Friday, July 30, 2004

College Costs: Rhetoric and Reality,

I think sometimes that the financial aid and loans, however laudable in their ability to help people obtain higher education have obscured the rise in the base cost of such an education and what it implies for Americans. At a time when it is becoming conventional wisdom that to earn a decent living one has to have a college degree, and when Alan Greenspan is lecturing Americans about needing more education, we have to ask ourselves is education truly affordable anymore?

Begging that question came some what seemed at first odd comments by Tom Ridge. (MSNBC)

Several senior Homeland Security officials told The Associated Press that Ridge has indicated in recent weeks he probably will resign after the election, even if Bush wins. They spoke only on condition of anonymity, citing the delicate nature of describing private conversations with their boss.

Ridge, 58, has explained to colleagues that he needs to earn money to comfortably put his two children, Tommy Jr. and Lesley, through college, officials said. Both are now teenagers. Ridge earns $175,700 a year as a Cabinet secretary.

Considering that most Americans don't make $175,700 dollars a year and their kids go to school, this claim at first glance seemed laughable. Then I considered it as a serious proposition. Suppose that Tom Ridge pays the 33% in Federal Income Tax rate. That's a bit low, but we need to add in State and local taxes, suppose that's 35% total just for arguments sake, then Tom Ridge nets yearly (0.66 x $175,700) about $116,000.

Now since he's probably assuming that he needs to retire, and won't be able to survive on social security for him and his wife, a good financial adviser would tell him he needs to invest about 10% of that income, which would cut him down to about $104,000. That's still more than double what many Americans take home before taxes.

If Tom Ridge and his wife wants their children to have elite status like them and be able to make a lot of money, they can't just send their kids to any old university. They need to send them to a very competitive or distinguished school. Well as it turns out, Harvard tuition is rising at over 5% yearly and costs about $40k a year.
Published Thursday, March 25, 2004
Harvard's tuition to increase 5.15 percent in '04-'05

Following a trend at other Ivy League Universities, Harvard College announced a tuition increase for the 2004-2005 school year Tuesday.

Harvard's term bill will increase 5.15 percent, with undergraduates paying $39,880 for their educations next year. In February Yale announced a 5 percent term bill increase for next year.

Compared to other Ivy League university term bills for the upcoming year, Yale's is one of the least expensive at $38,850, Yale President Richard Levin said.

In spite of the tuition increase, Harvard officials said financial aid will continue to adequately cover expenses for those in need. In February, William C. Kirby, Harvard dean of the faculty of arts, announced a change that will eliminate the requirement for families in households earning $40,000 or less to contribute to their children's education costs.

"We are determined to protect every student's ability to come to Harvard regardless of financial background," Kirby said in a press release.

Yes, but I would bet that the Ridge's don't recieve financial aid. I'm not here to bash Harvard, as the article cites Yale boasts of the "low" Ivy league school cost of a mere $38k a year. In addition, I'm sure many less well advantaged but academically talented kids get to these schools because of their financial aid offerings so they haven't completely shut their door to the middle class. The point is that the Ridges are elites and their kids will be groomed as elites and so this is a good guess at what such an elite Ivy League education would cost them.

But with two kids in school, that would put back the ridges $79,760 yearly, so they would have to live on $23,024 or $23k a year. Now I could live on that easily, but they have an elite lifestyle and probably more than one house - not that I'm saying they're being excessive since working in DC as a Cabinet official is a lot easier if you do buy a residence there and you'll have your normal out of DC residence. So having to live only on $23k a year would probably not be feasible for the Ridges assuming they have to maintain at least an upper middle class existence.

So weirdly enough I don't think it's that strange an idea that the Ridges would feel financially pinched by his income. I think it's more a testament to how wildly college education costs have grown, and how this has been masked emotionally from the public by financial aid and loans. This is important because this type of schooling is important insofar as becoming groomed to be an elite, meaning it's necessary for lubricating social mobility.

There are still people who go to state public schools and become millionaires, and there are still people who work themselves up by seniority and by ingenuity or by self-promotion. Just think of Madonna or Jobs or Wozniak. There are even still elites, like Bill Gates, who are genuinely creative and successful.

It is however a matter of degrees. I really do think as wage scales diverge that inevitably social inequity on a statistical basis will emerge. Our society is still a far cry from pre-Revolutionary France, but some disturbing trends are in play when a Cabinet official of the USA argues that he can't maintain his lifestyle and groom his kids to succeed like him for a mere $175k a year.