What will Duke education cost in 18 years?

[Rich]

Some college students are leveraging 2 years of community college to reduce their education cost.

I live in NJ where the reputation of the main state school, Rutgers, is just eh IMHO. And who wants to be a part of the BIG Whatever anyway?

My daughter is a high school sophomore and more and more I hear high school administrators, advisers and other parents say just that - consider two years of community college and then transfer to get a 4 year degree. If the system doesn't change then I think we're at the cusp where we'll see people doing this more and more.

[duke79]

I crunched some of the numbers. If we assume a current cost for room, board and tuition of $62,000 (and I think this number seriously underestimates the true cost of college today; e.g., does not include spending money, transportation costs, books, clothing, etc. Although some kids hopefully earn some money with summer jobs or jobs during the school year), and we assume college costs increase at 3% per year (compounded), then the cost would be around $82,000 per year 18 years from now. If we assume costs increase at 5% per year, then they yearly cost would be around $120,000 per year, obviously a big difference given the compounding effect over 18 years. To accumulate enough money to fully pay for four years 18 years from now (and assuming the 3% annual cost increase), you would need to save $1,350 per month for a new born child, assuming a 5% rate of return on your saved monies - obviously a daunting task for most young parents. The numbers are truly scary.

I stand corrected with my calculations (thanks to Devil 77); my old HP 12C calculator sometimes comes up with screwy numbers. If costs increase 3% compounded for 18 years, then tuition would be about $106,000 per year (and not $82,000). I apologize. The amount you would have to save for a new born today would obviously also be quite a bit larger than what I calcuated above. Sorry for the wrong numbers.

[duke79]

Thanks for crunching those numbers, duke79, but do any of us believe those numbers are sustainable? There's going to be a correction in college costs/financial aid/student loan debt sometime and I suspect it's coming sooner rather than later. Certainly before Baby reaches college age.

Yea, I would guess the inflation in college costs will have to come down at some point, although at the best schools, they seem to have almost unlimited pricing power (at least for those students whose parents can afford to pay the full cost). I think until we see dramatic drops in applications, colleges will have no incentive to reign in the increase in costs. If you're running a business and you can increase the prices for your products every year without affecting demand for those products, why would you not keep raising your prices?

[budwom]

I crunched some of the numbers. If we assume a current cost for room, board and tuition of $62,000 (and I think this number seriously underestimates the true cost of college today; e.g., does not include spending money, transportation costs, books, clothing, etc. Although some kids hopefully earn some money with summer jobs or jobs during the school year), and we assume college costs increase at 3% per year (compounded), then the cost would be around $82,000 per year 18 years from now. If we assume costs increase at 5% per year, then they yearly cost would be around $120,000 per year, obviously a big difference given the compounding effect over 18 years. To accumulate enough money to fully pay for four years 18 years from now (and assuming the 3% annual cost increase), you would need to save $1,350 per month for a new born child, assuming a 5% rate of return on your saved monies - obviously a daunting task for most young parents. The numbers are truly scary.

Well, you really can't assume 3% or 5% since it's been closer to 7% over time. Many analyses can be done which produce different results, but the crux of the matter is that college costs are growing MUCH faster
than the basic rate of inflation....and despite massively growing endowments, nothing appears to be moderating this trend.

[Bostondevil]

Yea, I would guess the inflation in college costs will have to come down at some point, although at the best schools, they seem to have almost unlimited pricing power (at least for those students whose parents can afford to pay the full cost). I think until we see dramatic drops in applications, colleges will have no incentive to reign in the increase in costs. If you're running a business and you can increase the prices for your products every year without affecting demand for those products, why would you not keep raising your prices?

