While it's easy to recognize that college costs are increasing at an alarming rate, we still must take the time to more deeply assess the problem at hand. While most parents and youths today have a basic understanding of exorbitant college costs, most of them are resigned to paying for college with vast amounts of debt.
Or, instead of taking on large amounts of debt, many parents today are delaying or even endangering their own retirement -- in order to pay for expensive college education for their child(ren).
In 1970, tuition at the University of MN Twin Cities was $522 a year. For the 2015-2016 school year at the U, tuition was $13,840. That's a mind-blowing increase of 2,551% -- a 25x multiplier.
If tuition had increased at a 3% annual rate since 1970, tuition today at the U of MN would be about $2,100 per year.
Stated differently, tuition rates have increased at more than six times the rate of inflation over the past 47 years.
[lest you think I am unfairly picking on the U of MN, these numbers are similar all across the country]
From a value perspective, we must ask ourselves: is the quality of a university education six times better than it was in 1970?
If the quality of a college education today is not in fact six times better than it was 50 years ago, then we need to at least ask the question of how much money is a prudent investment toward a college education. Each family's situation is unique, but the topic should be on the table for families today.
Back in 1970, tuition at the University of Minnesota would have eaten up just 5.5% of the per capita personal income in the state of MN. Today, a year of tuition equals nearly 28% of the per capita personal income in MN.
Maybe the first step toward wisdom in the area of college funding is acknowledging the problem of whether a quarter million dollar college degree is worth it for the average American family. If we start there, we can properly value any strategies that enable a family to lower the burden of college costs. We will explore some of those strategies in future posts.