College Finances and the ETS: Higher Ed is a Cash Cow, with the Student Being the Cow

I haven't written about higher ed issues (costs, value, etc) in part because my children have graduated (debt free, thank heavens) and because the issue is still too depressing. The kinds of issues I was struggling with years ago (is it "worth it" to go for a more prestigious college? how can one save if college costs rise at twice the rate of inflation? do schools offer "merit aid" and then nullify it with tuition increases in subsequent years, and so on). are--alas--with us still. Indeed, they are perhaps exacerbated by the fact that the job market is still difficult for recent graduates.

My clever title is borrowed from a piece I recently read in a new-to-me publication. The costs, the growth of the administrative class, the growth of the non-tenured instructor/part-timer class, yeah, I've seen it all. I used to tell my children that I felt that higher ed involved "trickle-up economics," with the borrowing/paying student enriching all those who stood to profit. The article in the link puts it better: higher education is a cash cow and the student is the cow.

Among the beneficiaries: the Testing Industries, you know, GRE, SAT, GMAT, MCAT, LSAT, and all others. Miss Em recently took the GREs and I was stunned to learn that the test cost over $160. Thankfully, she does not plan to take it again, having done well enough the first time.

I had this in mind when I received an email from Educational Testing Service, which puts out the tests. ETS wanted to know what works little old me taught in a survey course. I could contribute to the public weal (and to the AP Exams) by taking a survey. AND--as a reward--I could request a copy of the results.

You have got to be kidding, Mr and Ms ETS. My late father was in the survey biz and I remember that professionals who took surveys were compensated. So I shot back an email--which no doubt was not read--saying that if the ETS made money on the tests (it does) then the ETS should compensate with SOMETHING. I got another email a few days later, to which I made the same useless reply.

Take this out of your library!

Helping Adult Children Buy Houses: A Little Disclosure

There are so many issues involved, some of which were brought up in the comments to my last post. One has to think of one's own finances, especially retirement. One has to worry about creating dependency: The Millionaire Next Door authors talk about how Economic Outpatient Care weakens adult children and leads to less productivity. And: what about the other kid?

Well, who knows about retirement. Will we have enough? I have no idea. But my frugal chops are well-developed.

As for dependency: so far Frugal Son seems quite independent in his actions, especially considering how low his income is.

As for the other kid: both kids have similar profiles, for which see below.

The reason I am thinking about this is that--after almost 5 years of severe despondency and throwing my 403b statements in a box unopened, I took a peek recently and things seem OK, at least till the next bubble. When I say I, I mean we, by the way. I just do most of the planning, while Mr FS does the gardening, painting, and home and car maintenance. Since we are both frugal by nature and nurture, and because we fantasized about sending the two children to PRIVATE LIBERAL ARTS COLLEGES, we saved and saved, even as the cost of college soared at double the rate of inflation. We even started a 529 account, in which we amassed room and board expenses for four years, because we knew that if our children chose an in-state public institution, tuition would be free via the TOPS program.

As it happened, the dear children weren't as enamored of the private colleges as we were (perhaps there is a lesson there). They received some merit aid at private colleges. Each child also received room and board scholarships on top of tuition at public colleges. For that, we can all thank the test-taking gods or the fact that the children had genetic material from two families with good test takers. (Mr FS told me long ago that his older brother had perfect SATS. I have not independently verified this claim.) They each chose a public institution. Each is happy with that choice.

So, if you have been reading with any attention, you may have figured out that the 4 years of room and board fees remain untouched. Mr FS said "Why not let the kids share in the consequences of their choices?" I say, "No one would question our having spent this money on room and board or a car when they were in college, etc etc."

My musings will continue...

And, if you haven't read this, you should. It was a life changer for me.

Another Try: College Choices and a True Confession

Hmmmmm. The responses to my last post suggest that I was less clear than I hoped. It has been a difficult few months fo me, it is true. No wonder I can't write.

I will probably be unclear AGAIN. Nevertheless, another try.

I was struck by the fact that Sarah's parents had shelled out $20,000 a year for 4 years and that Sarah faces $20,000 in student loans, which her parents are committed to repay. I wondered if--looking ahead from that place almost four years ago--the parents regret the college choice. After all, Sarah is at a medium-level private school and majored in Psychology. So prestige-factor (crucial if one aspires to an academic career) and major (Psych does not necessarily lead to a lucrative career or anything in particular) are lacking.

I further wondered if parents should look ahead to the TOTAL cost of 4 years and figure out how their financial commitment could best be deployed. I did not mean to suggest that Junior be offered a car if he went to a lower cost school. UGH. I knew parents who did that. Bad idea, in my opinion.

I did wonder if parents should think about what they could give their kids with the total cost. Sarah's $100,000 could buy:

1. A BA from a mid-level private college with regional reputation.
2. A BA from a state school, with enough left over to buy a car (AFTER GRADUATION) and a hunk of a house.

I don't think people think like that. Should they?

