The intellectual equivalent of a ham sandwich.

Stacked Deck

I have a very young kiddo at home and this has led me to do some financial thinking and planning. For full disclosure, I was a fiscal conservative but am leaning more wacko liberal more and more due to the following I am about to explain.

I have a job that pays a good salary, and thankfully have never lived paycheck to paycheck. I am a college graduate and from a family where college was the expectation. Financial planning and forethought has always been a part of my life.

Let’s dive in.

Colorado, where I live, has public universities that would be fine options for a future potentially college bound child. We’ll look at Colorado State University’s (CSU) numbers (source).

Residents of Colorado pay an annual total price of $24,722 to attend Colorado State University Fort Collins on a full time basis. This fee is comprised of $8,716 for tuition,  $11,110 room and board, $1,200 for books and supplies and $2,336 for other fees.
Next up, let’s look at past tuition data in order to make an estimate about future tuition (source).

Year Out of State In State
2011 $23,652.00 $7,952.00
2012 $24,441.00 $8,649.00
2013 $25,166.00 $9,313.00
2014 $26,077.00 $9,897.00
2015 $27,267.00 $10,558.00
2016 $28,346.00 $11,052.00
2017 $29,372.00 $11,790.00
2018 $30,435.00 $12,578.00
2019 $31,537.00 $13,418.00
2020 $32,679.00 $14,314.00
2021 $33,862.00 $15,271.00
2022 $34,654.15 $15,608.22
2023 $35,689.93 $16,318.80
2024 $36,725.71 $17,029.38
2025 $37,761.49 $17,739.96
2026 $38,797.27 $18,450.55
2027 $39,833.05 $19,161.13
2028 $40,868.84 $19,871.71
2029 $41,904.62 $20,582.29
2030 $42,940.40 $21,292.87
2031 $43,976.18 $22,003.45
2032 $45,011.96 $22,714.04
2033 $46,047.75 $23,424.62
2034 $47,083.53 $24,135.20
2035 $48,119.31 $24,845.78
2036 $49,155.09 $25,556.36
2037 $50,190.87 $26,266.95
2038 $51,226.65 $26,977.53
2039 $52,262.44 $27,688.11
2040 $53,298.22 $28,398.69

Given that my son is brand spanking new, we’re looking at a projected TUITION cost of about $25,000 per year. That is currently the cost of one year of school. If the other costs (room and board, books and supplies, other fees) went up equivalently then in 18 years the cost of one year at CSU will go from $25,000 to $50,000. That’s one year of college.

Obvious math for the purposes of showing how painful the numbers are? A typical four year approach to college would cost $200,000. For a public school.

Looking at the above table, from 2011 to 2021 you’ve got a cost that has almost doubled (a 92% hike). What do you think the chances are of any person getting raises such that they make 92% more after 10 years of work? ie you’re hired on at $100,000, and ten years later you make $192,000?

***

Now that we’ve seen what we’re going to be dealing with, let’s talk about how to save up for that.

If you look up “don’t panic college cost” you’ll see a lot of articles talking about how grants and scholarships keep many from actually paying the full cost. That’s good, but you can’t plan on that. And more on that below.

Instead, you take advantage of some programs. Namely a 529 and a DCFSA.

First up, the 529. Every state provides a 529 and there are a ton of options. But it’s a way to put aside money, with tax advantages, that you’ll eventually use on college, vo-tech, books for school, etc (they have specific rules).

The DCFSA is a Dependent Care Flexible Spending Account. This is for when you have a little one. This is a tax advantages way to take money out of your paycheck (before it goes to you) and into this account which you then use to pay for daycare. If I’m already going to pay for daycare why not put money into a DCFSA to save myself a few tax dollars?

But here’s the thing!

In my case, my son won’t be in daycare til April but I am able, due to the fact that I don’t live paycheck to paycheck, to start putting money into the DCFSA right away. In fact, I don’t have a choice (I opted into this program when choosing medical insurance and such).

And again, thanks to a good salary, I am able to start putting money into my son’s college account (the 529) right away. With the investing that money will do, it’ll (hopefully) grow and invest into itself so that the money will grow.

With the fact that my wife and I have options and a good life, we’ll be able to provide stability, extracurricular options as the kiddo grows up, hopefully good schools, and parents who have predictable jobs and hours and we’ll be able to channel that into a good environment for a growing mind. This increases the odds of obtaining grants or scholarships.

With the 529, the DCFSA (to start the kid off right with a good daycare), and a healthy life that will increase the odds of being one of those who is able to secure scholarships or grants our kiddo will hopefully be able to afford college without crippling student loan debt should he choose to go.

***

Feel free to examine this from the perspective of someone who is less fortunate however you see. But a few points I’d like to make.

Would a mom or dad who is living more along the lines of paycheck to paycheck be able to afford the DCFSA? It could present a tougher challenge. Say a child is supposed to start daycare in June, you expect the mom or dad to sacrifice their precious paycheck that many months? And what if their kiddo is going to an unofficial, and therefore not DCFSA allowed, daycare or in home care?

And if they can’t do a DCFSA, what are the odds they’ll be able to do a 529?

And if they’re working jobs that don’t allow flexible hours, how easy will it be to have the kiddo join after school programs which prevent them from being able to take the bus home from school? And without a heavy resume when applying for colleges, the odds of a grant or scholarship for academic or extracurricular reasons decreases.

And if they’re looking at a $50,000 a year cost for college, isn’t it fair to look at that number and feel overwhelmed and less enthusiastic about pushing your child to better him or herself?

***

If you’re thinking, ‘well, it’s the American dream, you just have to work for it.’ Sure. I’m with you. But it’s like having two football teams where one has the latest pads, jerseys, cleats, etc and the other is playing naked. When you beat someone when you’ve got such a head start, it’s hardly worth patting yourself on the back.

Going worst case scenario – we live in a society where college (and housing, and autos) is increasing at a rate much, much faster than salaries are increasing. Aren’t we setting ourselves up to have a diminishing group of higher educated people? That does not benefit society as a whole.

Screenshot_20180107-111108~2

 

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