The Sky-High Cost of College Tuition and the Education Poorhouse
Three thousand dollars for a year of college.
That’s how much I paid in the early 1980s to attend Stetson University, an acclaimed and at the time very expensive private college in central Florida.
That seemed like a lot of money at the time, but fast-forward to today and it now costs $47,270 a year. That doesn’t even include room/board or books, which brings the cost to over $60,000 a year!
I just finished putting my two daughters through college, so I understand how inflation has skyrocketed the cost of college tuition.
If you believed the government numbers, however, you would think that inflation is nowhere to be found.
The Bureau of Labor Statistics calculates the Consumer Price Index (CPI) each month and according to it, inflation has averaged a benign 1.8% over the last 10 years.
What a Crock of $%#@!
If you dig behind the headline numbers, you’ll find that the cost of a college education has gone to the moon.
The Bureau of Labor Statistics divides our consumer world into eight categories:
- Medical Care
Additionally, the BLS assigns a relative size to each category according to how it thinks we spend our money.
As the accompanying chart shows, we spend most of our money on housing, food and transportation. Those three items consume 72% of our after-tax incomes.
Of course, every family is different and has different spending habits.
Example, the BLS estimates the average American family spends 6.6% on education/communication, but the weighting for college tuition and fees, a subcategory of education/communication, is only a piddly 1.6% of the total expenditures.
Ha! Funny Numbers Indeed!
Households with children in college can spend many times that and, worse, the cost of college tuition is still SKYROCKETING!
Medical insurance premiums get the most attention, but the fastest-growing category has been education/communication, which has almost doubled in the last 10 years.
Even worse… The college tuition and fees subcategory has gone up even more.
College tuition and fees has increased by a staggering 168% over the same time! Ouch!
That unchecked tuition inflation is the main reason Americans owe a collective $1.4 trillion in student loans with an average of $35,339 per borrower.
Sadly, I expect college tuition costs to keep going up and may soon become too expensive for many Americans.
If you have young children, I suggest that you take a long, serious look at a 529 plan in your state.
A 529 plan is a tax-advantaged savings plan designed to help you pay for future college costs. It is very similar to a Roth IRA in that contributions are nondeductible but the gains on the money you put into a 529 plan are untaxed and come out completely tax-free when used to pay for qualified college costs, including tuition, books, fees and room/board.
Even better, anybody — including grandparents, uncles, aunts and friends — can make contributions to a child’s 529 plan.
If you’d like to learn more about 529 plans, the Securities and Exchange Commission has an informative web page here.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch