I’m not trying to give you ‘one more thing to worry about.’ Nope. “Worry” is the wrong word. This is more of an attempt for folks to recognize what has been slowly happening, and develop a plan, ( and to eventually be explained here), an alternative. Though this topic has been mentioned in the news, it will not be a headline until there’s a trainwreck. Slow moving disasters don’t get news coverage.
Here’s the issue: If you have young children, and if you have plans to help pay ( or pay entirely) for their education after high school, there’s a good chance your current strategy will fall short of covering the cost. Here’s another thought we can explore: Is it worth it?
Let’s agree, for the time being, that it is worth it. That you and your child want to attend a college or university after high school. Here are some current costs and trends to be aware of:
- In 2017/2018, the average cost of a private university is $35,260 in just tuition and fees/yr. This doesn’t count living expenses, books, beer, and all of the other fun items that come with a college “education.” The estimated annual cost for a year at a private 4-year university averages out to $50,900/yr. This is obviously higher at some of the so-called “elite” universities.
- The average cost of a new college textbook went from $58 in 2011-12 to $80 in 2015-2016 – a 38% increase in just a few years. If you’re wondering who is holding those students hostage ( or the people paying for those students) who are forced to buy those textbooks – look no further than person standing at the podium at the front of the classroom. They’re only in it for the love of teaching though…. Right???
- Private Colleges/Universities aren’t the only ones taking more money. From 2007-2008 to 2017-2018, the average annual increase at a PUBLIC 4 year school was 3.6% per year in published tuition and fees ( AFTER adjusting for inflation). The median family income was up 0.3% per year between 2007-2016 ( ALSO after adjusting for inflation). Can you see how this might be a problem when the “Affordable” IN-STATE PUBLIC University goes up by 3.6% every year, while the average income amount is only at 0.3%?
It’s pretty clear to see that should this trend continue, that if you have a young child or children, it’s going to be extremely expensive for them to attend a College/University.
Let’s use a current 4 year old ( in 2018, starting a University education in the Fall of 2032) that ends up having the ability to attend an elite private university. Oddly enough, the rate of increase for tuition and fees and private universities has been slightly lower than that of public schools, at 3.13% ( again..adjusted for inflation) over the last 20 years.
- Current Cost in Tuition and Fees at Private University = $35,260/year.
- Estimated Cost in Tuition and Fees at Private University in 2032 = $54,284/year
- This estimate does not include living expenses, which can increase at a fluctuating level, but will be higher than today, no doubt.
- If using a 529 Plan as a vehicle to pay for education, and started (today) with a principal of $2,000, and added $100 monthly, at an annual rate of return 8.25%, the fund would have $38,091 in it; falling well short of the $54,284 for JUST tuition and fees, for just ONE year.
- NOTE: It was pretty difficult to find accurate data on historical ROR for 529s, since they’re not an old concept, and apparently vary widely, as one would expect, based on the investment choices… but this amount was pretty close.
- Point: it’s going to take more and more resources from a family to pay for a College/University education for your child if this trend continues.
- NOTE: I’m not contemplating potential federal aid, scholarships, and grants that could be used to offset some of these costs, which by income levels, can have significant impact.
Knowing that in 2018, there’s $1.48 Trillion in U.S. Student Loan debt, and the ever increasing tuition and fees of education will likely continue, one has to ask – is it worth it? Some other things to contemplate?
- What are students actually learning at Universities today?
- Are the faculty and staff actually promoting a broad worldview? ( The statistics are pretty clear here; the vast majority of college staff and faculty vote for 1 political party; I’ll let you guess which one. While my point is not political, providing only 1 worldview does have impact on future generations and future business).
- What’s the rate of return on an investment in education at the current levels of cost, and the increasing levels of cost?
- With technology increasing, lectures being posted online for free, the fast evolution of podcasts, will the modern University be “needed” into the future? ( My personal bet, is on “no”, but that’s another topic for another day).
- Does the modern education system create a class of indentured servitude, allowing for less risk and freedom due to the student loan system?
Stuff to think about, and create a plan around. Humans are problem solvers, so as I mentioned, don’t worry – but be aware and have a plan.
Andrew L Hamilton 