Sunday, January 17, 2010

College Night

I sat through a "college night" recently at my son's high school.

It was much more enlightening than I was expecting, but not for the reasons one would hope.

First, let me say how much removed from economic reality the college reps were. One of the colleges represented was a $50,000 per year private, liberal arts college. For a $200,000 and Bachelor's degree in nothing you can make a living at, you too can get a job making $32,000 per year, with upside to $50,000. After taxes, you MIGHT be able to pay back your student loans (if you are poor) or trust fund (if you are rich) in 20 years or so, but only if you scrape and save and struggle. Thanks! I needed that!

Then, the rep from an extremely selective school spoke. Also $50,000 per year, but at least you had bragging rights, and at this university you could get a degree in nursing, social work, history, english lit, art appreciation, education and host of other educational opportunities in which a graduate could expect to make $32,000 per year to start IF they could find a job (ok, you can always find a job in nursing, and probably for more money... but, to spend $200k for it?).

I wanted to stand up and ask the representatives if their institutions would still be around in 20 years, but since I am quite sure that more than half of them will not be, I did not wish to "rain on the parade".

You see, most of the parents in attendance had already invested $200,000 in their children's primary and high school education, and were now finding out just how poor of a return they had gotten for their investment. But, like any other environment where the masses can see clearly that the "Emperor has no Clothes", we sit there and nod politely in agreement while we are being Bullsh*ted. We LIKE a healthy dose of social approval with our Bullsh*t.

In truth, what option did we have? To send our kids to a public school with 40 kids in a classroom, 50 different kinds of drugs, several guns and knives... and 1 teacher? (We can thank the NEA, as well as other local teacher's unions for this sorry state of affairs, but that is another matter. Since they are staunch supporters of the Left, they will blame it all on GWB.) So we were stuck.

But I digress. Back to the economics of it all....

The increase in the costs of educational institutions has come at double or triple the rate of wage and price inflation. At this pace, if it were possible, within 20 years education would consume well over 100% of average family income... but that ain't what is going to happen.

The price bubble for education was blown by easy money and the Federal Government's Student Loan Program - "Sallie Mae". Sallie Mae performed the same function that Fannie Mae and Freddie Mac did in the housing market - they provided easy loans that enabled the industry to pass on ridiculous price increases. Young graduates will be no more able to pay off their student loans than the sub-prime market was able to pay off its mortgage debt. It sounded noble - "Everyone a homeowner" and "Every one a college graduate"; but any rudimentary top down analysis will yield the ultimate outcome - each credit market will eventually collapse, and with it the industry it supported.

So here I was, watching these colleges pitch 50 year old couples', with 2, 3, sometime 4 children (rich people generally don't have 7 kids but I guess there could have been an outlier present), most of whom are middle class millionaires why they should invest 1/3 or 1/4 of the family's net worth in said private college (for the 2 or 3 kids). Meanwhile, most of these folks have a lifestyle overhead that requires them to not only keep working forever, but to be as productive at 65 as they were at 40. Since we all know that ain't what's going to happen... what is going to happen is that many of these millionaires will eventually be a burden, rather than a blessing, on their children. Rather than being in a position to buy our children a home and start them in business, we have been conditioned into believing that $400,000 for private school and private college is the better investment. (But who says I'm so smart? What do I know? Nothing more than I have more experience with being poor and getting going then most of those present.)

This is insanity at its best.

The high school had built a monument to itself, yet requires that all of its students be dropped off and picked up, leaving the parents 2 round trips per day BY CAR. I often wonder what THAT looks like at $8 per gallon and 20% unemployment, and it is depending on the ability of parents to bear 5% -10% increases in total costs in a deflationary environment.

But I digress... (again)

I also wonder how this might have been improved upon. Since it cost over $400,000 to educate each child at private school and then private college, wouldn't it have been better to use that money to buy them each some income producing bonds or property and send them to public schools? Of course it would... but its too late now. (If you want to get REALLY, REALLY politically incorrect, all I have to do is bring up the family dynamics that led to this REALLY , REALLY bad decision.) The psychology of investment dictates that since we are "in for a penny, we are in for a pound". No matter how clearly we see the mushroom cloud over our kid's shoulder...

