May 6, 2024 – In today's Lifetime Planning segment, Financial Sense Newshour explores the rising costs of college education when comparing public vs private schools, in-state vs out-of-state, junior college, and trade school. Jim Puplava and Cris Sheridan also discuss the increasing attractiveness of trade schools for specialized skills in today's world and the 2+2 pathway combining junior college and state college.
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Transcript:
Cris Sheridan:
When it comes to inflation, one area that continues to go up in price each year is the cost of college. We recently discussed this and some of the most important points when it comes to college savings and planning with expert Mark Kantrowitz on a recent lifetime planning segment (see Planning for the High Cost of College: Mark Kantrowitz on 529 Plans, Scholarships, and Financial Aid). And data still supports the idea that the benefits of a college degree in terms of getting a higher paying job outweigh the cost. When it comes to tuition and student debt, however, this trade off between costs and benefits is no longer as clear as it was in the past. And as we discussed in our last show, it's in the midst of some pretty significant disruption.
Cris Sheridan:
Today we're going to discuss the various costs, the amount of inflation that we're seeing, some of the alternatives, and what we like best when we look at the data. So, Jim, start us off. Let's talk about what are the costs that we're looking at today for average college tuition.
Jim Puplava:
Let's talk about what's happened over the last two or three decades. Chris, the cost has been going up less in this decade, it's going up about four or 5% a year. The highest decade for college cost was, believe it or not, the 1980s when the average cost of tuition was going up almost ten, eight to 10% a year. So that's come down. It's about four or 5%.
Jim Puplava:
But here's the issue that we need to talk about when we're talking about cost. Now, if you're starting a family and maybe just have one kid, that's one thing that you can do. But you know, you have a family of two or three kids, this can get quite expensive. And what I want to do is share with you some cost. We're going to take a look at Ivy League schools, state colleges that are public, out of state colleges that are public, a junior college and trade school.
Jim Puplava:
Now, these are averages, but they come pretty close. An Ivy League education is averaging a little over $62,000 a year. You add in room and board, and that can be anywhere from 18 to 35. So you hear these figures in the media, especially with all the stuff going on campuses today, that it may cost you $90,000 a year to go to an Ivy League school if you're going to Harvard, Columbia, Brown, some of the big Ivy League schools. So it's quite expensive.
Jim Puplava:
Now, let's look at public schools. In state public schools are averaging about 11,000, and the room and board can be eight to 15,000. So still a substantial investment. So let's talk about a four year degree averaging about $20,000 a year. So four year degree, 80,000 versus $90,000 a year, or 360,000 for an Ivy league.
Jim Puplava:
Now, let's look at what it costs to go to a public school out of state. It gets more expensive. The average out of state public education goes to about 29,000. So almost a threefold jump there. An out of state living room and board, 15 to 25.
Jim Puplava:
So you could easily get up to maybe $40 to $50,000 a year. So that's going to cost you for four year degree, probably about 200,000. A junior college can cost you $3,800 a year, and room and board. Most junior colleges don't have dorms on campus, so you're probably going to have to rent an apartment off college. It's going to cost you about five to 10,000.
Jim Puplava:
And then a trade school can cost you anywhere for from 17 to 30,000 to graduate with some trade school. So trade school costs depend on the length of the program, whether you're going private versus public, whether you're living at home or off campus or on campus. So there's a lot of cost factors that go in there. You're not just looking at tuition. It's, hey, what does it cost to live in a dorm or get yourself an apartment?
Jim Puplava:
Food, books, all those kinds of things get added up into it. Yeah.
Cris Sheridan:
And again, when it comes to financing these costs and some of the various ways you can do so we discussed all of that with Mark Kantowitz just a couple of weeks back. That was a very informative interview. If you want to learn more about 529 plans, some gifting strategies. So we talk about financing these costs from a number of different angles. So there's things that you can do, including super funding, which was something he also mentioned, which is very advantageous as well.