I agree that the number of applications is unlikely to go down, yet. The system is not going to collapse from the top down though, it's going to collapse from the bottom up. The demand for top schools is probably going to increase at first but then, if the prices keep rising, there will simply not be enough students who meet the academic requirements who can pay. When that happens, alternatives will pop up, currently second tier universities will see their chance to attract top talent by lowering their prices whether through increasing their academic scholarships or lowering tuition. Once the top schools feel that pinch, then they will follow suit. I also think we will start losing many institutions to bankruptcy, mostly at the lower end academically. The student loan funded cash cow that is the current for profit school environment is not long for this world, no matter how many highly paid lobbyists the industry has on Capitol Hill. We have, for a couple of generations, held up the college degree banner as the way to work yourself into the middle class. It has lead to many people going to college without the best skill set for success (in college). I hope that all this restructuring is accompanied by a rethinking of jobs that currently require college degrees in theory but don't in practice. My favorite example is bank teller. I worked as a bank teller to help pay my way through undergrad. I couldn't do that today because most bank teller jobs require a college degree. I've done the work. I didn't need to graduate from college to do that work. Anybody with decent arithmetic skills and slightly above average attention to detail could do that work. We've made the college degree an expensive hoop that all must jump through. That thinking needs to change. Let's hope it does. I think it's probably going to have to.

[duke74]

The correction will likely impact schools outside the top 25 or without a significant pedigree.

No one is going confuse an online degree with a degree from Harvard, and it is the online courses and community colleges that will offer an education at a reasonable expense.
What you'll miss is the credential and the network.

I believe Dartmouth is leading the charge in protecting their revenue.
Some college students are leveraging 2 years of community college to reduce their education cost.
I believe Dartmouth is the first school on record indicating it will not accept transfer credits.

I'm also seeing a number of students go to public institutions for the first few years and then transfer. Is Dartmouth also limiting that?

[fuse]

I'm also seeing a number of students go to public institutions for the first few years and then transfer. Is Dartmouth also limiting that?

http://www.dartmouth.edu/~reg/docs/t...fact_sheet.pdf

There are a lot of caveats and qualifications (and fees!). I'm sure if you search further on the Dartmouth website you'll find more details.

[Bostondevil]

fuse - I don't think online degrees are a cost savings.

Here's just one article I've read about them. At one point, I investigated costs for myself because I was thinking of getting a teaching certificate. It was a passing fancy but when I saw how much it would cost online, that was a significant deterrent.

http://www.usnews.com/education/onli...t-always-cheap

[duke79]

Well, you really can't assume 3% or 5% since it's been closer to 7% over time. Many analyses can be done which produce different results, but the crux of the matter is that college costs are growing MUCH faster
than the basic rate of inflation....and despite massively growing endowments, nothing appears to be moderating this trend.

If costs continue to escalate at 7% compounded for 18 years, college would cost almost $210,000 per year or almost $850,000 for the four years. It's hard to imagine that they could rise that much and not eventually cut into the applicant pool substantially. And how would financial aid be able to keep up with such increases without enormous increases in the endowment. That is why I believe that the increases will have to decrease at some point and colleges will have to figure out how to make it reasonably affordable for many students and their parents. I guess the scary part of the equation is if inflation suddenly take off, like in the 1970's, then what will colleges do? We've had relatively benign rates of inflation for the last 30 years or so (according the government calculated CPI).

[fuse]

fuse - I don't think online degrees are a cost savings.

Here's just one article I've read about them. At one point, I investigated costs for myself because I was thinking of getting a teaching certificate. It was a passing fancy but when I saw how much it would cost online, that was a significant deterrent.

http://www.usnews.com/education/onli...t-always-cheap

I'm not sure they are a cost savings either, particularly when you take the credential aspect of an education into account.

There are so many interesting dynamics to factor in this dialog about cost/value of education.
NC State gets recognition locally as a good university locally, but that reputation / credential doesn't play real well on the West Coast (as an example).

I suspect there is some relative value depending on your time scale and chosen field of study.
Worth it if you can pay it off without hardship in the first five years after graduation?
Seems reasonable.
How quickly you can earn $1 million? (Or whatever sum that makes sense.)
Ideologically, maybe it's how quickly you can add value back into the system (how would you measure that?).