Here’s a toughie that many parents -- myself included -- face. How do you save up for college when the cost goes up anywhere from five to ten percent per year?
Investments aren’t earning anything close to that. Interest rates are historically low, which is great for borrowers but rough on savers. The stock market has returned approximately nothing, before fees, since TB was born in 2001. Bubbles come and go, but by definition, they generally aren’t great long-term investments. Our house is worth less than what we paid for it, though luckily we had enough of a down payment that we aren’t underwater. (Fates willing, I’m hoping to stick around here long enough that the current value won’t matter.) Salary increases aren’t automatic -- I’ve had exactly one since 2008 -- and they’re small when they happen.
A recent report took current costs and extrapolated, using fairly realistic higher-ed inflation figures and basic math. It came up with over $40,000 a year for public, in-state tuition 18 years from now, and over $90,000 for private non-profits. Granted, that’s a little misleading, since it doesn’t account for wage increases, but still; if salaries are going up maybe one percent a year, while tuition is going up five percent per year, the gap will widen quickly. And based on the last few years, I’d have to consider five percent increases a fairly conservative estimate. The public institutions have the same cost drivers as the privates, plus the added burdens of state cuts and unfunded mandates.
(There’s also the annoying disjuncture between percentages and base rates, as anyone in the community college world knows well. If we charge $5,000 a year and go up by $500, that’s a 10% increase -- what the hell are we thinking? If Nearby Private College charges $50,000 a year and goes up $2,000, then it only went up 4% -- what a paragon of fiscal virtue! Except that the paragon of virtue raised costs by four times as much as the wasteful public institution...)
Outside of higher education circles, this is a common topic of discussion. But among academics -- especially those who don’t work in financial aid offices -- it’s largely ignored. If anything, we can’t stop talking about cuts.
We ain’t seen nothin’ yet.
A few predictions:
1. Outside of California, the first major wave of collapses will occur among the small, undistinguished, tuition-driven privates. I can understand paying premium tuition for a premium degree, but $90,000 x 4 for a nothing-special degree? The only way they could survive is with “discount rate” levels that would imperil their survival. I just don’t see it.
2. In California, the publics will start dropping first, and probably very soon. (By “very soon,” I mean within the next two or three years.) I remain hopeful that California is more of an outlier (albeit a huge one) than a harbinger.
3. After the first or second wave of collapses, we’ll start to see massive movement away from the four-year degree as the default model. Instead of the “many paths to one place” model that American higher education offers now, we’ll have a “many paths to many places” model. That will mean certificates and certifications of various sorts, and possibly two-year degrees. Although that will mean wrenching transitions for many of the providers that are built entirely around the four-year degree, on balance, it may not be an entirely bad thing. At least it may help with the burgeoning “dropouts with debt” problem.
4. Many of those alternative credentials will come from providers that don’t exist yet. We may start to see a return to in-house training by corporations, complete with “indentured servitude” provisions that prohibit taking the training and running.
5. People at the elite outposts of higher ed will be the last to know.
I’d love to be wrong on this. I’d love to be able to say, with a straight face, that we’ll get single-payer health care and progressive taxation after the next election, and all will be made right in the world. That would be nifty. But I just don’t see it. And I don’t see the typical American family coming anywhere close to saving up hundreds of thousands per kid, especially when investments are returning approximately nothing. Not. Gonna. Happen.
Trends that can’t be sustained, won’t be. One way or another, the current trend won’t be.