The reason I am wondering is this. I put away some money in a 529 plan. My children are super test takers and ended up with totally paid degrees from state institutions. The 529 money languishes. It can be used for grad school and that may be where it will go. I can also take the money out, paying a small penalty. The money belongs to ME and Mr. FS.

Yet part of me--let's be honest, most of me--feels that I would like to share the leftovers with my children, both of whom did very well in college and have many options before them. While not $100,000 (don't I wish!), the money could ease their passage into independence. Kind of like a dowry in the olden days.

Do I make any sense this time? What would you do with the 529 money?

Should College Students Reap the Benefits of their Choice

Mr FS and I attended musical event last night. At the break, we talked to an acquaintance. Our chat followed a familiar course.

Acquaintance: How is Miss Em?
Me: Fine. How's Sarah?

There follows a 10 minute monologue detailing Sarah's many accomplishments. Poor Miss Em! The inquiry is perfunctory really: the acquaintance is only interested in blabbing about her daughter.

Las night the conversation took an unexpected turn. Instead of the expected bragfest, Mom said "I can't wait till Sarah graduates. I told her: that's it!" After some questions, I learned that Sarah--who attends a mid-range private college--got a lot of grants ("the tuition is over $40,000"). Still, Sarah faces $20,000 in debt and Mom and Dad pledged to pay it off.

I said, "$20,000 isn't all that bad for 4 years in a private college."

Mom said, "That doesn't count the $1800."
Me, "A year?"
Mom, "No, a MONTH."

I love math, as long as it's low level, so I quickly computed that we are talking about around $100,000 in after-tax income. Mom is a paralegal and I'm not sure what Dad does--something with maps.

Then I started thinking. If Sarah had elected to go to a state school, she would have received the Louisiana tuition scholarship (TOPS). Mom and Dad would have been on the hook for about $10,000/year for room, board, and books.

That totals $40,000. What about the other $60,000? Well, that could buy Sarah a car post graduation, leaving around $40,000 for a house down payment.

While I've heard some parents offer a wad of cash in lieu of a wedding to the happy couple, I've never heard of anyone offering to let the student reap all or even part of the financial benefit of choosing a lower cost school.

What do you think of this modest proposal?

We are all College Cooks

What is a College Cook? Someone with limited time, space, know how, and facilities. In truth, I have only one genuine College Cook in my immediate circle: Miss Em, who is heading into her last year of dorm life.

Frugal Son just moved to an apartment in New Orleans: he packed his beloved rice cooker. Mr C--an affiliate of our family, though not officially a member--just moved into his post-grad apartment and received his first rice cooker (courtesy of me and Goodwill) and a copy of the little guide Frugal Son and I put together:

This is not just a collection of easy recipes: we recommend 20 easy to buy and store products; we then offer 2 weeks of recipes that can be put together quickly, with little mess, in rice cooker or microwave, two college approved appliances. Oh, and did I mention that you or your cook will save a ton of money--not to mention time?

We priced it as low as Amazon can go for our program: $2.99. For the same price, you can order it from us and receive an ebook.

Even though I like to cook, I am as lazy as the next person (lazier, probably). I cook with my rice cooker most nights.

Check out our college Cooking blog for occasional posts and suggestions too.

Any other suggestions for the College Cook--even if the College Cook is long out of college?

Advanced Degrees Worth the Debt

Something useful from Kiplingers: 5 Advanced Degrees Worth the Debt.

There are no big surprises in the list. What is especially useful is that you get information on average indebtedness, average salaries, and--most useful--AVERAGE MONTHLY REPAYMENTS.

You also see what a relative bargain in-state medical and law degrees prove to be.

College students should take a look also. Then they should look at this.

Car-Free College?

Donna Freedman wrote a piece on going car-free in Seattle, saving herself $7000-$10,000 per year. Sadly, much of these United States is not set up for such a choice, given the vast distances to be traversed along with a dearth of public transport.

How about a more modest proposal? How about car-free in college? As Frugal Son prepares (fingers crossed) to graduate, I have been thinking about his cosmic or karmic savings account. Not only did he choose a state school with a big scholarship, but he chose to do without a car. Of course, he is making this choice mostly for ecological reasons.

Last week, we had a rendezvous at a crawfish boil. He came with a friend who had a car. They were enticed by the free crawfish invite. The rendezvous involved an exchange: we brought Frugal Son some clean towels; he gave us about 75% of the contents of his dorm room.

Even though his friend has a pretty efficient car, Frugal Son still paid $24.00 for the gas. Wow! When Frugal Son NEEDS a car (seldom), he pays for the gas plus some lagniappe. He also does a lot of cooking for people. Miss Em has a similar arrangement. She cuts a lot of hair for people. They give her rides. Of course, she pays for gas too.

One student of our acquaintance has a car at LSU. She never drives it. Why? She's afraid of losing her parking space.

Anyway, Frugal Son has at least a $20,000 deposit in his karmic and ecological savings account. Miss Em has half that.

Oh, speaking of modest proposal: if you are a college graduate, I hope you've had a chance to read this masterpiece. It's available in a THRIFT edition: perfect.