Integrated Financial Training: Westchester NY

If colleges did offer something of infinite value, we should be willing to pay an infinite price...but if we went shopping I suspect we could get it for less... 

The history of education began with the development and study of the classics, which can be argued to be priceless knowledge. In more modern times, the emphasis of a college education has shifted to the development of skills to improve employment prospects and the study of classics is substantially watered down. Sir Ken Robinson, an internationally recognized leader in the development of education, creativity and innovation levied criticism at the current state of affairs in education (be prepared to hold your sides if you watch his videos). The Economist Magazine wrote a scathing article (12/1/12) regarding the decline of the college education from what they agreed was the pinnacle of the world's educational system. They criticized the increase in "padding" demonstrating that from 1976 to present the number of professionals to professors has roughly doubled, along with the massive debt students must now take on for this much more dubious quality education. As this debt cannot be wiped out in bankruptcy court, it will follow students throughout their lives. To the extent it reaches beyond their means to repay as it does for some, it can potentially subject them to abject poverty for the remainder of their lives.

Financial planners used to say that the best investment you can make is in yourself. They looked at the difference between high school graduate incomes and college graduate incomes over one’s lifetime. Part of the problem with this is everyone does not work for that long, and as the Economist points out not everyone graduates. A career change, illness or death can derail the career process. When you consider these actuarial losses, the need for economic benefit from education must rise to offset these risks.

From a recent study I did projecting the income differential and including some gross measure of actuarial losses, the conclusion was that even the most expensive schools probably pay vs.. a high school diploma, even if someone only gets a liberal arts degree. However, with college inflation outpacing everything else, in roughly 10-15 years the situation will change. College professors from the expensive schools will have to get used to the idea that students will not pour into their classes for economic reasons, but will only be a playground for the wealthy. This will even take place in business and engineering schools. That said, there seems to be a long way to go for students who attend public schools within their own state.

A new sort of thinking is emerging among the college crowd. Financial aid offered seems to be a more critical factor than ever before. Students are not willing to spend much on their undergraduate degree because the graduate school is so much more important. More students are going to community college for 2 years and planning on doing very well. Then they can transfer to a more expensive school and get the valuable diploma from them. A final strategy might be to focus more on specific job training and bypassing the broad liberal studies subjects which can add quite an expense.

If we continue the recent trends of increasing cost faster than inflation, reducing quality, and bullet proof loans, then the world of education is set to change in a more dramatic way. The Economist suggests for example open online education may take its place to the extent they can offer some form of certification. Community colleges may fill in for the technical skills or colleges themselves may be forced to offer programs that are shorter and more targeted.

For those saving for college, keeping these changes in mind is important. To the extent you want your child to gain the benefit of the priceless knowledge gained from the classics, an avenue outside the college environment may be the best bet. Perhaps focusing on technical skills in a targeted program may be shorter and more cost effective, while the emphasis on philosophy, ethics, religion, psychology, etc. can be gained in better quality programs that may or may not offer certification. An employer may not need it for a job, but it can add a positive dimension for a candidate. Perhaps the long run trajectory of one’s income will be determined more by what they do after they graduate rather than before. Whatever the case, the knee jerk reaction to go to college may need to change much sooner than expected. Parents with young children should monitor these changes and develop their philosophy on the subject as part of their planning processes.

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