"My friends... my fellow Americans" - any local or national politico presently on the stump...
You can be a populist liberal or a free market baron, the reality is that having a college education does matter when it comes to an individual's employable future and the income they can expect to make on an annual basis. Forget for a moment the Rich Dad Poor Dad garbage that your education doesn't matter. Is the world staying still? Do you live in a static world, or a world changing rapidly?
Education makes you elastic, mailable and better equipped to embrace change. I am 33 years old. Richard Florida (Rise of the Creative Class) has done research that shows the average Gen X'er will have 7 unique careers in their work life. Guess what? I'm on 3 and a half already. Without my education, the events of the last dozen years would have left me with few options, little creativty, and a stake in this year's election that looks more like buying Lotto tickets than living the American Dream.
Stump Speech Rhetoric Number 1: The Economy of Have's and Have Not's
The gap between Rich America and Poor America continues to widen. Democrats and Republicans are presently going nutty on this example. But here are some facts: In 1994, the richest 20% of America received more of the nation's income than the middle 3/5ths combined. We live in a top-heavy world in regards to income. Government can create vehicles to redistribute some of that wealth, but without a wholesale change to our capitalist economy, this is how free-markets work. The top have more than every-one else. Right or wrong: It's a fact.
Stump Speech Rhetoric Number 2: Skill Matters. Education Plus Skill Matters More.
Ask yourself this: do you pay more for a standardized commodity or a customized commodity? Why can Apple hold price on an iPod? Because it makes for such a brilliant customized experience. Other players hold music. iPod makes it your own. Same reason you pay twice the price for a Mocha and not a cup of Decaf. Can we accept this as fact? Okay, let's move to this example: in 1979, the college graduate earned 49% more a year than a worker with a high school diploma. By 1994, the earnings gap had widened to 89%. To further re-butt the "education doesn't matter crowd"... each year of formal schooling after high school adds 5% to 15% to annual earnings for life. These are US Dept. of Labor Stats.
Stump Speech Rhetoric Number 3: Imagine Grecian Columns, Not Safeway Tech.
Community College may work for some, but those are the 5% to 15% annual earnings increments. The four-year bachelors degrees make the massive difference. And they ain't getting cheaper. Today, in-state tuition, books, room and board in Colorado exceeds $10,000 per year for undergrad studies at CU or CSU. Almost no one gets through in 4 years. In 15 years when my twins are 18, it is expected that the same in-state "four-year plan" that costs $40,000 today will cost $103,946. That's based on models found through a number of college planning websites. It's already almost $40,000 a year at my alma mater, Colorado College.
Stump Speech Rhetoric Number 4: You Have 4 Choices (credit The Group, Inc. Fort Collins, CO).
- Pay College Costs out of ordinary income. You can add 25 to 30% a year on top of this for the taxable wages, because remember the government takes their share first. So today, paying $10,000 a year requires earning $13,000 a year. Paying in 2023 at $104,000 for the 4 years, or $26,000 per year requires dedicating $34,000 a year in income to pay for education. Per kid. I'm not too uncommon in that I have three within three years of one another. Simple compound interest says this "opportunity/problem" grows with each child you have.
- Student works to pay part of the costs. This could add years to the timetable reducing it's efficiency, and it increases the probability of drop out. It does inspire a stronger work ethic in the individual however, since nothing is free in life, right? I paid for 25% of my education this way. I also carried over-loaded semesters twice and graduated a semester early. I missed out on study abroad. I missed out on three classes I wanted to take. I didn't get to compliment my hard-core humanities education with as much science or economics as today I wish I had.
- Student loans are an option. Barack Obama had to write bestselling memoirs to pay his student loans two years ago (almost 2 decades after graduating law school in the 80's). A Columbia undergrad and Harvard Law degree tend to be pricey and, um, not free. The majority of students aspiring for a college education begin their college experience in debt and the majority of these debt-burdened individuals have more than half that projected tuition expense saddled to their name within 2 years of graduation.
- Pay college costs out of assets. "I don't have any assets" you might say. Well, here is one you might think of: buy a rental property that will be free and clear when your child hits 18.
The Compel Grant Close: The easiest way to pay for college is to buy a rental property with a 15-year loan when your children are 5 or younger.
Here's the equity in a $200,000 rental property with a 20% downpayment:
Equity Now Equity in 5 years Equity in 10 years Equity in 15 years
*$40,000 $76,140 $127,372 $200,000
**$40,000 $131,396 $253,150 $415,785
*Assumes 0% annual appreciation
**Assumes 5% annual appreciation, the 27 year average for Colorado Springs Metro MLS from 1980 to 2007
You will probably be $200 to $300 a month upside down on this property in year one with tenants paying 80 to 90% of the monthly mortgage expense. At tax time, you will see most of your expenses and out of pocket returned to you in the form of tax credits. Your monthly interest will help offset some of these losses as well.
By the time the home is sold fifteen years from now, it will probably be renting for $1500 to $2000 a month, and since it is paid off with no monthly expense for ownership, will be supplying you with an additional $20,000 +/- in annual income. This income can be used to begin paying down the principle even sooner should your children already be 7 or 8 years old.
My fellow Americans... No government can force you to do this. You just have to decide for yourself if you want your children to go to college or not.