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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{ 10 comments… read them below or add one }
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.