One of the topics I discussed in last month’s Dividend Superstars issue was higher costs for higher learning. And while it’s certainly not a cost most retirees face, it does add another example to my long list of soaring prices for many of life’s biggest expenses — regardless of what the CPI shows.
Today, the College Board’s latest survey came out, showing that tuition and fees at private 4-year schools rose 4.4% in the current school year to $26,273. Meanwhile, the price of a 4-year public university education spiked more than 6% for both in-state and out-of state students ($7,020 and $18,548).
Put bluntly, I question whether many of our country’s students are really getting value for their money anymore.
I am certainly saving and investing for my own daughter’s education. But given these trends — and the money to be made from plenty of out-of-the-box careers — I will be giving her the choice to pick her own path.
Heck, would you rather go into business for yourself with a headstart of $30K – $100K or come out with a 4-year degree in the hole? That question gets harder and harder to answer.
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I think that it’s an excellent idea to consider alternatives to traditional formal education. Done on a large scale, that would also work to limit cost hikes because of the competetive pressures.
Private schools are very costly. The best deal is actually go to community school first. My children were too spoiled and too smart to follow that path, but I have known a number of kids that came from restricted financial backgrounds and they first started at community college and went on to be nurses, pharmacists, computer programers, etc. I’m thinking that existing technology may force costly education to cut costs and make education more affordable. It is a serious problem seeing kids attending 4 year schools graduating with large debts of $50,000+ and with current job prospects making it close to impossible to pay off.
Nilus Mattive Reply:
October 27th, 2009 at 11:37 AM
I think you’re right … and technology is already creating more heated competition via distance learning programs, online-only schools, etc.
Graduate studies add another big monkeywrench into the equation, too. I believe more and more students are engaged in an “educational arms race” and in the process they’re taking on more and more cost with far less promise of a good ROI. Heck, I know lawyers who are still paying $1200 a month on their law school loans ten years after graduating! Ouch.
What about for-profit private schools such as Strayer. Seems like the outsized increase in fees for traditional schools would be a boon for the likes of ITT and Apollo Grp.
Yes, that’s my real name.
Personally, I think we are doing our kids a huge disservice with the mantra for the last several decades of “get a good education so you can get a good JOB.”
Boo!
Our family on both sides has nothing but generations of self employed people. Small businesses, granted, but our own. Our sons were homeschooled when it wasn’t the “cool” thing to do. We always told them, “Start your own business, don’t work for someone else!” The youngest now has TWO businesses and has his fifth child on the way – all of whom are being homeschooled. The oldest isn’t married yet and he *is* working for someone right now – but at the same time he has two businesses, one smaller and the new one will be larger – that are getting going. So far, both sons are doing well with their endeavors. My husband and I just last year bought a waste management/trash pickup service in our rural area. It’s the only one here. We work three days a week. We’ve also been farmers/animal breeders among other things.
The number one thing we hammered into our kids was STAY OUT OF DEBT – even if you have to live in an 8X20 building with no running water for 7 years (like we did with our two little kids) as you get better situated. We believe we have Biblical teaching to back this up – like the verse that says to build your farm first and then your house, and to “owe no man anything except to love him” or the one that says “give and it shall be given unto you”. We have worked hard to stick with scriptural financial principles. It wasn’t easy undoing the habit of using credit cards or checks to get what we wanted. But it’s paying off big time now. We now own 120 acres, our home, our cars/trucks, etc. and have no debt. We even bought our trash business outright. Our youngest son didn’t adhere to his parents’ teaching after he married a girl who was used to credit cards, etc. With a serious medical bill hitting them not long after, it wasn’t long before they were $100,000 in debt and our son was about to panic. Four years ago, the Lord God intervened and today they and their business are debt free and have TWO homes paid for – and all of their cars/trucks. I won’t go into those details but it was amazing. His main business is a lawn care business for upscale clients. He hires no employees. Same for us. We stay small enough to keep from doing that.
