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The high cost of a cheap college

Some of the most affordable colleges have high dropout and student loan default rates.

By MSN Money Partner Feb 14, 2013 1:15PM

This post comes from AnnaMaria Andriotis at partner site MarketWatch.


MarketWatch logoPresident Barack Obama called for colleges to rein in their costs during his State of the Union address Tuesday night. But new data show those who attend schools with lower tuition often end up paying in other ways.


Image: College fund stored in glass jar in kitchen © Vstock LLC, Tetra images, Getty ImagesStudents who go to the most affordable four-year public colleges are more likely to drop out and fall behind on their student loan payments, according to the College Scorecard released by the U.S. Department of Education on Wednesday. The tool, touted by Obama on Tuesday night, breaks down colleges' net costs (what families pay after factoring in grants and scholarships), graduation rates and student loan debt, and compares the figures nationally.


All 10 of the four-year public colleges with the lowest net prices have a graduation rate below the 58% national average. And  half of those schools have a higher federal loan default rate for student borrowers than the 13.4% national average.


At a time when families are becoming cost conscious about the college they choose, the findings suggest that cheaper isn't always better. "Part of it is, you get what you pay for," says Mark Kantrowitz, the publisher of, which tracks financial aid and student debt.


In-state families at these schools pay average net prices ranging from roughly $1,400 to $4,000, according to Education Department data for the 2009-10 academic year, the latest available. Yet many of their students still fall behind on loan payments.


Of the 10 schools on this list, Dalton State College, in Dalton, Ga., has the top default rate: 21.3 % of its student borrowers defaulted on federal student loans before Sept. 30, 2011, within three years of entering repayment, according to data from the College Scorecard. The school is tied with Indian River State College, in Fort Pierce, Fla., and followed by Edison State College in Fort Myers, Fla., at 20.1%.


MarketWatch chart

Carol Jones, financial aid director at Dalton State College, says its borrowers have fallen behind on payments because the local economy has shed many jobs since the recession, making it harder for its college graduates to find work. She adds that the school once accepted most students who applied, but that it has recently raised its admissions standards. Indian River State and Edison State colleges didn't immediately respond to requests for comment.


Some college experts say the dismal figures are also due to the quality of education at lower-cost colleges. These schools are less likely to have the large support staff, including counselors and tutors, who can help students overcome academic or financial setbacks, says Kantrowitz. They're also less likely to have as many full-time professors or other academics available on campus for students.


With fewer resources, there's an increased chance of students dropping out. After Dalton State, California State University at Dominquez Hills has the second-lowest graduation rate on the list of most-affordable colleges, at 24.4%. (The scorecard, from the National Center for Education Statistics, looks at the number of first-time, full-time students beginning college in the fall of 2005, and assesses how many of them had graduated by 2011, six years later.)

Susan Borrego, the vice president for enrollment management and student affairs at CSU Dominguez Hills, says that to improve graduation rates, the school has been providing students with more support, including more academic advising and summer programs designed to improve study skills. But she says the financial background of the school's students -- most of whom come from lower-income families -- also impacts its graduation rates.


In general, colleges with lower net costs tend to attract more lower-income students who are also more at risk for leaving school before graduation if their families suffer a financial setback. (According to, about a quarter of students at public colleges receive need-based federal Pell grants, compared with roughly 10% of students at Ivy League schools -- where graduation rates are near 100% and loan default rates are in the low single digits.)


From there, a domino effect ensues: Dropouts are less likely to have the means to keep up with student loan payments, which in turn leads to a higher default rate for that institution.


For families, the College Scorecard data suggest that finding a middle ground may be the way to go. Families should review the financial aid packages they receive from colleges to pinpoint the ones that will require the least out-of-pocket costs, then use the tool to see how those institutions' students fare.


Families should also do some legwork, including visiting the campus and inquiring about their job placement rates. Last year, SmartMoney pinpointed the colleges that help their graduates get the best salaries. (The Education Department is working on adding employment information in the Scorecard.)


Separately, advisers suggest that families shouldn't be quick to dismiss private colleges with higher sticker prices. Many have large endowments and bigger revenue streams than public colleges do. Private schools often use those funds to provide more services on campus and more free aid to students.


More from MarketWatch and MSN Money:


Feb 14, 2013 2:16PM
Students go to these less expensive colleges to get their gen-eds out of the way. Then, they transfer to the more expensive institution with the greater range of degrees.  Simply because a student "drops out" of one school does not mean that the student quits going to school. These figures are not entirely accurate.  The loan default rate is a better measure.
Feb 14, 2013 3:24PM
There are to many variables for these stats to be accurate
May 2, 2013 4:04AM
This is a brain-dead article that borders on the absurd. Colleges are so overpriced now it is just ridiculous. Students are borrowing heavily to go to these overpriced schools and coming out of college with debts they will be paying on the rest of their lives.