Cris Sheridan:
So lots of different strategies from a college planning standpoint. And Jim, when you're talking about averages, I think it's important, you know, when you're, you're talking about the average cost of college, just like inflation, uh, personal experiences will vary widely depending on the college that you're going to, not to mention the huge difference that you'll see depending on the major that you choose. And that's where that trade off is really starting to break down, let's say, when it comes to the benefits of getting a college degree. So that's why it's very important that we're having this conversation. People are now assessing these trade offs much more critically today than they have in the past.
Cris Sheridan:
So now let's talk about some of the various trade offs and alternatives that prospective college students and parents want. Need to decide between.
Jim Puplava:
Yeah, we're going to look at basically four alternatives. Number one, a public school versus a private in state versus out of state, a junior college, which is what I call two plus two, which is my favorite. It's not only what I used to get my college education, but I used it with my sons, and we've used it with some employees who were basically doing internships with us and then eventually became full time employees. And then also a new thing that you're going to see a lot more of, which are trade schools. So let's begin with the first alternative, a private education.
Jim Puplava:
Well, number one, they are prohibitively expensive. The average is 62,000. By the time you add books, room and board, you're probably looking at 90,000 a year. So about $360,000 to go to Harvard, Stanford, Brown, Princeton, Yale, all the big Ivy League schools that you're used to. Also, just take a look at the evening news.
Jim Puplava:
You've seen a lot of radicalization with the administration and the professors. In fact, the Wall Street Journal just recently did an article. Given all these events that we're seeing around the country, a lot of corporations are avoiding hiring from these Ivy League schools. That may be an issue if your kid is going to Ivy League school, and that school just happens to be on the evening news every night. Also, many of the curriculums that you're seeing at these Ivy League schools are basically irrelevant to getting a job where I think private comes into being.
Jim Puplava:
If you are going into a specialty like finance, going to the University of Pennsylvania or Wharton, going into engineering or going into medical, you're going to be a doctor. And also, as I mentioned, you know, you got to look at, it's not just expensive in terms of tuition, but these dorms to live on campus. If you're in a fraternity or something like that, you have to think about that. The tuition may only be 60, $70,000 a year, but throw in room and board. Now, if you're going to be a doctor, you know, there is some prestige coming out of Harvard medical school or something like that.
Jim Puplava:
So you have to look at, you know, how bright your kid and the specialty they're going in. I would say if you're going after a specialty where there's a high demand computer technology, coding, engineering, finance, medical, maybe there might be some advantage there, especially if you have a bright kid. So it can be quite expensive. So let's look at some of these alternatives and look at a state public college. First of all, instead of 62,000, they're about 11,000.
Jim Puplava:
Way less expensive, more practical, especially if you're a family and you have two to four kids or even more, you know, that could be quite expensive. So maybe a public college in state. And there's many top state colleges. You know, I look at California, I look at Alabama and some of these other states. I have.
Jim Puplava:
My brother's son is a 4.6 grade average, all star athlete. He chose to go to a out of state public school because, simply because of the education and the specialty in, in finance. And you, one thing that can work with a state public school is what I call my two plus two program. That's where you go two years at a junior college. You graduate from a junior college and then transfer to a state college.
Jim Puplava:
I mean, the junior college averages about $3,800 a year. So let's say you pay 8000 to get your first two year degree at a junior college, then switch over to a state where you're paying 11,000 and definitely a lot cheaper. Now, if you want to go to an out of state public college, which you may, because there are a lot of public colleges out of state that have a specialty. It could be in engineering, it could be in finance, it could be in medical. So if you're pursuing or even computer programming and coding or AI or something like that, it may be to your advantage to go out of state for the specialty of that public college.
Jim Puplava:
Now, here's, here's one. One of my favorites is a junior college. And reason this is going to become more and more important. A lot of big corporations now are teaming up with junior colleges to come up with a skilled trade school program. You go two years and you come out and you can learn how to run robotics on a factory floor.
