College Tuition Financial Aid Plan For Parents

The old adage or paradigm regarding the American Dream is that each future generation has the opportunity to live a better life than their parents (and grand-parents of course as well).  And part of that upward climb to increased prosperity has included the attainment of higher education for your children and grand-children.  But what if higher education suddenly became so costly and unaffordable that only the extremely wealthy could afford it?  I know what you might be thinking: in today's day and age there are a number of programs available to theoretically allow everyone that wants to attend a university to do so.  But aside from outright scholarships (which basically means someone else footing the bill or part of it, which certainly is very laudable and helpful to parents) the only real option open to many families is the utilization of debt to fund a higher education.  It was not always this way in the United States and previously it was the case that college bound students could often pay their own way by working part time to pay for education expenses.  However, things have changed.

College Tuition Costs Are UP, Wages Are Down

Mr. Chris Farrell, writing for Marketplace.Org, reports that while American median family income is up 15 percent since 1983 (which actually has not been enough to keep pace with inflation by the way), the cost of private colleges is up 126 percent and public school tuition is up 129 percent.  Some other sources comparing costs going back to the 1970's claim that compared to university costs then and now in 2015, higher education costs have actually increased 1,000 percent.  Stated more clearly in actual US Dollar terms for 2015, the average cost of a private four-year college is now $42,419 and there are currently 57 American universities or colleges charging US$60,000 (or more) for tuition, fees, room, and board in 2015 or so says a recent statistical report by the College Board.

Think about that for a minute.  What other product or even an investment has gone up by one thousand percent over the past 45 years.  Have salaries gone up one thousand percent?  Have real estate prices gone up one thousand percent?  Where do these cost increases come from, and more importantly, is it worth it?  There are of course a number of statistics that prove university or college graduates can certainly achieve earnings potentials in excess and beyond their non college educated peers.  But does a one thousand percent increase in higher education costs translate to a one thousand percent increase in salary or income?  The statistics would appear to reply a resounding NO. 

According to Pew Research, real wages (after adjusted for inflation) have been flat or even falling for decades, regardless of whether the economy has been adding or subtracting jobs.   And Mr. Larence Mishel and Ms. Heidi Shierholz writing for the Economic Policy Institute in an article from 2013 highlight a trend of stagnant or declining wages (inflation adjusted) while actual worker productivity has gone up.  They go on to say that: According to every major data source, the vast majority of U.S. workers—including white-collar and blue-collar workers and those with and without a college degree—have endured more than a decade of wage stagnation. Wage growth has significantly underperformed productivity growth regardless of occupation, gender, race/ethnicity, or education level.

College Tuition And The Middle Class

Of course, there are averages and there are exceptions to every rule (or median statistic).  People working in certain industries have tended to do well over the past decade all in all (finance, financial services) and the much commented upon top 1 percent have indeed seem their incomes and overall wealth grow regardless of what was going on in the broader economy.  And to be fair, even at the time when official US government unemployment statistics indicated a 12 percent unemployment rate previously, the unemployment rate for university graduates was about 4 percent during that same period (we still think the currently reported 5 – 6 unemployment rate in the US reported by the government is bogus, but you can read more about that in one of our previous articles).  So, we are not trying to make a case against higher education at all but rather to point out what we believe are two very important things to consider:

Number 1: The costs for an education from a US based university or college is so astronomical today bordering on the ridiculous (as in not necessarily worth the excessive cost charged by US based higher learning institutions, all things considered).

Number 2: The only way many middle class families can afford a higher education for college bound offspring is for the parents to go into debt, the student themselves to go into debt, or both.

And even the so-called financially well off are finding it very difficult and challenging to navigate ways to cover college tuition costs for children.   A recent New York Times article dated April 7, 2015 sites New York City Mayor Bill De Blasio, his annual income as mayor of US$225,000, his other real estate assets and income, and his own issues trying to afford a university education for his son.  Granted, the New York Times article tells us Mayor De Blasio's son is contemplating Brown University, and NOT one of the much lower cost public universities in New York City (which is somewhat interesting to us considering Mayor De Blasio comes from the political left, which usually espouses anti-elitism as one of it's political platforms).

