Tuition Intuitions

I was talking to a friend recently, and commending him on his forthcoming bump in take-home pay, though neither his compensation nor tax bracket had moved an iota.

Turns out he’s got a daughter who has just graduated from college and—wonders of wonders, she has a job lined up in her field of study. That’s no mean feat in this world, and while the end of the worst of the pandemic now seems in sight, the past couple of years have been… rough.

Thankfully, my “kids” have now all cleared those thresholds—and did so without racking up the extraordinary amounts of debt that so many accumulate these days as part of their college “experience.” Yes, we provided some assistance, and no, many parents can’t (or won’t). But my kids also made their choices based on financial realities—realities that we, as parents, laid out for them (and no, many parents can’t—or won’t).

Our discussions were frank—but we tried to be reasonable about it. We had three children to get through college, after all—and all over a period of about eight years. And yes, that means we had one really stressful year where there were tuition payments due for all three. 

Our conversation(s) focused on how much we could afford to put toward their education, and then left it to them to figure out how the rest would be funded—via scholarships, their own work and personal savings, and, if necessary, debt. We took pains to outline the cost of the latter, but fortunately my kids weren’t sucked in by the allure of what (too) often sounds like “easy” money (despite the persistent entreaties of one particular high school guidance counselor who, if I could bring up on charges for her financially irresponsible advocacy, I would).   

‘Moving’ Targets

Looking back on that process, I’m struck by a couple of things: the sheer, breathtaking expense of a college education these days, the complexity of the college aid process (not that going through it provided any financial benefit to us), and the “suddenness” with which it all comes due.

First off, you don’t really know how much it’s all going to cost—right up till the day you write that check—the final check. There’s the whole private-versus-public decision (the costs of the latter will be heavily influenced by your current state of residence), and even that decision can be driven by the field of study your graduate chooses to undertake. Each school has different policies (and costs) about things like meal plans, student vehicles, and even how the dorms are furnished (or not).

But perhaps the worst of the variables is the sheer annual increases in tuition[1] and expenses. I remember all too well that the tuition bill for the senior year of one of my kids was roughly 20% higher than the one from her first year. Talk about your moving targets—and that in a period of essentially no inflation! 

With regard to my kids and their college funding—well, we learned as we went along. Our sacrifices (eventually) paid off, as did their hard work, in terms of AP classes in high school, key scholarships, (and the grades that made both a reality). All three graduated on time (one even “early”). Ultimately, I think we did the right things the right way, certainly the best we could at the time—but in hindsight perhaps not soon enough to fully compensate for the targets that continued to move higher even after college began.[2]

While the comparisons are imperfect, there are some striking similarities between preparing for that big investment in college—and that of retirement. There’s the uncertainty of the ultimate amount, the unknown impact of inflation and/or higher prices along the way (including once you are actually in retirement) and, of course, the market’s “contribution.” College even has a “target date” of sorts—one that can, at least in theory, like retirement, be postponed, but one whose postponement certainly isn’t optimal. 

Many retirement savers—including this one—may well find themselves in the same boat one day. Having done the right things the right way(s) for a long time, they could nonetheless one day find themselves coming up short due to any number of circumstances beyond their immediate control—and some choices as to when, where and how—that ultimately aren’t... choices.

Ask any parent; time has a way of slipping away from us, and tomorrow is always closer than it seems.

Footnotes

[1] It bears noting—particularly with May 29 being designated as National 529 Day (5/29, get it?)—that we did take advantage of those programs as a means of setting aside money for our children’s education, though my wife had the foresight to begin setting money aside via payroll deduction in EE Savings Bonds early on, and before 529s were an option. But, as things played out, the bulk of those tuition bills came due during the financial crisis of 2007-2009—and perhaps as with many others, those tuition payments required sacrifices in other areas. 

[2] Yes, I know there are college pre-payment programs, but the requisite level of “certainty” and timing never applied in our case(s)