The recent college admissions scandal should give us all pause for thought. Most of us don’t appreciate those who cut in line or use wealth and power to influence what is perceived as a merit-based competition. People are angry—as they should be. Yet, some of this anger may be misdirected. We should not let this scandal distract us from the much larger “college cost crisis”: a crisis for which we all bear some responsibility. The cost of a four-year degree continues to rise, with in-state costs topping $25,000 per year and elite private universities approaching $75,000. Why? The simple answer is that schools have little incentive to keep costs under control. College loans are plentiful and relatively inexpensive. In our zeal to do the absolute best for our children, we as parents continue to borrow and pay, frequently at the expense of our own retirement.
It doesn’t need to be this way. You wouldn’t purchase a Ferrari if you knew that you could only afford a Chevy, thinking “I will figure out a way to pay for it later.” Yet, in my practice, I see parents and high school students do this all too often. Don’t fall victim to the prestige complex. Apply to the best schools possible, but understand that while it might make perfect sense to borrow a large sum of money for an engineering degree or medical school, it might not make sense for your future poet. In my experience, the earning power of a four-year liberal arts degree doesn’t seem to vary much between public and private schools. In fact, more and more research is now suggesting where your child goes to college is far less important than you think. So why not pick the cheaper option? As parents, our goal should be to get our children out of college in four years with a good job or a path to graduate school as economically as possible.
How do we achieve this goal? It all starts with a conversation. Engage your children early in discussions about money and the cost of college relative to what your family can afford, what scholarships might be available, and what a reasonable amount of debt after college might be. In short, be the parent. Too often these decisions are made solely on an emotional basis. Emotional decisions can prove dangerously expensive and financially restricting down the road. Counteract this by looking at college more from an investment standpoint. Perhaps you should require your high school senior to present a business case for the college of their choice!