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  • Our Biggest Expense

    By Joshua Kim January 12, 2010 8:22 pm EST

    We often hear that buying a house will be a family's biggest expense. I wonder if this aphorism still holds true. In my family, our greatest expense will be higher education. My wife and I are committed to giving our girls (now 7th and 5th grade) the same advantage of a debt-free college and graduate school that we enjoyed.

    But the math is daunting. Let's say that our kids followed in our path and went to a private undergraduate school. That is about $50K per year - times four years. For both girls that's $400,000 total in undergraduate expenses. Yes, I know that this is the retail cost that most families don't pay. And yes they could go to a public institution. And yes they might qualify for scholarships. But I'm betting that our family will fall into the tuition bubble - we will make too much to qualify for much aid, but too little not worry and struggle.

    Then comes graduate or professional school. If one kid follows my wife in medicine that is easily another couple of hundred thousand dollars. If the other kid goes to graduate school then perhaps our family cost will be less, but given the realities of the job market, I'm betting they will both go the professional school route.

    At this point in the game I'm thinking that $500,000 is a reasonable estimate for what it is going to cost to get our kids fully graduated and credentialed, again if we don't want them to start life with a huge educational debt. Does this sound realistic to you?

    There is no way we will be able to save that much money. Who can? We anticipate that when college comes for our girls that we will downsize our house, trade the equity for tuition, and move into something small, cheap and outside of an expensive school district. We also plan to work forever.

    The irony is that we are committed to doing whatever it takes to get our kids through the most expensive and bundled education system at the same time when learning is becoming unbundled and cheap. What sort of amazing learning experiences are available on YouTube EDU or iTunesU? Want to learn physics, then the Open Culture site has a wonderful course for you. We all know about the amazing courses available at Carnegie Mellon or MIT. As Lev Gonick talked about in "The Year Ahead in IT," the Open Content and Open University movements are both contributing enormous amounts of materials to the commons while redefining how we think about our institutions.

    This is a serious mismatch that I have not been able to get my head around. As the costs of institutions of higher education continue to go up, and the ability to access learning for free on the Web explodes, the value as a parent for a traditional degree (and graduate degree) seems only to increase. Perhaps I want my girls to have the bundled experience that my wife and I enjoyed. This includes all the social learning that occurs through living in a dorm, living a away from home, interacting with a wide range of smart and diverse students and professors.

    Is it the dorm living?, the social scenes?, the culture and sports?, the food? - I'm honestly not so sure. I know our desire for our kids to have a traditional undergraduate experience is not really tied into the labor market - as someone (not sure who it was) has said that a diploma was once a ticket to a job, and now is just a passport. We know our girls will need to go to graduate or professional schools if they hope to have middle-class lives. But we don't think that a high-priced undergraduate institution is necessary to feed into professional or graduate school. Yet we are looking forward to paying the undergraduate tuition.

    Are we being irrational? Why? Will higher education be your families biggest expense?

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Comments on Our Biggest Expense

  • The house is peanuts compared to higher ed costs
  • Posted by WMFXIR , DIR ITMS at NJIT on January 13, 2010 at 9:30am EST

  • Let me assure you that you are correct in the expectation that higher ed costs are going to far out strip the cost of your purchase of a house. I am on the outside end of putting 3 daughters through college (2 private colleges, 1 public [in combined BSMS program]) and marrying off two. The purchase of the house was a pittance in comparison. Thank goodness for the (mostly) rising real estate values which allowed us to go ever deeper into debt to be able to pay for all of this. We still owe 3 times the original price for the house in various mortgages. All well worth providing them the experiences (only part of which I had {commuter} [thank goodness for the GI bill]) of residential college life. It was a pleasure watching them grow through this experience over the years.

  • Poor planning
  • Posted by Lev on January 13, 2010 at 11:30am EST

  • If you'd started saving when your children were born, you'd have had more than 20 years to accumulate the $500K, so would need to save at a rate of only $25K/year (less, really; while the cost of higher ed goes up 4-5% a year, your investments should do better than that over a 20 year period.) Since one of you is a doctor, that should have been feasible. By waiting until only six years before the oldest starts college, you have made it much more difficult.

  • something's wrong here, don't you think?
  • Posted by Gary Lewis at <a href="http://garymlewis.com/instchg">Edu Imaginations</a> on January 13, 2010 at 11:45am EST

  • Hi Joshua - You say "We know our girls will need to go to graduate or professional schools if they hope to have middle-class lives."

    You may be correct, but is it right (ie, fair, just)? Is that the kind of world you want your kids to inherit? A half million dollars as a gatekeeper's fee into middle class seems pretty steep.

    Now might be the perfect time to just say no. And to help build a better future for kids everywhere.

    Best regards, Gary

  • Learning & credentialing are different
  • Posted by Anonymous on January 13, 2010 at 11:45am EST

  • We should not confuse "learning" with "credentialing." Though the former may occur during the latter, one can learn from ALL kinds of experiences. What one buys, through the credentialing process, is a route (not the only one) to a middle class lifestyle.

  • Tuition waivers?
  • Posted by John Dooley , Professor of Computer Science at Knox College on January 13, 2010 at 1:02pm EST

  • We did start saving (although not $25K/yr) for our son's college education and that has helped quite a bit. What has helped even more is the tuition waiver available at our institution (that's a $32K benefit every year), which is also available at other colleges in our consortium.

    Isn't this type of tuition waiver common, particularly at smaller institutions as a way to offset lower salaries???

    As for graduate school, he's on his own...;^)

  • Posted by Karen DeCoster , Project Director at Massachusetts Department of Elementary & Secondary Education on January 15, 2010 at 4:15pm EST

  • Fabulous post! While there is much to respond to in your post and the comments let me start here:

    " would need to save at a rate of only $25K/year'

    Only?!!! How many young middle class parents can afford to do that while also saving for retirement and ensuring too that they have an adequate reserve to weather tough economic times. Chances are that they too are still paying college loans. Something has simply got to give.

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