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Day after day we get new reports of colleges and universities that optimistically reopened their doors shutting down because of big clusters of COVID19 among their students. Some are going exclusively online again, others are adopting hybrid models, but the traditional campus ambience of crowded lecture halls, packed sports arenas, fraternity and sorority gatherings and beer-and-bong parties is gone, at least for this year.
That’s prompted the people who pay the bills for this American rite of passage to reconsider whether a college education, especially in its current form, is worth the price. A recent poll taken by the financial services firm Edward Jones found that 36% of American adults are reconsidering their investments in higher education. Some 80% of those surveyed who are currently saving for college worry that students’ education may suffer because of the lack of resources or social contact only in-person learning can provide.
Nearly a third of those surveyed said they were more likely to attend an online-only college rather than a traditional four-year college or university while one in five were contemplating getting a job or an internship and skipping college altogether.
In an interview, the firm’s investment strategist, Nela Richardson, told me that these trends had been brewing for some time, as rising costs of education have eclipsed overall inflation and student debt topped $1.5 trillion.
“The cost of tuition has already been a thread in this narrative of, ‘Is it worth it?’” she said. “Already there was a student debt overhang that was affecting people’s perception of the value of education.”
Then came the pandemic, which has “stripped away all the excess and we’re left with the bare necessity,” Richardson told me. “So, what is the bare necessity of education? What are you really paying for? If it can be delivered on an online model for the same price, what am I paying for?”
“If my education has now become transactional, what am I getting out of this transaction?” she continued. “I’ve heard people say, ‘I’m basically paying for my kid to quarantine in their apartment while taking online courses.’ I think, though, that would be regarded as temporary if it wasn’t in this broader context of how expensive education and tuition have become.”
That broader context also includes the fact that 20 million Americans are either unemployed or out of the labor force and currently want a job. Meanwhile, a July survey by the National Federation of Independent Business found that 23% of its small business respondents expected to be out of business in six months if conditions don’t change.
That’s no incentive to shell out tens of thousands of dollars on a watered-down educational experience that may not pay off as much as it did in the past. So, says Richardson, parents are starting to think outside the box, and “especially now that families have to make all kinds of different trade-offs, that is going to accelerate, I think, what people demand from education post-pandemic.”
Among the possible alternatives are sending kids to community college the first couple of years and then finish at a state university or four-year college to save on tuition and other expenses. Or skip four-year college and go for an associate’s degree or a certificate for occupations such as paralegal, licensed practical nurse, dental assistant, or HVAC mechanic and installer. One million occupational certificates a year are awarded, second only to bachelor’s degrees.
Read:High-school students who take college classes don’t always save time — or money
You can use 529 college savings plans to pay for certificate programs if they’re offered by an eligible institution, as well as the costs of apprenticeships in skilled trades. “We’ve seen 529 plans actually broaden and be extended,” says Richardson.
Parents now can use them to buy laptops and cover other costs connected with online learning, as well as paying tuition for K-12 education (which I don’t recommend for most people).
Only 45% of those surveyed by Edward Jones were even aware of the role of 529 plans, and saving for education ranked well behind retirement and building an emergency fund as a financial goal.
These plans haven’t exactly caught fire. Currently fewer than one in five children under 18 have a 529 plan in their names, according to Mark Kantrowitz of savingforcollege.com. A study by researchers at the Federal Reserve found that only 2.5% of all families had 529 plans in 2013 and “these families have significantly higher income and wealth than families who do not own such accounts.”
As of last June, there were 14 million 529 accounts in the U.S., with total plan assets of $352 billion and an average balance of about $25,000, enough to pay for roughly one year at a state university.
Given their need to stretch every dollar—and make sure they’re getting a decent return on their investment in their children’s future—parents are rethinking how to use that money most effectively and whether the whole college “experience,” as currently constituted, is worth it altogether. That may shake up higher education more than anything else in the years ahead.
Now read:This isn’t the college experience you were expecting — but get a degree anyway
Howard R. Gold is a MarketWatch columnist. No-Nonsense College appears monthly. Follow him on Twitter @howardrgold.
