An Education Tsunami is Coming: Rethink Your Family’s Approach to the Expense of College


August 14, 2013JRW-WW.jpg


With back to school season upon us, the world of education your children and grandchildren face is not the one you grew up in. For starters, a college degree is much more expensive today, and this is reflected in sky-high levels of student debt. According to the New York Federal Reserve Bank:


  • U.S. student debt nearly tripled from 2004 to 2012, with both the number of borrowers and the average debt balance rising some 70%


  • Roughly 17% of borrowers are 90 or more days delinquent


  • About 44% of borrowers have not even started repayment yet


It is ironic that students are taking on so much debt to pay for education at a time when, thanks to the Internet, information and knowledge flow more freely than ever before. But many students (and their parents) are stuck in the conventional thinking that an aspiring collegiate must gain acceptance to the most elite, highest-ranking institution possible, and then do whatever it takes to pay for it.


The encyclopedia, newspaper and music industries offer a lesson in what happens when conventional thinking collides with a new technological reality. Education is in for a similar sea-change.


People have long suspected that undergraduate instruction at elite universities might not be worth the price of admission, because the faculty is so focused on research. Now there are studies showing that most students who are good enough to gain admission to the most elite schools do just as well in future earnings when they attend a less elite, more affordable school.


Today, Khan Academy has gained the support of Google and the Bill and Melinda Gates Foundation in taking the concept of “affordable” to a whole new level. With the goal of providing “a free world-class education for anyone anywhere,” the academy offers over 3,000 tutorial videos on a variety of subjects for free online. Prestigious schools such as Rice, Stanford and Yale have followed suit, making their own course videos freely available.


And while tuition prices for traditional classes continue to rise, the amount families actually pay for college has declined since 2010, due to economizing (read more). Opportunities to economize will only increase with the growing availability of quality education from a variety of sources.


The lesson you should take from this is to embrace the brave new world when planning for the education of your children or grandchildren. For instance, rather than an expensive-to-obtain degree, you might want to consider an honors program at a state university. These offer small classes and even select residence halls filled with exceptional students focused on learning rather than partying.


Carefully research and consider all options, from online study to a hybrid education that combines, say, two years of online community college with two years at a university. Most importantly, don’t wreck your child’s finances or your own just to get a “prestigious” name printed on a diploma. Many options are out there. Rethink your child’s college education strategy and don’t get caught off-guard by a tsunami of change.


As your unbiased sounding board on all financial matters, call PARTNERSINWEALTH to discuss planning for your family’s education expenses. We can facilitate these important discussions fairly and objectively (and with experience; we have kids in college, too). For more information, helpful guidance or professional assistance, please contact Jim Waters, CFP®, at PARTNERSINWEALTH , 713.964.4028 or