Jim Puplava:
You're seeing big corporations like Simmons, Boeing, and even Walmart is working with junior colleges to develop technicians that can do all the maintenance work on all the equipment that's going in these stores, whether they're solar powered stores, whether it's being powered by solar panels or some other form of clean energy. And there's all the things that go into a stored electricity, all the handyman stuff that has to be done, and they're teaming up with junior colleges. The thing I like about junior colleges and why corporations are enjoying and teaming up, a skilled workforce, reduced training course costs, diversity, inclusion, and industry specific training. You can get funding and equipment. As I mentioned, the big corporations you're seeing more and more Boeing, Simmons, Walmart, GE is thinking about doing this.
Jim Puplava:
A lot of the corporations, and especially as we start bringing factories back to the US, as we're seeing in chip factories. You've got Taiwan semiconductor in Phoenix. You've got Apple building a factory there. You have intel building a factory. You've got intel building a factory in Ohio.
Jim Puplava:
Where are all these skilled workers going to come from? Where you want specific engineering and computer coding skills? Well, a two year degree with a specialty where you can come out and get a nice high paying job working at a major corporation on their factories. Because if we're bringing manufacturing back, we're going to need the engineering and the computer skills to work these factories. Because today, I mean, take a look at the Amazon warehouse.
Jim Puplava:
They're very highly automated. Who's going to learn how to run those robots in the factory floor? It's not going to be Larry, Mo and Curly putting on the bumper in front of a car. This could be a robot. So, you know, that takes a lot of specialty skills.
Jim Puplava:
And you're seeing this more and more.
Cris Sheridan:
So, Jim, as you mentioned earlier, you know, there's really kind of four different alternatives that we can see that parents are going to have to deal with and kids will have to decide on. That's public versus private, in state versus out of state, junior college, two plus two, and a trade school. Those are the four basic breakdowns that we've provided here. And I know, you know, when you're discussing with parents and with others about college planning, as part of our financial planning process that we provide here at financial cents wealth management, you have advocated for this two plus two program that you mentioned here. Can you tell us a little bit about that and why this is your favorite route?
Jim Puplava:
Well, two plus two is two years at a junior college and two years at a state college, preferably in the town that you live in, it's the way I worked and got my way through college. I came from a family of ten kids. There's no way my dad was a cabinet maker. There was no way he was going to put ten kids through school. So I had to work.
Jim Puplava:
So I went to a junior college. And, Chris, this will really tell you about inflation. I went to Phoenix College in Arizona. And what do you think I paid for tuition? Full load, 15 hours a semester, $48.
Jim Puplava:
So I got my aa degree, two years at a junior college, not counting books. It was $180. And then I went on to Arizona State, where the tuition was about 300. So the two plus two program. The way this works is you go two years junior, goes two years to the local junior college, and then he goes two years to, let's say, a state university in town.
Jim Puplava:
Now, the reason this works is junior stays at home and has a job. He's working part time. And so instead of taking on debt, he's actually earning money. And we have several interns in our office, and they're going through this two plus two program. We had one intern, went to a junior college, and one major in financial planning, went on to the San Diego State University, got two years there, and graduated.
Jim Puplava:
And then when he got out, he had a full time job with us. So when he graduated from college, not only did he not have any debt, he actually had built up a little bit of a net worth in a 401K program. So this way, you know, there when. When you go from a junior college to a state college, like when I went to Phoenix College, I graduated from Arizona State. My degree said Arizona State.
Jim Puplava:
It didn't say, oh, half Arizona State. So it doesn't really make a difference. And the important thing is, when you live at home, you know, you don't have all those costs. I mean, the average cost here of an apartment in San Diego is $2,900. So, you know, you.
Jim Puplava:
You have $3,800 a year for tuition, and then you add, you know, $2,900 a month for school times, let's say, nine months for the semester. You're talking about 27,000. So if you live at home, it's a lot less expensive. And also, it really helps to work part time, and especially if you can get a part time job in the kind of field that you wanted to go into. I had one son that had a part time job working for a drug company because he majored in biochemistry.
Jim Puplava:
And so you develop work skills, and you look more attractive to an employer when you get out of college. It's just like, hey, I just went to college. Had a good time partying. No, I worked at college, and I worked, and also, specifically, I worked in the field I wanted to get a job in. It makes you much more attractive, and you could probably even get a better starting salary coming out of college, especially if you've worked as an intern, which is what we have right now.
