushing into these choices, and what kind of long-term habits can be formed as a result.
Room and Board
Anyone who’s ever bought something inside an airport or at a baseball game knows that captive consumers have to pay exorbitant prices, and college housing is no different. Many colleges rent their dorm rooms out for significantly more than it would cost to live in an apartment near the campus, or charge the same amount for an otherwise inferior space. For example, in 2007 the amount that the University of Miami charged students for dorm rooms was around six times what it cost to live off-campus. A common response is that it's simply more convenient to live on campus, but this is a high price to pay for a convenience that doesn't even manifest itself academically: several studies have found that students who live in dormitories did not achieve higher grades or even study more than students who lived off-campus.
Housing is one of the more sizable secondary costs, but lots of other things add to the burden, particularly for relatively impoverished students. Ramen noodles remain one of the most enduring clichés about college life, an example of temporarily skimping in one area to save money for another (like tuition). But suppose you attend one of the many schools with a mandatory meal plan, the higher education equivalent of proprietary arcade tokens. Students on meal plans only eat about 60% of the food they’ve paid for, and if you take into account how many meals a student is likely to miss when buying these plans, the cost per meal is often around $10-$15.
Colleges call this the, “Missed-Meal Factor,” and they count on it. The University of Massachusetts says that "The prices of the meal plans take into account the missed-meal factor. If the students did eat all the meals on their meal plans, the prices of the meal plans would be [even] higher." I'll leave it to the reader to decide whether or not a college student should be spending $15 on each meal, but whether they should or not, meal plans represent another layer of obfuscation to add to the tug of war between tuition fees, subsidies, incidental costs, scholarships, and everything else that makes a straightforward cost-benefit analysis difficult.
These food and housing prices are even less competitive than they appear at first blush, because the comparisons are with individual private alternatives. But colleges sell in bulk, and to an ever replenishing group of freshmen. Combine this economy of scale with the fact that many receive tax subsidies for housing, and they ought to be able to undercut private alternatives.
Credit Cards
As exorbitant as the food and housing prices are, diligent prospective students can still avoid them. But things get murkier when you delve into the morally questionable (and extremely profitable) relationships many colleges have with credit card companies. A large number of colleges receive millions for selling the personal information of their students, alumni, and employees to credit card companies: the University of Tennessee received $16.5 million for selling this information; the University of Michigan got $14 million; Michigan State University got $14 million, and the University of Oklahoma got $13 million.
In addition, over the next couple of years, the 250 biggest colleges in American will receive around $5 billion combined from banks in exchange for letting them place ads for credit cards and other services on their campuses. It's simple ad targeting: students have self-selected as young people willing to take on lots of debt, so why not inundate them with ads for credit cards?
But surely if a student is ready to live on their own they’re ready to decide whether or not they can use credit responsibly, right? Unfortunately, this isn’t the case. One research study came to the conclusion that credit card marketing "poses a greater threat [to college students] than alcohol or sexually transmitted diseases." And the marketing is highly effective: around 80% of college students have at least one credit card, and the average student has four. A whopping 42% of students have six or more.
It should come as no surprise that the generations formed in this kind of culture have struggled so mightily with credit card debt.
You pay to go there, you pay to live there, you pay to eat there, they can sell your personal information, and they can bombard you with advertisements for credit cards. Colleges leave no stone unturned, and they can squeeze water from all of them.
Some of these problems can be avoided by shrewd students, and some cannot. But even the things that can be avoided require that students be constantly vigilant at precisely the time when they have other things vying for their attention. The system seems custom designed to take advantage of the deluge of information and choices that each student has to make. And it also seems designed to desensitize young people to the perils of debt, which can have a dramatic ripple effect throughout the rest of their lives.
In the next installment, we’ll look at interest rates and the long-term implications of these financial decisions.
Continued in Part 3: Captive Consumers: How Colleges Prepare Students for a Life of Debt.