Colleges are overpriced because they support the egos of the "elite" that run them - but most of these professors would fail miserably if they were put out in the real world.  Many college professors that go out into the work force fail miserably or are mediocre. Yet in college their egos are beyond believable. I have three college degrees and what was so striking about about the numerous professors that I took classes from was that nearly all of them had egos the size of elephants.

I remember a physics professor literally cutting down a  young 20 year old student telling him that he did not have the "intelligence" to be in his class because the student was getting a C right in front of me. At the risk of losing my grade, I confronted the professor after I the young student left. I told the physics professor that he didn't have a clue of what the young man was capable of because he had not invested any time in the student. He made a snap judgment of a human being and possibly damaged the young man for life.

We need to deflate the egos of these self-proclaimed intellectuals and make our colleges  affordable  to all students. Also our colleges need to prepare our students for real careers, not careers that have no future. Colleges are offering degrees in absurd subjects that don't even offer jobs or offer very few jobs in the real world.

Our colleges used to be the envy of the world and some of them are still very good, but many of them are way too expensive and offer little support to the students that attend them.

Feb 14, 2013 3:41PM

Correlation does not mean causality. Maybe the students choose to go cheaper colleges when they may not be the best of students or are exploring their options and trying to minimize the cost of said exploration or the higher chance of failing out. It can also be due to the high standards set in what are likely public institutions with many reputations that are safeguarded. Public universities are certainly not diploma mills.  I can tell you this: I was one of the top ten students in my class of about 100. College was not a mere linear increase in study requirements. It was a quantum leap in the amount of work I had to do to come out with a 3.08GPA.

Feb 14, 2013 3:42PM

CSU-DH and CSU-LA cater to a specific crowd (first to attend college in their family, mostly LOW income, come from lower preforming high schools) and unfortunately that crowd is not nearly as readily equiped academically to handle college as students who attend other CSU campuses - Long Beach, San Diego, Northridge where the incoming students do not need a TON of remedial classes, significant tutoring, etc.  those costs add up FAST and often times, students get discouraged and drop out.


that said, i do know a handful of CSU-DH and CSU- LA grads - most of them were transfers from a JC who were there for a SPECIFIC program and graduated. most had chosen the school b/c geographically it was a good fit for them (ie they could live at home).

May 2, 2013 9:20AM
I really don't like this article. I am student myself and I started out at a community college. I then transferred to a 4 year university to finish my degree. The so called 53% drop out rate of cheaper colleges isn't calculated correctly and doesn't take into consideration transfer students. Also, how can the comparison be made that "fewer dollars, fewer diplomas" is in any way correlated. The type of college attended doesn't directly affect your willingness or ability to repay school loans. Thats an absurd assumption. 
May 2, 2013 10:43AM
Sounds like pure crap to me. I attended a small, unappreciated, cheap state college in the 60's, with no help from family. Due to the era my first job out of college was Marine Corps OCS, and I noticed my commission was as good as anybody's. When I left active duty the same "worthless" little college treated me like a king while I got my M.S. So that was a B.S. and M.S. with no college loans, no debt. I got job offers commensurate with any university, but my applications for a PhD program got me accepted by several of the best universities in the country, free rides with decent pay. Its not what the diploma says, its what you do with it.
May 2, 2013 10:24AM
I read the one post that said education needs to be free.. Its a good thought but this will fill the schools with those who can't cut it and waste their time, the other students time and that of the teacher. Also, community colleges are almost free to anyone who takes the time to apply for grants or scholarships.  
Feb 14, 2013 2:24PM
The graduation rate is less at 4 year public universities than at 4 year schools because they are HARDER. Go to some run of the mill private school (exceptions are IVY league, Stanford, Vanderbilt, NWestern, Duke, and a few others), they hold your hand and drag you to the finish line. I won't even look at a private school resume when I hire. And the on-line colleges are a a total joke. There's a reason  why a student needs a ratio of 4 students to every professor. The reason is not good. They aren't that bright. Private schools look at students as their customers. Its a lot harder to find a new customer willing to shell out $20k to $30K a year than it is to keep one. Public schools have a different attitude. Students are easily replaced every year as they have thousands more applications than they have room.
Feb 14, 2013 4:50PM
People who pick their college because it's the cheapest just don't get it, and probably won't truly understand other hugely important things in life as well: the difference between a career and a job, for example.  Way too many college students in America believe that the key to earning large salaries and having a successful career is a diploma.  Anybody who is successful knows that a diploma is just a piece of paper, that ability, skill, and personal traits like intelligence and being able to work well with others is the key to success.  Why do top graduates from top or well-established universities get and keep the best jobs?  Because they have demonstrated the potential to succeed that they eventually live up to on the job.  Buying the cheapest, easiest piece of paper available demonstrates the exact opposite potential, and the people who believe that nonsense generally will not be our future leaders because they are naive.
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