My wife and I are thrilled that we will graduate the 3rd of our 4 boys with a college degree next week. This is a mammoth undertaking and we are blessed we have been able to accomplish this. Less than 17% of the US population has a four year degree and with the current rising costs of a college degree we worry this figure will get worse.
A four year degree is critical to compete in the ever more competitive world economy but it is getting much harder to get. This combined with the tremendous debt that students are accumulating to get a degree, should be a huge national concern. Here are some current education statistics that should frighten all of us:
The worst news of all for all us parents is that 85% of 2011 college graduates have moved home with their parents to survive. So let me worn you if you think they are gone - think again. They are like boomerangs. Actually, I told my wife that I would not celebrate their graduations until they got full time jobs covering all their bills and providing benefits. Then we celebrate.
The truth is the kids are not all at fault. The rotten economy and bad governmental policy are a huge part of the problem. The recession has caused so many people to be unemployed who have work experience and degrees. These folks get all the new jobs and the college grads with limited experience get shoved into part time work or nothing. You can't blame the employers as they can now hire folks with good work experience and a degree for what they used to hire snot nosed college grads that they had to train.
So why is college so expensive? There are a number of reasons. First is demand. Right now there are more students applying for college than ever before. Universities are building and expanding but the demand is not just US based. College enrollment is up over 138% in the last 30 years.The amount of foreign students that are applying to US colleges is at an all time high.
Second is bad management on the part of colleges and universities. Sure they face inflation just like any business - food water, fuel, and electricity have all increased for them. They have in some cases faced increased spending on expanding facilities but most of this has been paid for by donations or debt. The big culprit for spending is labor costs. Between 1993 and 2007 university spending rose by 35% but admin expenses went up by 61% and instruction expense by 39%. A study in 2010 showed enrollment between 1993 and 2007 up by 14.5%, admin staff per 100 students rose by nearly 40%. Also admin spending per student was up 66% for the same time period.
The third reason is due to tenure. Universities recognize that about half of all faculty are tenured and this guarantees them employment for life and many expensive perks. For example in 2011, 20 of Harvard's 48 history professors were on sabbatical. Tenured sabbaticals now happen at most colleges every 3 years instead of every 7. Add to this tenure problem that due to increased enrollment it is becoming nearly impossible to graduate from a state college in four years because classes just are not available.
So how will this end? Well if we keep raising tuition costs at the rate we have been very soon most Americans will not be able to afford a college education. Since American enrollment still accounts for the majority of students in four year colleges this could be a wake up call for university administrators. I think we should not wait for that. We need to send a strong message to our colleges and the government that this is unacceptable! We need to cut tuition costs by decreasing expenditure at these schools. We need to stop providing huge tax dollar increases to state schools and force them to live within their budgets. We need to review tenure rules and see if they really benefit students and colleges or are they just tradition that is unnecessary today?
Also we need to take a good hard look at student loans. Since the government took this over we have seen more defaults and certainly loans are very hard to get. We have to be very careful with our fragile economy to avoid another financial crisis. While it is true that a trillion in student loans is nothing compared to the recent recession, but having $67 billion in default is reason for serious concern. If students keep borrowing and then can't find good jobs when they graduate, this default rate will continue to rise. Since the cost of college is escalating at a furious rate and the only way to pay for it is with loans, this problem could mushroom rapidly. It is somewhat of a perfect storm.
So for all those parents facing their kids going to college I offer my deepest sympathy from a financial perspective. Search for all the aid you can, force them to keep their grades up, make them work part time and keep the spare bedroom open because they are probably coming back. Encourage them to focus on a very specific field early so they can find work when they get out. I did not make mine intern enough during the summers and it is hurting them in the job search now.
On a humorous note I have on son who chose to take the long road to a degree. He got into a great four year university but decided to party more than study. After a horrid first year he then went to a local community college to "get is General Ed requirements" out of the way. H managed to make that into a four year adventure at 4 different schools. The racket here is that all the schools make you start over as they each have specific General Ed requirements and you can only take these courses at their school. So my son has about 25 hours of English and basic Math at the college level. He finally settled down studied business, graduated with a 4.0 GPA but it took him just over eight years. I have contacted Guinness Book of Records to see if that is a world record!
Parents note: Your lifestyle will change, you will probably have some debt but you are giving them a gift they will ultimately use the rest of their lives. Plus you can party like a rock star when they graduate and get off your payroll and couch!
A four year degree is critical to compete in the ever more competitive world economy but it is getting much harder to get. This combined with the tremendous debt that students are accumulating to get a degree, should be a huge national concern. Here are some current education statistics that should frighten all of us:
- Between 1982 and 2007 US family income grew by 147% and college costs went up 440%
- According to Bloomberg research, college tuition has gone up over 1120% in the last 30 years. Healthcare only rose 601% in the same time frame and we all consider that an outrage.
