For 50 years, professional advisors have been telling clients a consistent story about planning for college. It emphasizes the value higher education adds to a young person’s life, along with the belief that parents can make a difference in meeting college costs. It is based on positive values including upwardly mobility, personal motivation, thrift, and investing in the future.
However, times are changing. The nation’s mood is shifting with financial realities and personal priorities. Getting into and through college, at any cost, is no longer America’s holy grail.
Why has this trend continued? Two reasons: demand and supply.
Demand – According to the U.S. Census, about 21 million Americans are enrolled in college and about 57 per cent of enrollees are women. The table below compares U.S. college enrollments in 1970 and 2012.
Is this debt load crushing young Americans and their families? About $124 billion of federal student loans are more than 90 days delinquent. Most of these loans can never be discharged in bankruptcy, and virtually all defaulted student loans are reported to credit rating agencies, damaging for years the borrower’s chances for mortgages, car loans, credit cards and even jobs. (A federal direct loan is delinquent when any payment is past due; a default occurs on the 270th day of delinquency.)
The New Calculus
Almost every parent who has taken a “college tour” with a child has noticed the lavish sums of money spent on athletic facilities, student unions, high-tech interconnectivity and other non-academic amenities designed to appeal to an 18-year-old mind. In the past, most parents have accepted that they must pay for these “lifestyle expansions” of the college experience. Now, they are starting to question whether such costly amenities contribute to the child’s acquisition of knowledge or useful employment skills.
In 2012, two researchers asked 671 U.S. college students to revisit a battery of questions that had originally been asked of their counterparts in 1980. For 12 of the questions, not one of the 671 students knew the right answer. You can try these questions yourself here: http://clinicalpsychreading.blogspot.com/2013/09/general-knowledge-norms-2013-update.html
Rising college costs are a battleship. Although the rate of increase has begun to slow, it will take many years to turn around. Today’s parents should expect average college costs to keep rising at double-the-CPI rates for the next few years. At the same time, there are different ways of looking at the value proposition college offers, as well as the question of how much debt is enough for any family or young person.