But I am not allowed to bring this stuff up. I am already persona non grata at the school because I have pointed out some silliness in the past. After all, these institutions do not want anybody directing any independent thinking in THEIR direction.

The "State University" rep was even more interesting. After being led to believe that going to a private school for high school would be helpful in getting their children into the more selective state schools, the State U. rep said that the State required the admissions officers to go strictly by the numbers - GPA and SAT or ACT scores. In other words, not only did we parents spend a great deal of money on private school, it actually HURT the student's chances of getting of getting into our state's most selective state school because of the "rigor" of the school's curriculum; student's in "less rigorous" programs have a better shot at a higher GPA, all else being equal.

My jaw hit the floor (this would partly explain how the Valedictorian of the school a couple year's back was rejected by the University of Florida). Thereafter, he tried to cover what he just said by telling the parents that while the "school did not take XXX school's" program into account, he did. But then he went on to say that it was again, strictly by the numbers because of Florida's "Sunshine Laws".

And there you have it.


bureaucrat said...

As a graduate of an "elite" (Top 20) university, and having lived for about 20 years thereafter, I have a few comments ...

Remember that 80% of kids go to PUBLIC universities (University of Illinois, etc.) and not the elite schools that cost $1,300,000 to graduate from.

Also remember that the eventual retirement of the baby boomers will swell the coffers of all those university endowments, making college more and more affordable as time goes by. Reduced living expections by students will help tremendously (you don't need a phone in your room). I know my parents haven't given me any indication where their money is going (not much to me, I guess), and I'll bet it's going to their alma mater (which is my alma mater).

Almost every kid in my university got some form of financial aid. I'm aware of only two students/dummies (myself and Howard) who paid full price in cash (thank you Grandma). Since education loans are guaranteed by the Fed Govt., they have low interest rates. And like a car loan, the term of an education loan is relatively short, meaning the interest on the loan is a minor detail (30 year mortgages are something entirely different).

And finally, if anything, the forced reading and writing of words at school made me a pretty good writer (even when I'm writing in "bureaucratese"). With the separation between rich and poor growing by the day, ANY advantage a kid has will perhaps be enough to put him in the "rich" category. It worked that way for me. Top 20% of income earners. :)

Anonymous said...

What's wrong with public schooling?? Giving your child a dose of reality is priceless! Assuming you live in a decent neighborhood, the public schooling isn't that bad unless you live in a big city like LA.

I did attend a public high school and I'm currently in my final year at a private university. I can attest to there are huge differences between the two, but if the kid has no drive to succeed then spending all that money on private schooling isn't going to do one flipping thing for them.

Greg T. Jeffers said...

Young man:

I hope you take this as kindly as I mean it:

Nothing wrong with public school.... nothing much right, either.

Much of that has to do with politics, policies, unions, funding and budgeting.

Although I fully recognize that I may not know what I am talking about... and I know you think you are worldly and educated at the age of 22 or 23... I assure you, you are not - best to listen more, speak less.

Check back after you have raised a family to college age and are about to write the checks from money you earned (rather than inherited, if that applies). By then you will have had 25 or 30 years to prove how smart you are...

I wish for you every success! Good Luck!

kathy said...

We were blessed to live in a small community that provided my kids with excellent educations. When my second son was accepted at an elite school, he calculated the debt load and chose a state school that we could pay for without debt. He graduated from there near the top of his class and is now the director of a residential psychiatric program for disturbed adolescents. It was his dream job and he is delighted with it. My oldest son flunked out of college twice (he never wanted to go-my bad for insisting) and went on to start his own internet security company and will retire a multi-millionaire before he is forty. Youngest son took off a few years to do some missionary work and returned to college as a 26 year old with a clear vision. He wants to be an adoption worker in the deaf community (major in social work-a minor in sign). I still worry that the two human service kids will be unable to earn a living in the future and I'm really glad that both kids have a plan b that does not involve their non-college graduate big brother supporting them.

