Costs of Higher Education Assessed
ROMANS: The next loan crisis is coming to a college campus near you. You've probably heard the student loan horror stories. It's only a small portion of borrowers, really, but it does happen -- $60,000, 70,000, 80,000, even $100,000 in student debt. Then graduation, and for some a low-paying job. We've talked a lot about the problem of the low-wage recovery on this show, but for students with high loan balances and low wages, there is a solution no one is talking about. The income-based repayment program gives borrowers a break, and that break is about to get bigger. Here's how it works. Those with government-backed student loans can apply, then the government considers their income and their family size, then does some calculations and reduces monthly payments, depending on the amount of the loan for those who qualify. But borrowers must reapply each year. The reduced payments won't be more than 15 percent of discretionary income. But thanks to a bill passed along with ObamaCare, that amount will drop to 10 percent starting next summer. Imagine that, 10 percent of your discretionary income goes to student loans. That's it, 10 percent, cap there. So if you've got a kid in high school or middle school, check this out and show it to them. It's not a long-term solution to rising college costs and ballooning student debt. Higher education is still the gateway to the middle class, but that gateway is getting narrower every day. I spent some time recently with a mother struggling to help her son step through that gateway.</s>PATRICIA RODRIGUEZ, STRUGGLING TO PAY FOR SON'S COLLEGE EDUCATION: I started saving when he was 2. And he's 19, and it's never enough. Anywhere you can cut corners and save money.</s>ROMANS (voice-over): Patricia Rodriguez needs $13,000.</s>RODRIGUEZ: Where do you get an extra $1,200 a month?</s>ROMANS: Don't you worry about borrowing all that money?</s>RODRIGUEZ: Yes.</s>ROMANS (voice-over): Her son, Jason, is a sophomore at the University of Hartford, but Patricia's savings are gone. How are you going to get it?</s>RODRIGUEZ: I don't know.</s>ROMANS (voice-over): Nothing in American life has risen in price so quickly as the cost of college, up more than 500 percent since 1985.</s>STEPHEN MOORE, "THE WALL STREET JOURNAL": I think the universities are the biggest scam going in America. The costs -- there's no reason a college education should cost $30,000, $40,000, $50,000 a year.</s>ROMANS (voice-over): Why is it so expensive? Some say the easy money available to students has created a tuition bubble. Others say it's simple economics.</s>RICK NEWMAN, COLUMNIST, YAHOO! FINANCE: You have to go to college to get ahead. At the same time, it's not as if new colleges are opening up all over. We basically have a fixed amount of supply, and when demand is going up and supply isn't, prices rise.</s>ROMANS (voice-over): And so does debt. Grants and scholarships only cover about 30 percent of college costs. So students have to find or borrow the rest. Two-thirds of college grads have loan debt now averaging more than $26,000. Others have much more.</s>RACHEL BOHR, COLUMBIA STUDENT: Right now I'm almost $60,000 in debt, which will affect my ability to get a mortgage, to have children and put them through a good education. And it will affect what kinds of jobs that I choose.</s>ROMANS (voice-over): And jobs are what it's all about. Americans with a college education are more likely to be employed and they earn more money. But in this economy, there are no guarantees. More than 36 percent of recent grads are working in jobs that do not require a college degree.</s>UNIDENTIFIED FEMALE: Have a good day. Thanks.</s>ROMANS (voice-over): That's why the country's most famous student loan recipient wants to hold colleges accountable.</s>OBAMA: What we want to do is rate them on who's offering the best value so students and taxpayers get a bigger bang for their buck.</s>RODRIGUEZ: He likes to come home and seeing his friends, but he does also have a great time in college.</s>ROMANS (voice-over): But finding the bucks in the first place, that's the real struggle for parents like Patricia.</s>RODRIGUEZ: All you want is your kid to go to school and do well, and that's what he's doing, and we don't have the money.</s>ROMANS (voice-over): Few Americans will if college costs keep rising.</s>ROMANS: She's doing everything she can, and it's just running right out of her reach, just running away from her, the cost of college. It may be the beginning of the next crisis, but college is still worth it. You saw the numbers there -- lower unemployment rates and much higher wages. Salaries for the class of 2013 rose 2.4 percent from last year. That's according to a new report out this week from the National Association of Colleges and Employers. And the extra help from the government will hopefully make it easier for grads who need it. That's it for this week's YOUR MONEY, as you get ready to watch Eli and Peyton face off in the Manning Bowl. Want you to head to our blog at CNN.com/yourmoney. I'm going to tell you all about the business of being a big-time NFL quarterback. We're going to see you here next week. Have a great weekend.