- AP reports that just between 2008 and 2010 tuition went up over 15%
- The Average State University tuition is over $30,000
- More than 2/3 of all college students receive some sort of aid or loan
- Student loan debt just passed the landmark of $1 trillion. That's more than the combined value of Apple,Microsoft, Facebook, and Google.
- 1 in 10 students graduate with at least $40,000 in debt and the average for 2 out of 3 students is $20,000 in debt.
- 1 in 6 graduates default on their student loans ( 6 million students) making this a serious national debt problem. Keep in mind that credit card, mortgage and home equity debt has decreased since 2001. We have over $67 billion in bad student loan debt and rising daily!
The worst news of all for all us parents is that 85% of 2011 college graduates have moved home with their parents to survive. So let me worn you if you think they are gone - think again. They are like boomerangs. Actually, I told my wife that I would not celebrate their graduations until they got full time jobs covering all their bills and providing benefits. Then we celebrate.
The truth is the kids are not all at fault. The rotten economy and bad governmental policy are a huge part of the problem. The recession has caused so many people to be unemployed who have work experience and degrees. These folks get all the new jobs and the college grads with limited experience get shoved into part time work or nothing. You can't blame the employers as they can now hire folks with good work experience and a degree for what they used to hire snot nosed college grads that they had to train.
So why is college so expensive? There are a number of reasons. First is demand. Right now there are more students applying for college than ever before. Universities are building and expanding but the demand is not just US based. College enrollment is up over 138% in the last 30 years.The amount of foreign students that are applying to US colleges is at an all time high.
Second is bad management on the part of colleges and universities. Sure they face inflation just like any business - food water, fuel, and electricity have all increased for them. They have in some cases faced increased spending on expanding facilities but most of this has been paid for by donations or debt. The big culprit for spending is labor costs. Between 1993 and 2007 university spending rose by 35% but admin expenses went up by 61% and instruction expense by 39%. A study in 2010 showed enrollment between 1993 and 2007 up by 14.5%, admin staff per 100 students rose by nearly 40%. Also admin spending per student was up 66% for the same time period.
The third reason is due to tenure. Universities recognize that about half of all faculty are tenured and this guarantees them employment for life and many expensive perks. For example in 2011, 20 of Harvard's 48 history professors were on sabbatical. Tenured sabbaticals now happen at most colleges every 3 years instead of every 7. Add to this tenure problem that due to increased enrollment it is becoming nearly impossible to graduate from a state college in four years because classes just are not available.
So how will this end? Well if we keep raising tuition costs at the rate we have been very soon most Americans will not be able to afford a college education. Since American enrollment still accounts for the majority of students in four year colleges this could be a wake up call for university administrators. I think we should not wait for that. We need to send a strong message to our colleges and the government that this is unacceptable! We need to cut tuition costs by decreasing expenditure at these schools. We need to stop providing huge tax dollar increases to state schools and force them to live within their budgets. We need to review tenure rules and see if they really benefit students and colleges or are they just tradition that is unnecessary today?
Also we need to take a good hard look at student loans. Since the government took this over we have seen more defaults and certainly loans are very hard to get. We have to be very careful with our fragile economy to avoid another financial crisis. While it is true that a trillion in student loans is nothing compared to the recent recession, but having $67 billion in default is reason for serious concern. If students keep borrowing and then can't find good jobs when they graduate, this default rate will continue to rise. Since the cost of college is escalating at a furious rate and the only way to pay for it is with loans, this problem could mushroom rapidly. It is somewhat of a perfect storm.
So for all those parents facing their kids going to college I offer my deepest sympathy from a financial perspective. Search for all the aid you can, force them to keep their grades up, make them work part time and keep the spare bedroom open because they are probably coming back. Encourage them to focus on a very specific field early so they can find work when they get out. I did not make mine intern enough during the summers and it is hurting them in the job search now.
On a humorous note I have on son who chose to take the long road to a degree. He got into a great four year university but decided to party more than study. After a horrid first year he then went to a local community college to "get is General Ed requirements" out of the way. H managed to make that into a four year adventure at 4 different schools. The racket here is that all the schools make you start over as they each have specific General Ed requirements and you can only take these courses at their school. So my son has about 25 hours of English and basic Math at the college level. He finally settled down studied business, graduated with a 4.0 GPA but it took him just over eight years. I have contacted Guinness Book of Records to see if that is a world record!
Parents note: Your lifestyle will change, you will probably have some debt but you are giving them a gift they will ultimately use the rest of their lives. Plus you can party like a rock star when they graduate and get off your payroll and couch!