Jim Puplava:
We take interns that are majoring in financial planning or finance, because I like that they're going to school, and at the same time, they're working for us. They're learning the trade, learning how to become financial advisors. And I did this with my sons. I had one son who was the valedictorian of his high school class. Now, he could have got into Stanford, he could have got into Harvard.
Jim Puplava:
But when I basically talked to him what he wanted to do, and he said, dad, I have no idea what I wanted to do. And it wasn't until about his sophomore year at a junior college, he said, I want to come into the field, work in the family business. And, you know, Chris, you know, in his junior, senior year, he was majoring in finance, and he was, he was an apprentice on our trade desk, so he was getting real time training in the field that he was running into. So I used two plus two with all of my kids. You know, I could afford to send them to a good school.
Jim Puplava:
But you know what? I had one son who thought he wanted to be, you know, work into the drug industry. He's actually in the business now, but he basically didn't really find that out until after he graduated. Looked at the job market, got a job at a major drug company, and goes, I really don't enjoy this. Pay isn't that good.
Jim Puplava:
I'm not going to start a family with this and change professions. We had him take some tests, and he was very proficient in either law or finance, and he chose finance. And like I said, it was the very same thing that I did because, you know, my parents had ten kids. There's no way they were going to send ten kids to college. So I had to work.
Jim Puplava:
And I started out with the junior college, and thank goodness I did, because dollar 48 a semester with books was something I could afford.
Cris Sheridan:
Yeah, you know, it's an interesting story, too. I have a similar experience where, you know, I ended up going to a four year university right after high school and had an engineering major. That's what I started out at, decided that I wanted to do something different. So I ended up transferring out, then went to a junior college and got all of my general education courses out of the way at the junior college at a much, much cheaper rate. Got those done, and then ended up transferring back to another university to get my math degree.
Cris Sheridan:
But, you know, I mean, it would have been better off if I'd probably gone to the junior college first, got those general ed courses out of the way, figured out if I wanted to do engineering or math and then transferred, have been a lot easier. But in any case, you know, the junior college was very, very convenient and like you say, cost effective for paying for those general ed courses. And my degree, like you say, it doesn't say anything about the fact that I got part of my courses completed at a junior college, I've got Arnold Schwarzenegger's signature right on there.
Jim Puplava:
So you're legit? Yeah, I'm legit. It's funny, because we deal. I have doctors as clients. I have lawyers as clients, business owners as clients, corporate executives, and even dealing with their kids.
Jim Puplava:
And even though they're making a good income, you know, very, you know, I have some doctors. They've got kids that want to go into the medical field and become a doctor. So, you know, very few kids today with parents, they have a kid that goes, you know, dad, I'm going to be a doctor. Dad, I'm going to be a lawyer, dad, I'm going to be an engineer or something like that, or I'm going to go and finance. Very few kids, when they're getting out of high school, have a definitive idea.
Jim Puplava:
This is what I want to be. And like you, Chris, and like one of my sons, you may have a definitive idea, but then in middle of college, or you change your mind and you go, I mean, I changed my major, uh, when I was in college, uh, coming out of junior college, going to Arizona State, I changed. And so a lot of kids don't have a firm idea. This is what I want to do with my life. And what do they say?
Jim Puplava:
You may change professions two or three times in your working career today. So that's why I like the two plus two. And especially for families, I don't care if you're Larry, lots of bucks, you know, what's wrong with going to a junior college for two years? Getting your, you know, 101, 202 courses out of the way. And then as you take those general courses, you might get a clear idea in terms of what you want to be.
Jim Puplava:
And it's a lot, lot cheaper. I mean, $3,800 for tuition for a junior college versus 1130 or 60,000 living at home, versus spending anywhere from ten to $30,000 a year for room and board, especially if you're going to a place like Columbia or Harvard, some of those eastern schools where the cost of living is extremely high, especially in the big, crowded cities, you know, that could be quite expensive. And if you're a parent with two or three kids, just imagine what this is going to cost. So once again, two plus two. To me, it's one of the best ways.
