Is the cost of education worth the debt?

Grand Rapids, MI -- (SBWire) -- 05/22/2013 --Do you have trouble keeping up with what is going on in the U.S. economy?

Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can help out. Whether people enjoy his weekly newsletter at http://www.moving-markets.com or his blog at http://www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On May 13, 2013 his blog was titled Evidence the Tuition Buble is Beginning to Collapse?

"In the past, I have written about the fact that college tuition costs have risen significantly faster than other expenses, including food and medical outlays," began Tubbergen. "I have offered my opinion that this trend of rapidly rising tuition costs is a result of the readily available money to finance a college education."

Tubbergen goes on to state tuition hikes at institutions of higher learning have been almost exponential due to the easy credit available to students in order to finance their higher education. As with any bubble, in order to exist, easy money has to be available to just about anyone who wants it: even those who are marginally qualified to borrow.

"Once the system reaches its capacity for debt, the debt accumulation trend reverses and prices decline," explains Tubbergen. "That's deflation. It has occurred in the real estate market and now I belive we are seeing the beginning of this deflationary phenomenon with higher education costs."

Tubbergen quotes below from a May 6, 2013 article in the Wall Street Journal.

Private U.S. colleges, worried they could be pricing themselves out of the market after years of relentless tuition increases, are offering record financial assistance to keep classrooms full.

The average "tuition discount rate" -- the reduction off the price afforded by grants and scholarships given by these schools -- hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.

"It's a buyer's market" for all but the most select private colleges and flagship public universities, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, NY that works with colleges on pricing and financial-aid strategies.

It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high school seniors to commit for their freshman year of college, early reports suggest that non-top-tier schools fell 10% short of enrollment targets, said Mr. Scannell.

The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value, with about 65% increasing their discount rate in the fall of 2012. Except for the most exclusive schools, private colleges increasingly are vulnerable to the stagnant wages of many families, deepening student debt, the uncertain job market, growing questions about the value of costly four-year degrees and unfavorable demographics.

About one of every eight U.S. undergraduates is enrolled at a private nonprofit college. Such schools provided 70% of all grant aid to undergraduate students in 2009, the most recent year for which data are available, Nacubo says.

The average discount rate at private colleges has climbed for seven years in a row, and the latest increase was smaller than the jump in 2011, said Natalie Pullaro Davis, the study's author. But colleges also are having a tougher time boosting their sticker prices. That makes it harder for colleges to generate new revenue to offset the impact of higher aid and their own rising costs.

Because of economic factors and political pressure on colleges to hold the line on tuition, "we have hit a tipping point on price," said John Nelson, managing director at Moody's Investors Services. Last year, the median sticker price at about 280 private colleges and universities tracked by the debt-rating firm rose 3.9%, the smallest increase in at least 12 years.

"These 'sticker prices' the article describes are simply numbers games," notes Tubbergen. "While sticker prices increase so do discounts at most schools, resulting in a net decline in tuition costs. While this declining tuition cost trend is firmly underway I expect it to continue and intensify."

Tubbergen feels the takeaway here is to avoid taking on debt, especially debt in order to finance a college education. With anemic employment numbers and the jobs that are being created being the low-paying kind, the return on investment for many college graduates is negative.

"To top it off, student loan debt cannot be discharged in a bankruptcy proceeding," concludes Tubbergen. "To paraphrase an old Eddie Murphy joke, student loan debt is like luggage: it stays with you forever."

To read the blog in its entirety go to http://www.dennistubbergen.com and select his May 13, 2013 entry.

Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.

About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at http://www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to http://www.moving-markets.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.