I wasted a lot of time in the 1960’s and 1970’s worrying about how I was going to pay for college educations for our two sons. I salted away money every month trying to make sure I would not be embarrassed by a fund shortage at the projected times of their high school graduations, 1984 and 1986. It’s a bit hazy now, but, as I recall, by the time they started college I had saved enough to pay for two years for each. But, I had received some nice job promotions and raises, and my wife was a full time public school teacher, so they would have gone off to college even without those savings accounts.
I don’t know if parents today worry about such things or not. It seems that the costs of college educations have risen so fast compared to median incomes that many have little to no chance of paying as they go and have abandoned the current crop of students to the mercy of the student loan providers, not the least of which is our federal government. Today the University of South Carolina announced that tuition for 2012-13 will be $10,488 for in-state students and $27,463 for non-residents. Those are formidable numbers for a state with median household income of about $42,000. And then there are private institutions Wofford and Furman at $35,000 and $41,000 respectively.
So, the students are blithely borrowing as if there were no tomorrow until graduation approaches and the truth about job prospects and starting salaries begins to dawn and they realize they have made a big mistake. Of course there is that promise by President Obama to forgive the loans after some period of time, but who knows what future administrations might do?
The trap many such students have fallen into, borrowing more than something is worth to pay for it, is the same trap many homeowners fell into in the 1990’s and early 2000’s. In the case of homes, the mistakes were assuming the home was going to increase in value year by year and failing to consider the cost of maintenance, utilities, and taxes, not to mention the hassles and headaches associated with home ownership. And, of course our federal government was promoting that traditional American dream of home ownership for everyone. In the case of education borrowing, people looked at average earnings for college graduates compared to average earnings for high school graduates and failed to recognize that all college degrees are not of equal value and that coincidence is not the same as cause and effect. And, of course our federal government was promoting that new American dream of college degrees for everyone.
The housing bubble created by all that borrowing driven inflation burst in 2008, renting has again become fashionable, empty homes sit deteriorating, and underwater mortgages sit festering all across America. It will take some time for this problem to be resolved. And the next bubble to burst is the higher education bubble created by all that borrowing driven inflation in tuition, fees, books, and other higher education costs. And when it does, universities will find themselves cutting costs and tuition and fees in competition for students rather than competing for taxpayer dollars for student loans and grants. I hope.
The good news is that universities will also find themselves competing with an entirely new web based education model that will deliver better academic results at a fraction of the cost of the traditional residential university mode. Granted there will be some losses in Greek life, sports mania, campus politics, campus activism, drunken behavior, sexual misconduct, and other socialization aspects of the current higher education process, but the learning of academic disciplines will be accelerated and improved dramatically with the aid of such as Khan Academy.
For example, in today’s WSJ Weekend Interview, Sebastian Thrun, German born holder of a PhD in computer science from the University of Bonn, founder of Google X, home of the self-driving car project and Google Glass, and Stanford University professor, talks about his new company, Udacity. The goal of Udacity is the “democratization of higher education.” The idea was born when Thrun offered an on-line course in artificial intelligence and 160,000 people signed up. Twenty three thousand finished the course. Two hundred of the students were Stanford tuition payers, or borrowers. The top 410 performers were on-line and the 411th was the first one registered as an official Stanford student. Tuition for the on-line course was one dollar. The Stanford University Administration was not happy.
The good news is that bubbles burst, markets clear, problems get resolved, and things get better. It just takes time. In the meantime, don’t waste your time obsessing about the possible future cost of your children’s educations, or about your student loan payments. Just keep taking on-line courses and making sure your education and skills are up-to-date and marketable. I just signed up for Introduction to Computer Science taught by UVa Professor David Evans. It begins June 25th. It is free unless I decide to take the test, and I have sworn my test-taking days are over.Tweet