The oldest son has listened and worked hard to stay out of debt. It’s starting to pay off for him. In 1980, my husband and I owned three businesses and just one loan from the bank that we’d taken out for expansion and improvements for our grain elevator business was $250,000 (in 1979). That didn’t count the loans for our house, car, etc. In 1980, we took a look at the economy (remember the Carter days?), our financial situation (looked REAL good on paper, but wasn’t REAL! If the dollar tanked, we’d be homeless and on the streets), and our holy Scriptures. We decided it was time to do it God’s way instead of man’s. We got out of debt (which meant letting go of our businesses and our house) and also cut up our credit cards – and quit using a bank account. We lived until 2007 with no banks, no credit cards, etc. – if we didn’t have the cash to pay for something, we didn’t buy it. We learned to live real simple and produce a lot of our own food (still do). The past 7 years we’ve been investing in silver and some gold. We own outright 120 acres of land in two states (80 of it farm ground that’s being leased out), our home, our cars, trucks, tractors, etc. are all paid for. The money we have coming in goes to pay a small elec. bill, fuel, phone bill, etc. Some groceries but we grow a lot of what we eat. We’re getting ready to make an offer on 10 more acres next to our homestead here – will pay for it up front. We have some FRN’s in savings but we don’t trust those at all anymore so we save them more to find ways to invest them in rather than to keep them. We’d rather have it in metals or other assests. We are working on setting up our home with all solar power (do you know how much the cost for that has come down in just the last six months? Also a 30% tax credit for getting it). We’ll not only produce our own power, we’ll be able to sell some back to the power company. This set up is expandable so all three homes on our property can eventually be running on it. We have watched the fuel/oil prices on almost a daily basis. When we see it’s down about as low as it’s going to be, we buy a bunch (have containers for diesel, gasoline and propane). Doing this has already saved us bunches. We have enough propane now to last about five years (for cooking in the house mainly). We heat with wood from our own place. We are constantly looking for things that are costing us (like the elec. bill) and then working to find ways to lower that expense or stop it completely. As we’ve loosened up cash, we’re trying to invest it in ways easy for us to keep control of. I don’t mind paying $1400 for a new fridge when it runs on both solar energy (or elec.) or propane – dual energy fridge. The fridge I have now is one that we bought new over 30 years ago and it’s still running really well. I expect the new one to give me the same kind of long service once I start using it and I’ll more than get my money back on it. Right now it’s still in its packing box in our shop.
One of my pet peeves is how the public schools are only teaching our kids how to be dependent on someone else for their “living”. They should be starting these kids in grade school with learning how to handle money and make money. These kids should be MILLIONARES by the time they are teens and owning their own businesses. Not coming out of college in debt already up to their ears! Or their parents. We did not encourage our sons to go to college even though we did. We encouraged them to jump right in and look for things that interested them and find a niche in the business world with that. The oldest son has always loved airplanes and cockpit simulators. He started his first sim as a teen using my empty cereal boxes, etc. Now his love has led him into being nationally known for his real sims – he’s one of the two guys that got the Air Force One sim up and running for the Ronald Reagan museum – met Supreme Court Justice Clarence Thomas there as Thomas heard about the sim and came to see it. The two sat in the sim and chatted like old friends (Thomas is our favorite justice!). Our son has just got done working on a new Tom Cruise movie where they got the 707 cockpit up and running so Tom could use it in the movie like it was real. He’s traveled all over and is meeting wonderful people – was at the dinner at the Reagan museum where Nancy Reagan made her last public appearance. The George W. Bush library has contacted our son and his sim friend about doing an Air Force One sim for them like they did for Reagan’s. And there may be another movie soon as Tom Cruise may be doing a movie about the Flying Tigers next.
Our son has a new business that he’s starting with a friend of his and it’s taking off so fast that it’s about taken their breath away. This one doesn’t have anything to do with airplanes, though. LOL!
It’s amazing what happens when you encourage creativity and independence in kids instead of pushing them into a mold that forces them to be like everyone else or something is “wrong” with them. Some friends of our’s who also homeschooled when we were (in the 80’s) sent their son to be an apprentice with a locksmith in the largest town closest to them. The boy was about 17 then. He’d been homeschooled his whole life. He discovered that he was good with the locksmith stuff and that he liked it! He eventually moved to Las Vegas and did really well out there as a locksmith. Now he’s moved back home and has his own locksmith business here close to his family again. But he’s self employed – that’s my point. As is his father.
I apologize for being so lengthy but this topic is one that is near and dear to my heart….
What is the difference between a 529 plan and a Coverdale plan?
