How much should parents of young kids panic about the future of college tuition?
I hear so much anxiety and guilt from parents who say they can’t save enough or can’t save at all for their children’s college educations. If you look at tuition cost projections in the financial press, I’d be worried too. They’re all but predicting that a 3 year old today will need $4.7 million for tuition when they turn 18 (I’m kidding, but you get the idea!). It’s just mind-numbing.
If you go by the past, when tuition grew at roughly 3 times the rate of inflation, you’d be right to be scared. But there’s something called inertia bias, when we assume that the way things have been is how they’ll always be. And that’s simply not the case.
We are in a new era for education and the schools will have to be brought to it kicking and screaming. I get such a kick out of the news that the University of the South has upset its collegiate colleagues by announcing that they are cutting tuition for the next year by 10%. Some schools have frozen tuition in the past, but this is an entirely new step.
Universities make good arguments about why they say they have to raise tuition. Buy they’re all excuses. What they need is tight control on spending and new ways of providing education. Here’s one that upsets people: Universities that try to be all things to all people may have to reduce their courses of study and the number of degrees they offer to become more streamlined and efficient.
There’s no possible way if tuition grows at 3 times the rate of inflation that any parent could afford to send their kids to school — other than the ultra rich. Things have to change. I’m not saying don’t save any money for your child’s college. But your first priority is to save for your own retirement in every tax advantaged or tax free way possible. Have a rainy day account and reduce your own debt. After that, then you can get around to saving for college tuition.
But the heavy lifting needs to happen at campuses with a new focus on making education affordable. So I see this as a “don’t worry, be happy” kind of scenario for parents.
Note: This article origianlly aired February 2011