Jim Puplava:
And especially, like, we've seen the development of the interns that we have that we're bringing into the business, where they're actually learning day to day what they're going to end up doing in their career and then applying that from what they're learning at school. I think it's the best of all worlds. Now, I want to talk about something else that I think you're going to see a bigger demand for, and that is trade schools. And I remember a story. I collect art, and there was a art store close by to where we live.
Jim Puplava:
And I was talking to the owner of the art store. Her husband ran these. I forget what you call these big machines they do to make roads and clear roads. You know, the guy was making over $90,000 a year. Wife wanted junior to go to college.
Jim Puplava:
Dad wanted him to apprentice. He would start out like 25, $30 an hour as an apprentice, and eventually he'd be making six figures. And we need trade people. I just think, Chris, you know, running a house in the last year, we had a sinkhole with the rain, so there was a brick layer. We had to have part of the plumbing done in the house because of faulty plumbing that had to be replaced.
Jim Puplava:
So there was a plumber, and then I put in a charging station for EV's. So there was electrician. And then in my wellness center, I had to have 220 amp plugins for special machines I'm using. So there was electrician. And believe me, that is not cheap.
Jim Puplava:
Today you got plumbers that can make six figures, electricians. We need these kind of trades people. Where are they going to come from? You still need that kind of stuff. And I think that's a little bit more secure because one of the things that AI is going to do, it's a disruptive.
Jim Puplava:
And the jobs it's going to replace are white collar jobs. That's why I think these trade schools and a lot of companies are now gearing up with these junior colleges because once again, we're bringing, because of supply chain issues, cold war with China, we are bringing factories back to the US. And you are going to need a special skill set to work at a factory today or even work at a Walmart. If you want to work up into the higher levels, like the guy that runs the maintenance on the store, you're going to need a higher skill set. And that's what these companies are finding out.
Jim Puplava:
Two year program at a junior college just works perfectly.
Cris Sheridan:
Yeah, yeah. And like we were talking about in the very beginning, I mean, the trade off between the costs and the benefits of college are increasingly starting to favor more and more. For, as you pointed out, this two plus two type of program where you can cut down those costs but still benefit from going to a university. And as you just pointed out, when it comes to technical or trade schools, they're seeing demand come in as college students or as prospective college students and parents increasingly look at the value proposition and say, you know what? This four year Ivy League university, for example, or perhaps some of the other universities that we see in the news, I'm not sure if that's where I want to send my kid.
Cris Sheridan:
I'm also not sure about the future. Like you said, what sort of impact AI is going to have on displacing some of these white collar jobs. Hey, these are professions that people need. And the data even bears out that going to a trade school, even though it's cheaper, much, much cheaper, and you can still have federal assistance, federal funding for these as well, if they're accredited, which is helpful, you know, even though they cost way less money, you still can have a really good, high paying profession. It doesn't necessarily lead to having a lower paying job.
Jim Puplava:
Yeah, I mean, I just think of the interns that we have employed working for us. You know, they graduated. They not only got a good paying job, but they had already built up a net worth in their 401k programs because not only were they putting some money in the 401k, but we were matching it. So imagine graduating from college with a net worth to start out your working career versus a pile of debt. I think you're better off.
Cris Sheridan:
Yeah. And I think the moral of story here is that obviously we're talking in generalities when it comes to the trade offs and some of the alternatives. But every kid is unique. Every person's situation is unique. So that's part of what we do here at financial sense wealth management when it comes to assessing the individual needs and circumstances of every individual, every family, seeing what would be the best college that they could go to.
Cris Sheridan:
Is the two plus two program the best fit? What are some of the trade schools that are available? So these are just the range of options that people can deal with. And again, if you want to learn more about the financing and the college planning part of it, when it comes to the costs with 529 plans and other things that you can utilize, definitely feel free to click the link that we'll have located in the show notes where we discuss that with college planning expertise. Mark Cantowitz.
Jim Puplava:
In the meantime, until we talk again, we hope you have a pleasant weekend.