Nilus Mattive Reply:
November 17th, 2009 at 9:29 AM
Short answer: MUCH lower contribution limits, no state tax break, but effectively unlimited investment choices. Formerly known as the Education IRA.
I agree that college education now is not the best avenue. The cost is prohibitive. We have returned to the way it use to be years ago. Only the wealthy can really afford this “education”. Firstly the first two years are a repeat of high school and “the major” courses really don’t get into the subject matter until the latter part of the third year and the senior year. So much time is spent on social activities and asundry of “stuff” called courses just there to spend your money. I am in a work enviroment where the majority are PH.D’s or MD’s. Many come to work angry every day after realizing that though they make better than average salaries they sold their “souls” to get there. All live the “American Nightmare” formally called the ” American Dream”. They all have “designer” clothes. Live in the “designer” neighborhoods. Drive “designer” cars and send their children at the pre-school level to the “designer” schools. They have obtained the degree that is given all Americans ” A Doctor of Philosophy in “debt till you die” degree. Welcome to America where addiction to “consumerism” is the law of the land and “misery” is a way of life. Chapters of the ” American Dream” : I. Exercise is developing your thumb muscles via computer games. II. Recreation is shopping. III. Wisdom of Our Elders are the ” Madoff” type … you cheat and rob others to live ” The lifestyle of the rich and famous”.
IV. We all bank with “Usuary Banks of America” where interest rates on a debit card are as high as3,250%. More chapters… follow Return to eden2.8
I have twin girls in college now and I have two thoughts on 529 plans. First – you should know that the colleges look at them as if they are Grants so they will take every penny of your 529 plan before they consider you for financial aid. I have seen this happen and been at the events where they tell this to groups of parents. Second, if you don’t know if you can fully fund both your retirement and your kids college fund, I suggest the retirement account fully before beginning on the kids college fund. You can always borrow for college – try and borrow for your retirement. Second, a motivated kid will find a way.
Nilus Mattive Reply:
November 17th, 2009 at 11:43 AM
I totally agree that a parent’s retirement comes first for the reasons you cited. Just don’t tell my 2-year-old … she already gets mad enough at me!
Regarding the effect on financial aid … that depends on whether the plan is in the parent’s name or the student’s name. Either way, yes, it will impact overall eligibility to some degree … but in the parent’s name is definitely the better route.
… it’s all been said here … just a note of agreement with those who feel we’ve been fleeced for the cost of our education by many less educated (apparently smarter!) than us … shame on us!!
I have my own company that produces Web Based Training. I also work for the largest for profit university system in the world which I am not allowed to name. The comment about for profits as an alternative. Let me tell you what they make. This company hires almost 100 people a month and is probably good fro about 3 billion a year and growing. They are just as greedy if not more greedy than the private sector except we do pay taxes. Don’t forget most of these school pay no taxes on the money they take in. I wish I could run a tax free business.
Nilus Mattive Reply:
February 23rd, 2010 at 10:00 AM
Thanks, David. My point exactly!
If a person has the discipline, it makes a lot of economic sense to get a job even before graduating from high school. Then get a GED at night school and go on to get BS degree online. If a person works for the right company, the cost of the online education will be picked up by the employer.
I paid for my son’s BS degree, but he got his MS degree online paid for by his employer. He hopes to get his PHD online also. Then go on to become an online teacher and consultant.
Just wanted to say how much I enjoyed your comments in “Soaring College Costs: Adding Insult to Injury”. I think you are spot-on about the way schools keep trying to get all the money they can out of there customers.
Have you thought about taking on the cost of medical treatment in this country? Hospitals and Physicians are by far the highest cost of health care. Medical errors and mistakes are frightening especially for such a highly trained and educated profession.
I have just returned from a week of touring college campuses for my daughter. The costs are indeed very high. As a security concern for my child I made a point of asking the local college cops what sort of problems they had. It seems that the money we spend for education is wasted because after the students get finished killing brain cells while partying several nights a week the education is worthless. My son is in college already and several of his friends are flunking or have transfered from other harder shcools in order to try and remain in school, but the party goes on.