Stephen B. said...


Even without looking up the numbers of how large Boomers' retirement funds are, how much retirees in general leave to private schools versus how much private schools will be depending on such funds, I cannot believe that, in the tough times to come, boomer endowment additions are going to carry private schools and colleges through the rough times to come by any stretch of the imagination.

bureaucrat said...

With billions in play with the deaths of the baby boomers, even with net worths dropping, and their realization that their kids have gotten WAY, WAY too spoiled with their cell phones, Aeropostale designer clothes and Honda Civics, parents born between 1946 and 1964 are going to stop passing their wealth on to their children and start giving it to their old schools. Kinda "the final insult." :)

tweell said...

My children have gone to a variety of high schools. My eldest went to Catholic school, the next two to public and the final two went/are going to a charter school.
The prestigious religious school wasn't worth the time and pain in my opinion. There was only one monk left, no nuns, and no religion either.
The public school wasn't bad at first, but later inner city teens were being bused in. It became a dangerous place for my daughters to be. I spent a lot of time there the last year a daughter was enrolled, luckily I was able to do so.
The charter school has been very good. Some charter schools have been established for profit, but the one we found was set up and run by teachers who wanted to teach and were frustrated by the public school system. A rigidly enforced discipline system, a maximum of 25 students in a classroom and a tough curriculum has me happy.

Dan said...

Thank you sir, may I have another...

Anonymous said...

I went to public high school and a state college. It worked fine for me. It is not the same today. We lived in a middle class town in Mass. where the school administration could not figure out why students should not show up drunk at school functions. Drugs were for sale in the fifth grade. It all looked nice on the outside. Nice buildings on a pretty campus. They did an outstanding job right up to middle school, then all h**l broke loose. Literally dozens of the kids my daughters went to school with are now dead, dead druggies. I got my kids out and I'm glad I did.

Some kids breeze right by the problems, some get involved in them. The school administration and half the parents think its "just part of growing up" or "they're just weekend warriors." It turns my stomach to see outraged mothers bitching out the police who have picked up their drunk, stoned, puke drenched 13 and 14 year old children. I'm sure we saved one daughter's life with private school. The others may have done well regardless. I'm fortunate to never have to know.

It's not the teacher's union, or the school administration so much. They are a reflection of the degenerate, decadent standards of the community at large. Things have improved since then, and I'm glad as the potential for ruined lives is decreased.

As far as the private college thing goes, well, I've got one left in school. I know it's insane. Two more tuition payments and we're done. Thank goodness.


Coal Guy

Greg T. Jeffers said...

Dear Whine, WHine, Whine:

I think you missed the point.

You personalized your comments for me; thankfully, I won't miss any meals either way. This is not true for many of my contemporaries, middle aged parents that have spent a lifetime working hard to provide for their family - something I am willing to wager BIG money you have not done yet.

I have retired from the investment advisory business, but what I see coming down the road for these parents is a very, very difficult old age. Squandering opportunities and refusing to analyze potential outcomes is not how one provides for oes old age.

Anonymous said...

Just to clarify things a bit, I never expected my teenagers not to drink or take stupid risks. We all have. It's just that the number of parents, school administrators and psychologists that actually believe that it is somehow OK for a 14 year old to get trashed every weekend is absolutely astounding.


Coal guy

Joseph said...

Call me silly but I have no college degree and earn in the top 10% of people in my industry (I.T.). When on contracts people ask where my degree is from, I just chuckle and tell them they wouldn't believe me.

This is the same lesson we are instilling in our 4 homeschooled children. Drive and determination can overcome a lot of things. They are learning how to run businesses early in their teen years and know that if they want to pursue a field where they must have a degree find the place with the best balance of inexpensive and decent edukation and then kick butt. We have told them all that they will have zero help in their college years from us....better to have them push hard and then be the heros when we step in with some $$ instead of raising a spoiled Barbie that is waiting for Daddy to pony up the $$.

Best wishes to all of you and thanks for the post Greg.