Like many young parents, when my wife and I found out we were having a child one of the (many) things that came to mind was planning for college. Once we shared the news with friends and family - many joked that we better open the college savings account now! Panic immediately set in.
When we stopped for a moment and really thought about it - college planning is essentially trying to hit an unknown, moving target. The challenge is made even more difficult for a newborn, given the target is 18 years in the future. One thing we know for certain is in order to build enough resources to fund the goal we need to start as early as possible so we should start planning now.
All of this got me thinking - what is college even going to look like for our baby in 2035?
Access to Learning
In 2012, I began studying for my MBA. At orientation, I was handed a brand new iPad loaded with class room/learning applications and required reading for several courses. There was even a session during the orientation on how the iPad was going to be used as a tool throughout our studies.
To put this in perspective, when I graduated the 8th grade in 2002, my parents gave me my first cell phone which only made phone calls. It would not be until after my freshman year of college that the smartphone came into the picture in June of 2007. The first iPad was introduced 3 years later in 2010, the year I graduated college and started working.
In almost a decade I went from having a simple clunky cell phone to studying on a tablet that contained almost all of my text books. Looking back, it is fascinating how quickly technology has changed the way we work, the way we learn, and the way we interact.
If such rapid change is possible over 10 years - what could be possible over the next 18?
In a recent article in Time Higher Education, a weekly magazine based in the UK that reports on issues related to higher education, academics were asked how they imagine higher education will look in 2030.
Stephen Joel Trachtenberg, University Professor of Public Service and President Emeritus of George Washington University in Washington DC, had an interesting take:
"Devices will replace faculty by 2030. There will be reliable e-learning options from numerous providers on multiple platforms, and students will select the ones most compatible with their preferred learning style. Earning "a degree" will lose importance as the range of credentials widens. Certificates from schools, workplaces and industry, alongside something akin to the merit badges earned by Scouts, will gain in respectability - especially once a new system of accreditation for them is developed."
Like many things, commoditization of a good or service puts downward pressure on price. It becomes less about the prestige of going to a certain college and more about getting the highest return on investment, or "ROI". Whether or not any of this will come to fruition is a huge question mark, but with technology anything is possible.
Assuming no drastic changes to higher education - figuring out the costs in 2035 will be the most important piece of the planning process. The cost of college, in its current form, can be estimated using today's cost and factoring in inflation. The key factor here is what inflation number to use. Historically, the cost of college has gone up on average about 6.0% every year.
As you can see in the chart below, using data obtained from the Bureau of Labor Statistics, in the past several years the rising cost of college expenses has dropped dramatically. This is a very good thing for young parents out there - especially if the cost of college rises at almost half of what it had risen in the past.
Assuming the cost of college rises on average 3% over the next several years what will the costs be in 2035?
Based on these estimates I will certainly be starting a college savings account for our baby when she is born. However, like all other plans it will not be something I set and forget. Savings goals should be reviewed at least every year as circumstances change over time.
If you would like to discuss your college plan please contact the team at Upswing!