Mounting college costs and student loan debts present a substantial dilemma for those planning to start families in the next few years: What will the cost, and value, of a college education look like 25 years down the line?
Experts say that if current trends continue, the outlook is a gloomy one in which some would-be students are priced out of a college education, and more of those that do attend face substantial student loan debts. "It'll be much more expensive to go to school, so they'll be concerned not just about that debt, but is that debt worth it?" said Mark Kantrowitz, senior vice president at Edvisors.com.
During the 2013–14 academic year, the average cost of tuition, room and board at a private nonprofit four-year college was $40,917, up 1.7 percent from the previous year, according to The College Board. At a public four-year college, the average cost to attend was $18,391, up 1.2 percent. If college costs increase at a rate of just 2 percent per year, in 25 years parents of incoming college freshmen might expect to spend as much as $68,471 in today's dollars for that first year—or a total of nearly $300,000 on a four-year program.
Of that, somewhere in the neighborhood of $55,000 to $80,000 could be student loans. Today's grads carry an average loan balance of $33,000, said Kantrowitz, with that debt load increasing by roughly $1,000 to $2,000 each year as college costs rise.
Even public colleges, traditionally lower-cost, could see prices jump. State funding has slid in recent decades from about 75 percent to 53 percent of the cost per student, shifting more of the burden to families, said Daniel J. Hurley, associate vice president for governmental relations and state policy at the American Association of State Colleges and Universities. "As much hope as I would like to hold out for a strong reinvestment by states in public education, I believe that in 25 years, public higher education will be even more of a privately financed good," he said.
Panicking yet? Take a deep breath—the general consensus is that current college pricing trends largely aren't sustainable. "There's no way for them to continue that pricing surge," said Jeffrey Selingo, author of "College (Un)Bound" and "MOOC U." Costs will certainly be higher than they are today, but the higher they go, the more families will be priced out or unwilling to take on the debt of attending, sending more in search of lower-cost alternatives, such as public colleges, two-year degrees or online platforms like start-up Minerva.
Only a select few colleges (think Ivy League institutions and others, where applicants far outstrip acceptances) will retain the pricing power to make big annual jumps in tuition, he said. Most will need to assess their cost structure to keep prices low enough to remain a viable option—or risk closing.
Measures might include hybrid classes with an online component to allow more students in core classes without requiring additional professors or classrooms, Selingo said. Or data analytics to help students efficiently pick classes, cutting down bills by meeting graduation requirements in fewer semesters.
As costs rise, families are also likely to focus more on the value of the college selected, said Susan Aldridge, president of Drexel University Online. "Right now there's a lot of competition in terms of price," she said. But the final choice may come down to less important factors. "We see students picking a campus based on whether there's a rock climbing wall and 12 different kinds of cereal in the cafeteria."
A bachelor's degree is currently worth about $300,000 in extra wages over the course of a working life, according to a new report from the Federal Reserve Bank of New York. Rising costs to attend and mounting student loans become more of an issue if graduates can't land jobs.
"It's not just about price, but the quality of the education as it relates to preparing students," said Aldridge, who is also the author of "Wired for Success: Real-World Solutions for Transforming Higher Education." "That's the area where we get the value on investment, not in all the facilities."
On the financing side, students and their families may have alternatives to racking up substantial student loan debt. Companies are already creating closer ties with colleges, weighing in on needed skills to be hirable at graduation, said Aldridge. More companies could follow the lead of Starbucks in offering employees tuition discounts at partner colleges, or sponsoring students with the intent to hire them after graduation. "We're already seeing that, and I'm expecting that to continue to grow exponentially," she said.
Borrowers could even turn to investors through a growing number of crowdfunding sites such as Upstart or CommonBond, said Kantrowitz. Some allow students to solicit donations. Others offer loans with a low interest rate, or ask borrowers to pay a percentage of their post-graduation salary instead of repaying a set loan amount. "These educational investments might take off," he said.
Federal student loans are more likely to move toward longer repayment terms, with payments scaled to the borrower's income, said Hurley. "We'll see more innovation on the part of both federal and state governments and the private sector in terms of debt financing," he said. It's a mixed benefit. Those kinds of repayment plans may help grads manage their debt with more affordable monthly payments, but result in a bigger bill paid out over a longer period.
Put another way: In 25 years, new college grads might have a loan balance they're paying off over the next 25.
—By CNBC.com's Kelli Grant