I have two requirements for college. The first requirement is that my child goes. The second requirement is that he exits college with zero debt so that he can go to graduate school.
College costs, like baby toys, health care, and homeowners insurance are a scam. If you want to feel like you're a better parent by spending more money, someone will help you do it. Unfortunately, decision making and financial literacy in this country are abysmally deficient.
This scam falls the hardest on the middle class. The deal for the middle class is this:
Agree to send your child to our school at the exorbitant price of $260,000. Then fill out these financial aid forms and we'll tell you what the real price is. We will calculate the real price by evaluating everything you've spent your life saving for, like your home and retirement, and then we'll take as much of it as we can.
The secret of top graduate schools in the US - I'm talking about University of Chicago or Stanford - is that most of their graduate students did not attend Harvard. Most attended OK but not great schools. Some attended downright crappy schools but got into Northwestern by getting a masters. They're all really bright and capable. You're child will feel like a real putz sitting in his graduate class with $200,000 in student debt.
What about the experience?
I recently had a discussion with a top ranked academic dad who argued that sending your child away to college is an important experience for their character. Living independently and all of that. I don't dispute this claim, but you'd have to be nuts to pay over $200,000 for your child to learn to live independently when a) they will anyway and b) there are cheaper ways to do it if you want your child to be independent by age 17.
I'm not recommending that my child get an online degree from the University of Online Degrees. I will point out, however, that the risk of your child not being able to live independently greatly diminishes after the age of 20. One quarter to one third of college freshman completely fail at living independently, to the detriment of their lifestyle, grades, and future. 'My kids are perfectly capable of being independent at age 17', you argue. My kids are even more independent than yours (see my blog's title). That is an additional reason I'm not paying over $200,000 so they can learn to be independent.
To help you understand how to make good financial decisions from someone who has accumulated decades of undergraduate and graduate training in financial decision making and the math behind it, here are some examples to warm up for the college decision.
Insurance companies will describe all of the safety and security you need at $2,000 per year to over-insure your house. I observed that in my densely populated neighborhood that there have been zero events warranting insurance in the last 100 years. If I could legally go without insurance, I would. 40 years times $2,000 is $80,000. That's a lot of money to cover a hypothetical accident.
When I graduated from college, I took my car into the dealer on schedule. I would get my car back after paying $500 to $1,000. After graduate school, I never took my car in ever. Plus, I have bare bones auto liability insurance. I save enough to buy a new car every 15 years. I would certainly appreciate zero risk on an over-insured well maintained car, but instead I spent a few hours reading the manual and looking at my engine. That's about $10,000 an hour for my time.
Here are three general financial decision making principles that we are going to apply to the college question:
- If you observe that most people do something, don't do it because it's probably the result of financial illiteracy and laziness. Most people make the wrong financial decision most of the time.
- If someone stands to make a lot of money by offering you advice - I'm thinking universities - do not take it.
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You have to put a bit of thought into the alternatives.
Here is the alternative
As the graph above demonstrates, you can spend less money and obtain a superior result if you forgo the traditional 4 year university (option A in the graph above) and opt for a combination of a local solution for undergraduate followed by sending your child away for a masters (option B).
How will your child be regarded by employers, peers, and more advanced degree programs? Not special? Not gifted? On the contrary, this child is going to be gritty and unique.
Fortunately, we live in a large urban area with a cheaper, local option that is equivalent to the premier state school 4 hours away in farm country. Unfortunately, I'm not the only one who has identified this solution. Our premier state university's enrollment is down, but the local version's enrollment is up 37%.
Under no circumstances am I considering an undergraduate degree at any of the top 20 universities. It's not that I don't value an undergraduate degree from MIT, for example. It's just that I value a graduate degree from MIT more, and I value having a graduate degree from MIT with no student debt even more. The pedigree from an undergraduate degree has become pedestrian - it's so 1980. I don't know anyone who doesn't have a graduate degree.
What about graduating early?
We have the option to knock off 1 to 2 years of college credits during high school. I'm not against accelerated work, but this is not going to factor into my plans.
Passing an AP History exam as a high school senior is not equivalent to taking a history course as a college freshman. The former has a certificate, and the latter an education. The best high schools in the country can churn out AP students who spend their time mastering the material on the test at the cost of learning. There's something to be said about an older student - learning takes time. A student who memorizes formulas is useless to both employers and graduate programs.
Instead, the AP treadmill is useful to push a child into more advanced college courses. I'll let my child take AP courses, but each one will defer real learning until college. Testing out of BC calculus does not mean you avoid college math - it means that college math is going to be CD calculus or whatever follows BC. (Advanced series and real analysis in case you care.)
