A common goal for many of our clients is funding all or part of their children’s or grandchildren’s higher education. Each client situation is unique in terms of the type of college (public or private), how much college (undergraduate and/or graduate degree), how many years they expect this higher education to take to complete, their view on the kids picking up part of the tab or taking on debt — and the list goes on.
Still our clients seem to have two things in common. They value the importance of higher education and believe it will be delivered the same way it has for centuries: on a campus in a classroom with a professor.
And while that still may be typical today, there is no denying that the fundamental economic equation for higher education has changed. As a result, some powerful forces are impacting the education industry and creating a need for clients (and their advisers) to rethink their vision and approach for funding the next generation’s higher education.
Let’s be clear before we move on that there are many personal, social and financial benefits of getting a college degree; we believe everyone should have access to and be encouraged to pursue higher education.
The basic benefit of getting a higher education has not changed: You will earn more money, have more opportunities for a meaningful career and enjoy a healthier life with a college degree than without one. However, the economic equation has changed:
Costs are higher: According to the Bureau of Labor Statistics, the cost of a college degree has increased six times the rate of inflation since 1983. The relative cost also has increased, from 23 percent to 38 percent of the median annual income. As a result:
Student (or family) debt has increased: Debt per student has doubled over the last 15 years and two-thirds of college graduates now take out loans. The average debt load for the class of 2012 was $29,400, according to a report by the Institute for College Access & Success’ Project on Student Debt.
Value (in dollars) of college degrees has shrunk: While there is controversy over how much, if any, average college graduate wages have increased after inflation over the last several decades, the general trend is clear: a bachelor’s degree does not provide the income security it once did. As an example, over the last decade, 19 percent of male college graduates and 16 percent of female graduates have faced declining earnings and a lot more debt – the combination of which severally limits their options.
Graduate degrees: The reaction for many who can’t land jobs after college has been to pursue graduate degrees. But this, of course, also increases the costs and potential for debt.
The combination of the changing economics, the reduction of public funding for colleges and universities, the fact that many technical jobs go unfilled, and that many employers are not satisfied with the quality of recent graduates is creating radical change in higher education. While the impact may be dire for many traditional education institutions (see the contributed column on page 5), it is very optimistic from the point of view of students and employers.
What are some of these revolutionary ideas?
Massive Open Online Courses (MOOCs): They are usually free, credit-less and massive (think hundreds of thousands of students). These differ from traditional online courses, which charge tuition, carry credit and limit enrollment. Among the largest providers of MOOCs are Coursera, edX, Udacity and Udemy. You may be surprised to see that some of the biggest names in certain industries are teaching these MOOCs. For example, Udemy recently announced a new faculty project in which award-winning professors from universities including Dartmouth, University of Virginia and Northwestern are offering courses.
Early indications are that “networks” and “social connections” are being created in an even more powerful way using social media and other forms of electronic communication than traditional on-campus universities. This implies that “who you know” will be just as powerful in the MOOC world as the on-campus world.
Emergence of online-only certified universities: There are hundreds of online-only universities. In fact, U.S. News & World Report publishes an annual ranking of online colleges. It includes everything from accounting and computer science programs to education and human resources.
Online course offerings: The number of college students taking at least one online course nearly doubled to 45 percent between 2008 and 2013. Stanford University, MIT and Harvard are among the top institutions offering courses online. In fall 2011, Stanford offered an online course in Artificial Intelligence to anyone in the world: 160,000 students enrolled and 23,000 passed the course. To put these numbers in context, Stanford admits about 2,000 students a year. It offered the same A.I. class at the same time to on-campus students: 200 students signed up for the on-campus class, but attendance dwindled to only 30 as students elected to complete the class online.
Exciting new curriculum and approaches to teaching: Institutions like The College of Wooster, a private liberal arts college in Ohio, are delivering campus-based education in new and creative ways. At Wooster, all curriculum is delivered in project-based format and every undergraduate student works one-on-one with a faculty member to conceive, plan and complete a significant piece of original research, scholarship or creative expression. This is a far cry from the massive study hall lectures many of us experienced during our college days.
No college at all: While an extreme view, there are some entrepreneurs who believe many students should simply say “no” to college. The most famous is Paypal co-founder Peter Thiel through the Thiel Fellowship.
The fellowship brings together some of the world’s most creative and motivated young people, and helps them bring their most ambitious ideas and projects to life. Thiel Fellows are given a no-strings-attached grant of $100,000 to skip college and focus on their work, their research and their self-education. They are mentored by a network of visionary thinkers, investors, scientists and entrepreneurs, who provide guidance and business connections that can’t be replicated in any classroom.
While these ideas may generate headlines and might prove to be the right path for some, there’s still a vast majority of people who will be better served by some form of traditional higher education.
What does all this mean for our clients? For many it means setting aside more of their current assets and income for traditional undergraduate and graduate degree programs.
For others it means thinking differently and being more flexible in how you fund your children’s education.
But for all of us with school-age kids, it is a call to broaden our thinking about the different paths to our end goal of having independent, productive and well-prepared young adults who pursue their dreams and contribute to a better world.