Changing the way we think about higher education
I’d like to share some “alternative” viewpoints with you on higher education in this month’s column. As a warning, this article is very information heavy and contains many links to sources that I encourage you to investigate.
Should every child go to college?
I personally think that we need to challenge the assumption that all kids need to attend a four year college or university. That just isn’t true. College is not for everyone. Beyond that, a four-year university is not the only college choice available for those interested in pursuing higher education. College costs have soared and the decision to save for those expenses is daunting for many parents. We have all seen the charts that financial advisors love to share that illustrate the projected cost of tuition when your child reaches the age of 18. They are pretty scary.
Trade and vocational options
Trades and vocational careers are in demand now because we have been so focused on pushing every high school graduate to college. I was at a conference recently where the HR Director said he would have an easier time finding the company’s next CEO than he would finding a welder. Most of these trades have good starting salaries (compared to new college graduates) and people who work in the trades have a higher propensity to be entrepreneurs and hire others in our communities (George’s local HVAC or plumbing service).
Community colleges and online programs
An extremely viable alternative to a traditional four-year university is our outstanding Virginia Community College System. I encourage you to watch this video titled “Success In The New Economy”. It really opened my eyes to a new way of thinking about higher education. I am also very optimistic about new emerging education trends such as Massive Open Online Courses, or MOOCS for short. Coursera and Udacity are two of the top providers that offer outstanding courses from prestigious universities and corporate partners. The courses are FREE unless you require a certificate of completion. I am currently taking a course titled “Inspiring Leadership through Emotional Intelligence” which is taught by a celebrated author and neuroscience expert at Case Western Reserve University. My colleague is taking a “Data Scientist” course offered by Carnegie Mellon University.
The cost raising kids and saving for college
There is no denying that kids are expensive, and four years of traditional college is a large part of that total projected cost. According to the USDA’s Expenditures on Children by Families 2013 report, a child born in 2013 is estimated to cost a middle income American family an average of $304,480 through the age of 17 (assuming an annual inflation rate of 2.4%). After bearing those costs, the College Board estimates that the 2013-2014 full time undergraduate cost for one year at a public, four-year in-state university is $22,826. Depending on the projected tuition inflation rate that you use, that number can grow exponentially over the course of 17-18 years into the future.
College debt
Because a traditional college education has become so expensive, the average college graduate today is matriculating with a larger portion of student loan debt. The College Board reports that 57% of public four-year college bachelor’s degree recipients who graduated with debt in 2011-12 borrowed an average of $25,000. According to The Project on Student Debt, seven in 10 college seniors who graduated in 2012 had student loan debt, with an average of $29,400 for those with loans. These graduates are entering a very competitive job market where they need to quickly generate earnings to cover their debt service. This is why I think we need to put more emphasis on the actual return on investment of higher education. Unless you are independently wealthy, the goal of higher education is usually to improve your employment and earning prospects.
The benefits of a college education
However, despite my gloomy outlook on the cost of a traditional college education, it still pays to go to college on a relative basis today. I look to a number of sources for this validation. The Bureau of Labor Statistics has a nice graphic that illustrates the unemployment rate and median weekly earning’s by educational attainment. Additionally, I encourage you to read The Federal Reserve Bank of New York’s research piece titled “Do the benefits of college still outweigh the costs?” Will this tradeoff reverse as the cost of college rises at a faster pace than wage growth? It may not, but it is something to be mindful of as you plan for your children.
Deciding what’s right for your child
I personally think we need to use data to help us make education investment decisions for our children. My thinking here has been greatly influenced by the well-respected local economist, Chris Chmura. Luckily, here in Virginia, we are privy to some excellent data resources to help us with this task. The State Council of Higher Education for Virginia (SCHEV) has an outstanding online data portal that allows you to see degree completion rates for Virginia colleges and universities, post-completion wages by school and degree choice, student debt levels, and much more. The Virginia Wizard is another great online tool that helps you and your child determine their career interests and align this with actual job openings and different educational paths to prepare for those jobs and careers.
Saving for college and other important investments
Lastly, when it comes to paying for your child’s higher education, it is never too early (or late) to start. Although we can debate the actual projected cost of education in the future, it is prudent to save something for that expense regardless of the form it ultimately takes. However, your personal retirement and emergency savings needs to be the first priority. To my knowledge, there are student loans, but there is no such thing as a retirement loan. The vehicle and strategy that you use to save for this future expense can take many forms. I encourage you to consult your financial and tax advisors for a strategy that fits your goals and financial situation. However, I can’t say enough good things about Virginia’s very own 529 College Savings Plan. The plan continues to win many awards for its low cost investments, ease of use and transparency.
Share your thoughts
So now that I have stirred the pot a little, I would love to hear your thoughts! What do you think about the future of higher education? What about the trades and vocational careers? How are you preparing to cover the cost of your child’s higher education? How did you and your parents pay for your higher education or vocational schooling?
Join in the conversation! Comment below for a chance to win a Call Federal piggy bank, a $25 gift card to add to your college savings, and the book “Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them.”
Macaroni Kid will choose a winner on Thursday 9/4 and announce next week!
This column is only for the purpose of giving general information and is not intended to offer personal financial advice. Every situation is unique. Nothing in this column shall be construed as offering or disseminating specific financial, retirement, estate, tax, or legal advice. If you require any type of specific advice, please consult an attorney, qualified tax professional or Certified Financial Planner (CFP®).