I think that if we give these kids a couple of years to work before college they will have some respect for it. How about peace corps or military or environmental clean up jobs? The “dead weight” will fall to the side and the kids who do go to college will have a better idea of what they want to do. They will have more productive study time. We have spoiled these kids and they are often a bunch of party brats who want to live like Paris Hilton and her ilk.
The points you made hit home like a GPS guided missile. My daughter is in her first of 2 years of a BS in Nursing at a private school in WA. The state school cut back its program due to funding problems, but she was accepted at all the private schools she applied for!
I got a call from a senior at her school “updating” me on all the great things that they had built/done followed by a request for a scholarship donation. The tuition alone is $29,000 a year and they think I can pony up more ??
My son, who will be of college age in two years, will be going to a community college before going to college, if that’s what he then decides to do. That’s assuming that he can get into a community college after all the cutbacks they are suffering. I agree it’s looking more and more like education for the wealthy only!
The points you made hit home like a GPS guided missile. My daughter is in her first of 2 years of a BS in Nursing at a private school in WA. The state school cut back its program due to funding problems, but she was accepted at all the private schools she applied for!
I got a call from a senior at her school “updating” me on all the great things that they had built/done followed by a request for a scholarship donation. The tuition alone is $29,000 a year and they think I can pony up more ??
My son, who will be of college age in two years, will be going to a community college before going to college, if that’s what he then decides to do. That’s assuming that he can get into a community college after all the cutbacks they are suffering.
I disagree with much that’s been said here and Nilus, I am disappointed in your email sent out today. A very unbalanced perspective. Best wishes.
Nilus Mattive Reply:
February 23rd, 2010 at 8:55 PM
You’re free to disagree with me, Barry. But it’s more constructive if you tell me WHY you disagree with me … where my argument is flawed … and use specificity to dispute what I said.
I don’t think anyone can legitimately dispute the main points of my article, which are:
A. Education costs are soaring.
B. By extension, and given other factors, the ROI on a degree is becoming more and more questionable. And …
C. At the very least, not-for-profit schools are walking a very fine line these days.
I am university trained. Our children, seven of them, home schooled during the 80’s and 90’s before it was chic (actually, we were treated pretty shabbily) have worked their way through higher education beginning with junior college. There isn’t a single reason for a student to be ashamed or consider themselves less for attending a two-year college and decide to move higher. In fact, the junior college provided a very challenging array of material and the teachers were top-drawer, over-all. Now one is a free-lance anesthetist making six figures, another is a highly respected self-employed real estate appraiser making upper five figures, and the rest are making solid money in careers they enjoy. Almost all chose to graduate 4-year university or have gone on to graduate school. What student loans they took out have been paid back quickly. They worked very hard, didn’t play at their schools, pulled down dean’s list, phi beta kappa, etc. For them, the price was high; they paid their way, value their educations and now are reaping the benefits with several self-employed. They pulled off the best of both worlds.
Re:College Costs
How about a certain large university in Cambridge, MA with an enormous endowment fund paying fund managers millions in bonuses? How about using this largess to finance the educations of it’s attendees?
I’m a firm believer that in the future (near), those who have an actual skill to perform a needed service will be the winners in the job/income lottery. What the heck, anyone can get a degree, not everyone can fix your plumbing. Fewer and fewer actually!
NOTE: A quick review of my high school grad class (about 40 years ago) shows those who went the vocational route now among the most successful financially including a class “dummy” who started a trash collection business with a pickup truck, became a major regional player and sold out to a nationwide operator for millions.
I could go on for hours but you get the point.
Nilus Mattive Reply:
February 25th, 2010 at 7:22 AM
Absolutely, Robert. I agree on all counts. Regarding the endowments, that’s one of the reasons solicitations for MORE money raise my hackles so much.
And of course we could also get into a discussion about the ridiculous sums paid to college presidents, coaches, and other high-ranking employees at supposedly not-for-profit institutions.
To be continued in another column?
Attended the University of Miami in Florida back in 1961 to 1965 . The tuition back then was $500.00 a semester , $ 1000.00 a year. Now it is $ 30,000.00 a year . What happened ? Inflation ?
my husband and i received a call regarding an college endowment award
we were directed to the website dollarsforschool.org
our daughter received $25000 in college endowment awards just for her freshman year
and this is money that doesn’t have to be repaid
any parent who will face substantial out of pocket costs to send their child to college should look into this program