I was just wondering what the cost-limit signs for colleges would look like. For example, I envision signs on their gilded ivy-covered main gates that say something like “Caution: Cost limit: $250,000." That would be how much the sticker price of a four-year degree there would soak you. On the other hand, when visiting colleges, families (especially parents) should have their own warning signs as a pronouncement to college officials.

I can see parents sitting with their high school seniors in a college information session with something big and bold like this beaming from a sign around their necks: WARNING: College cost limit: $80,000. That would grab the attention of the admission department info-session speakers.

So, we have to wonder when the college-cost bridge will collapse under its own weight. What inspired my comments here is an interesting article from Bloomberg Businessweek: Are College Costs Reaching a Breaking Point? Here's the opening salvo:

… The growing attention to universities' soaring prices is pushing some private colleges to a tuition tipping point, according to Standard & Poor's Rating Services. In a new report, S&P said costs have risen so much, “many of their customers can't afford tuition without significant financial aid." If some schools don't keep their tuition under control, they'll shoot themselves in the foot and face the need for more drastic cost-cutting, such as layoffs, and potential mergers or closures, S&P says.

Reporter Karen Weise goes on to make some excellent points about the “weight limit" of college costs being reached in the not-so-distant future. One wonders when the collapse will occur, how it will happen, and to whom it will happen.

Thinking about these possibilities, I posted the BW article on the College Confidential discussion forum to see what parents and students think about the possibility of colleges buckling under their own cost burdens. Here's a sample of their comments. Perhaps you agree with some of them.

***

– YES, I think they are, based on the reports I'm reading of college apps dipping this year. Looks like we are on the downside of the slope for numbers of kids, so maybe costs will have to drop. One can hope – since I still have another in the pipeline that won't be applying for years!

Our local university flagship outlet (2 Universities -your degree comes from one or the other, depending on major), has a huge increase in enrollment this year, with higher GPAs and Test scores than before. Lots of people are commuting if they can, at least for the first two years, and then transferring to the University from which they hope to graduate, if they can. It makes good financial sense.

– Yes I believe we are at a crossroads. In our experience now since 1986, costs have continued to climb and merit money has become tighter. Now the entering freshman class is shrinking. These three factors combined should bring the situation to a peak. Dadinator, I agree with what you say on surface, but the market was climbing and money was loose in the 80s and 90s, it wasn't until the middle of the 2000s that money became tighter, people lost value in their retirement and savings accounts, there was no inflation and salaries did not increase so the real test will be what happened starting in 1987 and going forward. The market is climbing slowly but normal people are just starting to see real gains against previous loses. The housing market is far from reaching it's peak so equity is still down and banks are still tight for the average household sending kids off to college.

– In our current economy it's interesting to see so many CC kids say money is not a concern when they search for colleges. Money is no object, as my d explained about the summer abroad students in Paris who rented a motel room just to enjoy air conditioning when they had a heat wave. Meanwhile the vast majority of students whose parents have not found a way to save a small fortune and get gapped big time struggle with that average loan debt of high $20,000 to get that BA ticket to middle class. The economy has improved for many, but college becomes increasingly expensive for lower income people. Is there really a breaking point?

– I do think they're at a breaking point. College prices are ridiculous right now and it's just not sustainable. My family and I are paying upwards of $52,000 for my schooling alone (and my younger sister is a rising senior in high school) since I'm going to an out of state school. I can't believe people will continue to pay such high prices.

That being said, I don't think anything will change in the NEAR future. Tuition probably won't decrease while my sister and I are in school. I just hope prices go down for when it's time to send my kids to school (if I have them).

– A friend who works in admissions at a local private school said that they are losing many of their top applicants to the state schools and they are starting to feel the pressure. The local private already lowered their tuition and overall cost of attendance to about $35k. In addition, they regularly give $14k academic scholarships to to A students with above average test scores, leadership scholarships, and talent awards and still are losing to the state schools.

– The breaking point will cocur when there is a slow decrease in enrollment in the top 100 instittuions. When they have hard times finding people to pay their prices and endowments to fund their programs, then we will be at a breaking point. Is it now? No. Are people hurting? yes.

– In addition to tuition, colleges have a huge incentive to discount their price structure (i.e. “merit scholarships"), especially for wealthy families due to the future funding stream potential.

Admit a rich kid and give him $5,000 off sticker for four years, but generate twenty times that much in her future tax-deductible alumnae gifts. Rich families are far more likely to donate to colleges because: (1) they have disposable income to give and (2) they receive the greatest benefit from tax dedcuctions.

– As long as colleges are turning away students who have money – either their own or through loans, there is absolutely no incentive for them to build more bureaucracies and keep increasing tuition. If your car dealer can't find enough cars to sell to everyone who comes to his showroom with money, why would he not keep increasing prices?

The worst solution is to get taxpayers to bail out the students while the colleges go unscathed.

– This topic happens to be a particular pet peeve of mine. Colleges are supposed to be non-profit institutions, however they have been behaving as if they are profit maximizers (I would love to see a graph of university president pay versus tuition increases — I bet there is a correlation. The other part of my conspiracy theory is that Wall Street bankers are disproportionately represented on the board of regents of these schools and they encourage this type of behavior — makes sense, doesn't it? ). These schools will just keep raising tuition every year until they see a decrease in enrollment or if they have to accept lower SAT/GPA students so their reputation goes down. All these schools have long ago lost sight of the fact that their mission is to education students and NOT to charge an arm and a leg. My son is going to one of these wacko tuition schools next year, but he would not have gone unless the FA was in line with what it would have cost to go to a state school.

– Many students in our area are headed straight for CC for two years end then on to state U. These are kids that easily have the grades and scores to go all 4 years to University, it is strictly to avoid the debt.

***

There are some cogent comments above, wouldn't you agree? Why not check in and add your own to the mix? Better still, make your comment here, below, in the comments box. When do you think the college-cost bubble will burst? It may be sooner than you think

**********

Be sure to check out all my college-related articles at College Confidential.