Regardless, the point is the issue of income (and what is considered middle class these days) and the issue of possibly needing financial tuition aid.  Kalman A. Chany, president of a Manhattan based firm advising parents on financial aid matters is cited by the New York Times as saying: Particularly with two children in college, the six-figure income is not going to disqualify him from demonstrating need (speaking about Mayor De Blasio).  Therefore we come to another perhaps rhetorical question: if someone with a six figure income has need, what does it say about everyone else?  Those more towards the left of the political spectrum often rail about the upper income wealthy that should be taxed even more, but what exactly is wealthy these days?  If someone earning north of US$300,000 is in need, then that speaks volumes all by itself (and especially a Democratic party politician with that kind of income, in need).

Student Loan Debt Is The Problem !

Of course the main problem is the taking on of debt to pay for it all (or even some of it all).  Student loan debt for today's young generation is an albatross of unbelievable proportions.  The latest figures for 2015 indicate that young Americans currently owe in excess of US$1.3 Trillion Dollars of student loan debt and there are 40 Million people saddled with a debt burden of some kind – before they even start working or begin their adult lives.  The average student loan balance is US$25,000 to US$30,000 but there are many with higher debt amounts and some with more than US$100,000.   According to Ms. Susan Dynarski writing an article in the March 20, 2015 issue of the New York Times:  Student loans are now the second largest source of consumer debt in the United States, surpassed only by home mortgages. In a major reversal, they now constitute a larger portion of household debt than credit cards or car loans.  Is this anyway to begin your adult working life?  Mr. Donghoon Lee, a research officer at the Federal Reserve Bank of New York, has been recently quoted as saying in February 2015 that:  Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.  You think?  How can young people today even consider trying to buy their first home when they are already saddled with six figure student loan debts?

According to the Consumer Financial Protection Bureau, 2012 figures indicates that 850,000 private student loans totaling US$8 Billion were in default.  Another source claims that more than HALF of all outstanding student loans are currently in deferral, delinquency or default.  And on the job front, according to an article appearing in the Los Angeles Times on May 7, 2014: of those getting degrees in engineering, technology or math, 81.6% didn’t have a job.  Business majors had no better luck, with 85.1% still looking for work.  The Los Angeles Times also reported in 2014 that college graduates who are under 40 years of age and who have accumulated student debt have a median net worth of just $8,700, which compares to a median net worth of $64,700 for college grads in the same age cohort who did not take out student loans.

What then is the solution?  Generally speaking, obtain a college education DEBT FREE and certainly at a price or cost that makes sense.  In addition, also consider that job growth and certain opportunities are not going to be exclusive to the United States or even Europe going forward.  Obtaining knowledge, experience and even another language will all help up and coming university graduates to be better prepared for a world that certainly will be different than what their parents and grand-parents experienced.  In short, go abroad (yet another reason to consider expatriation).

Now I know what you are thinking: one cannot get a good education outside of the United States and the University Diploma earned from a university or college in another country will have not merit.  Not true, we say.  India has been producing some of the best computer programmers in the world over the past few years, and China has been making a very concerted effort to improve it's own universities in terms of curriculum, quality and prestige.  But while we cannot offer in-depth insight into every other country on the planet, we can tell you about our own personal experience in the Dominican Republic.  And to expand upon this I must tell you that I am in the process of helping my 17 year old nephew apply for one of the best engineering universities in the Dominican Republic.  He is a good kid my nephew, a bit lazy at time as I suppose many adolescents can be, but bright none the less (and when he wants something, he suddenly gets religion, if you know what I mean).  In fact, he wants to become a software programmer, and I think he has the aptitude and ability for it (since he was young I constantly was angry at him for tinkering with the software on the cell phones I had given him, because he wanted to see how they work, usually rendering them unusable as part of his electronic inquisitiveness).

