| June 5, 2013

Reducing College Costs Is Crucial for Families

I recently attended a lecture where a gentleman discussed how my kids could obtain a college degree by age 18 at a fraction of the cost of attending a traditional university. So, not only would they have an additional four years of earning potential, I might save up to $116,000 per child (as the estimated costs to attend a private college are around $33,000 per year).

I immediately started thinking how families might adjust their decision-making if they knew about this option when planning for their children’s futures. Because right now, there are certainly many problems with the traditional way of financing a college education and the corresponding results we’re seeing in the economy.

Consider: two-thirds of the class of 2011 hold student loans upon graduation, with the average borrower owing $26,600. Moreover, as Mitt Romney pointed out on the campaign trail last year, more than 50 percent of college graduates are either unemployed or underemployed. It’s clear that the higher education system is broken.

There are numerous reasons for this, of course, but one is administrative bloat. A 2010 Goldwater Institute study found that between 1993 and 2007, the number of full-time administrators per 100 students at the University of Oklahoma grew by 52 percent, while the number of employees engaged in teaching, research, or service only grew by 26 percent.

Fortunately, there are some things we can do as parents to help our children obtain a college degree without being beholden to the current failed system. As I mentioned, I had the pleasure of listening to the CEO of an organization which helps high-school students earn college credit for the courses they’re already taking through CLEP exams and community college courses. The high-school students then finishes earning the credit for their B.A. degree through an accredited college for the final 12 to 18 months of their high-school experience. In addition to the unbelievable savings that can be realized, this type of option, over time, could change behavior to the extent that it impacts family formation.

Few people disagree that children have become more and more costly since World War II. Outside of providing necessities, it is the cost of daycare and education that most heavily weighs on a married couple’s assessment of the financial impact of having additional children.

As OCPA research fellow Vance Fried has been pointing out, there are encouraging signs all around that college is about to become drastically cheaper—so much so that a mother may choose more time with her children over more paid hours at work because the financial stress of paying for her child’s education has been significantly lifted. Additionally, couples may choose to have an additional child because they can now afford the education for that child. A potential savings of $100,000 per child is nothing to scoff at—it could significantly alter fertility.

Let’s consider the tradeoffs that women must make. With 70 percent of women in the workforce, most women must choose which domestic and child-rearing duties can be outsourced and which duties simply cannot be provided given their finite amount of time to be divided between their job and domestic life. Ultimately, women have a finite amount of time to allocate between their job, a husband, children, and leisure. How women value these things is what has changed over the last 40 years, albeit partly because of the increasing cost of educating a child.

These choices or tradeoffs women have to make are never easy and are often accompanied with regret, as evidenced by even the most successful women in America. Three very successful women, two of whom are very much in the public eye and among the first women to reach the highest level of their professions, have said things that contradict their public image as liberals and feminists.

Take, for example, Katie Couric, who browbeat the former Alaska governor (and mother of five) Sarah Palin with respect to her foreign-policy acumen. Couric told Good Housekeeping last year: “I love being around my kids. I’m not a particularly solitary person ... I like a big, chaotic household—noise, commotion, laughter! Sometimes I think I should have had six kids. Or I wish I’d had one [more] at 37, but I was busy. My career.”

Another public personality, and the first female Secretary of State, Madeline Albright, made this statement: “We are who we are and, in large part, who we are is dictated by our biology. I believe women can do everything. They just can’t do it all at the same time.” There again is the mention of a woman’s tradeoff between excelling in her job versus rearing children.

Finally, Erin Callan, the former chief financial officer of Lehman Brothers, recently wrote an op-ed in The New York Times admitting the great regret she has with regards to pouring herself into her work at the expense of her marriage, which ended in divorce and zero children. “I have spent several years now living a different version of my life, where I try to apply my energy to my new husband, Anthony, and the people whom I love and care about,” she wrote. “But I can’t make up for lost time. Most important, although I now have stepchildren, I missed having a child of my own. I am 47 years old, and Anthony and I have been trying in vitro fertilization for several years. We are still hoping.”

There is discontent among women who have to sacrifice time with their family for their jobs—even at the very highest levels of success. Family finances have a mammoth impact on a married couple’s decision to have an additional child.

The significant decline in the cost of college, over the long run, might bridge the financial gap needed for married couples to increase fertility.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”

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