Paying for College Then vs. Now: Things Have Changed
By Joe Messinger, CFP®
May 3, 2018
1987! What a year! Baby Jessica was rescued from a well. George Bush (the first one) announced he would run for President. “Walk Like an Egyptian” by the Bangles was the number one song of the year. (With all the great music that year, that one was #1?!) Three Men and a Baby was the top domestic grossing film. (Another surprise in a year of Lethal Weapon, Fatal Attraction, Dirty Dancing, Good Morning, Vietnam, and Beverly Hills Cop II.) Zac Efron and Kendrick Lamar were born. (Sorry if that last one made you feel a bit old.)
Jump forward to today, and those kids who graduated from high school in 1987 are now the parents of kids graduating high school in 2018. If you are the parent of a first-time college-bound kid, you may be shocked by how the college process has changed especially the financial side.
The College Board presented some startling numbers in their Trends in College Pricing 2017. These are average tuition, fees, room and board figures in 2017 dollars.
| Public 4-year |
| Private 4-year
Keep in mind three things when looking at these numbers. First, these figures are per year. Second, these numbers are all expressed in 2017 dollars adjusted for inflation. You are not comparing apples to oranges here. The 1987 figures have been increased for inflation.
Third, these numbers are averages. While the 2017-18 median private non-profit price was $35,260, “10% of full-time students attend institutions with prices below $12,000 and 13% attend institutions charging $51,000 or more.” 13% are paying more than $200,000 for their 4-years of college!
In terms of percentages, the price of a public education has jumped 130%. The price of a private education is up 111%. (To learn a bit about the “why” for the cost increases, check out this earlier blog.)
Well, hasn’t income kept up?!
I’m sure you know the answer to this one. Nope. “Median family income was 18% higher in 2016 than in 1986.” (U.S. Census Bureau, 2016 Income Data, Table F-6)
When we were college students…
We could earn money to pay for a large part of college. Students don’t have enough hours in the day to earn enough to make a real dent.
Let’s play with some numbers. In 1987 at Michigan State, the per credit hour rate was $49.25. Assuming a full year of 30 credits, that amounts to $1,477.50 in tuition. In 2017, the per credit hour cost is $482 with an annual 30 credit price of $14,460. (Figures from http://www.ctlr.msu.edu/costudentaccounts/history.aspx)
The minimum wage in 1987 was $3.35. To earn the $1,477.50 in 1987, a student would need to work 441 hours. That’s a lot, but if a student worked full-time over the summer it was a possibility. Maybe they didn’t work that much, but a student could still expect to pay a good chunk of the bill if they needed to.
In 2017, the minimum wage was $7.25. To earn the $14,460 in 2017, a student would need to work 1,994 hours. That’s almost 50 weeks of full-time work! When are they going to go to school?
The college application and financial aid process has become fully automated and online since those days of paper and pencil in 1987. The impact of the Common App has altered the competitive landscape as more students apply to 10, 20, or even more colleges with a few clicks of the mouse.
The number of available spots at competitive colleges have not increased, but the number of applications has surged to record numbers. This year at Stanford, they received 47,450 applications for the available 2,040 spots.
In 1987, attending Ohio State was pretty much a guarantee so long as you had a pulse and lived in Ohio. Today, the ACT score of those entering main campus as freshmen is 29. The national average ACT score is 20.8.
Why are we telling you all this?
Because we don’t want it to come as a surprise. We meet people every day who say “yeah, we knew the cost of college was higher,” but they didn’t really understand the reality.
With knowledge comes the ability to make plans and be a smart consumer of a college education in today’s world of Marvel movies, Ed Sheeran music, and Elon Musk moon travel.
March 3, 2020