In any event, I think it safe to say that in any country there are a list of top quality, academically competitive ivy league equivalents, and then there is everything else.  The Dominican Republic certainly has a number of both private and public universities, with the UASD being the oldest (now public) university in the Americas.  It was founded roughly 500 years ago (give or take a few decades) in Santo Domingo by Papal Decree, and it still stands today educating young people as it has done before (obviously not in the original building of course).  But, aside from that, there are a large number of private universities in the country, with I would say at least 3 or 4 in the top tier category.  In fact, the school my nephew wants to attend is one of those, and he had to pass a 4 hour entrance exam to gain admittance.  That exam is given before and in addition to the national tests that all graduating high school students will need to take in June to graduate with their high school diploma (I do not know how difficult the national test is, but I would wager to bet the competitive university entrance exam giving by some of these private universities is far more difficult).

The obvious concern you might have is language.  Meaning, Spanish is of course the official language of the Dominican Republic and of course with the exception of some private bi-lingual schools, certainly the course curricula will be taught in Spanish.  However, with that said, there are a few English language university programs, especially for medicine.  And with regards to the engineering school my nephew wants to attend, one of the requirements is proficiency in English, with another separate entrance exam for that as well.  In addition, that same university offers a separate English language academic exam for foreign students.  So, that leads us to conclude that either some of the courses are taught in English, some of the text books are in English (if not all of them), or a combination of the two. 

In terms of tuition, the public and government supported UASD is by far the least expensive university education one can obtain in the Dominican Republic, but while a decent school, it still is a very large public university system with all that entails.  The school my nephew wants to attend, on the other hand, is considered to be a more prestigious competitive school mainly known for it's various engineering programs.  And as such, it certainly costs more than the equivalent public university. So, by now you want to know the tuition number for such a private school and here it is: for foreign students the cost is US$100 per credit, but for local residents and citizens, the tuition is less than half that.  As such, for my nephew I plan on spending about the equivalent of US$1,000 for the year (not including books and other expenses of course), which is assuming and based upon a 20 credit course load.  Not a burden at all, considering even the ridiculous tuition costs for public (read government) schools in the US, never even mind the private ones.

With regards to asking whether or not such a university decree has any standing or merit elsewhere, I can refer to my experience with another graduate from one of the top tier schools in the Dominican Republic who decided he wanted to pursue his Masters Degree in a school located in Europe or the US.  As it turned out, he was accepted by the London School of Economics and Political Science and another private university in the US.  Interesting enough, the London School of Economics offered him a full scholarship to get his Masters but the US university offered nothing more than acceptance.  Incredibly enough he decided to attend the US university and he ending up paying US$40,000 out of his own pocket for the one year program, whereas if it were me, I would taken the offer from London.  In any event, the point is, if a highly ranked university such as the London School of Economics (which includes Paul Volker, Michael Lewis, Robert Rubin and Lee Kuan Yew as alumni) is willing to offer someone a full scholarship that has graduated from a university in the Dominican Republic, it tells you something about the worth and credibility of the Dominican Republic degree.

In summary, by attending one of top tier universities in the Dominican Republic (which is not too hard on the wallet) prospective graduates can benefit from the following: a decent education that will not put themselves or parents in the poor house, the chance to live and study in another country thus broadening them regarding another culture, the opportunity to develop bilingual language skills  and the chance to obtain dual citizenship (and another passport) as well if they choose.  On the later, I think most Americans do not realize how having just a US passport can jeopardize employment prospects abroad.  For example, we have a few clients that were turned down for job applications because the employer did not want US citizens (this was in the petroleum industry).  In other cases, with recent pressures from the US tax collection agency to have foreign companies with US citizens as employees (who were living and working in another country, outside of the US stated more plainly) pay the employer FICA tax payments, many foreign companies abroad will NOT hire US citizens for this reason alone.  So, having another citizenship and passport can be a future work related advantage as well.