If you have read my other two Blogs on the cost of education, you must know that we have a serious problem. Just think about each high school graduate having to pay back $8.39/hr for 40 years and 2000 hours per year, or the college graduate having to pay $15.85/hr. Both of these two groups are having to pay back just over half of their take home pay for their education. I don't know where each of you are coming from, but you have to agree that we need to get this ratio "Down" and soon or this place is going to be in the toilet. I could have made the college numbers look worse if I had shown the high rate of drop outs from college like I did from high school. The drop out rate for colleges is actually worse than for high schools, but you never hear anything about it. Just like high school kids who start college and drop out eat up a lot of tax money and for what? Most parents and the public feel that we should have more of our kids going to college. The problem is that they have no understanding of the total cost to our society for education vs benefits. As you might have guessed, I would not have developed all these numbers on the cost of education if I did not also have some ideas about how to fix the problem. Here goes.
Like any cost reduction activity, you have to know exactly what and where the costs are. You also have to have some kind of objective and means to measure progress. Sounds like an excuse for never doing anything, but it is not. Let's take the numbers that I have developed earlier and have the objective to "Reduce" the ratio of cost per hour for education vs the earning power of the graduate. Right now both the high school graduates and the college graduates are having to pay back over 50% of their take home pay for their education. You could also select the difference between the earnings per hour after tax and the cost of education, but I think the end would be the same, so let's use the ratio. Like any ratio, there is a top and a bottom. If you change either one, you change the ratio. Make the top smaller or the bottom bigger and you change the ratio in the right direction, so that is what we are going to do. First, let's change the number of years worked from 40 to 45 so they will pay back for a total of 45 years. How much would that affect the hourly rate? Go to the tables for 45 years and the total for the college graduate at age 25 of $543,841 and we get $15.30/hr. As you can see we only reduced the rate by $0.55/hr. It is something, but not much. You can see that we will have to do more. Next let's see what happens if we clean house on the classes the kid has to take in college and I think you know the classes that I would cut so that he can graduate in just 4 years rather than 5 years. Now on graduation the kid will owe $181,104 and after waiting until age 25 to start paying, they will owe $209,644. That is $46,562 less to pay back. This is an additional savings per hour of $1.01/hr. Now we are starting to make progress, but $14.39/hr is still a lot. I personally think that if we worked at it a little harder and prepared our kids better in high school 99% of our kids could graduate college and know every thing they know now that counts in just 3 years "period". That means they would have a degree and be just 21 years old. If we could do that and get them into the work force by age 22 rather than the 25 that I have been using we would have them working for 48 years rather than the 45 and 40 years that I have used earlier. Now the impact of this would works out to $12.21/hr for an additional savings of $2.18/hr. This is starting to add up. I think you are starting to see which items have the biggest impact. The key principles are to (1) Spend your money as late in the process as possible (2) Start paying back as soon as possible. Long pay back periods are not very affective in reducing cost. Check how much your monthly payments would be on you home if you went from a 30 year note to a 35 year note. Not much affect. Notice that I have not changed the cost per year of college. In the above numbers is the amortization of high school at $8.39/hr. Now let's see what we can do about the high school numbers.
First, let's recheck the educational objective of high school. It is not fun and games although that is what many kids seem to think. It is to prepare them to function and be productive in our society. That is pay their share of taxes. To my way of thinking paying your share of taxes is your number one social responsibility. In the prior Blogs, I showed that when the kid turned age 25 he owed $287,857 for his 13 years of school. That worked out based on the 40 years of work to $8.39/hr. That is our base line. Going back to economic rule #1 we need to reduce the cost of the early years of education and push harder in the last years. Any business man know that this is what is required to run a business. Some call it "Cash Flow" or early break even. That is what we need to do here. What do you think would happen if we compared the impact of Head Start against the 12th year in high school in terms of their impact given the kid starts paying back at age 25 as before and for the original 40 years. Head Start costs $11,000 for the one year and is not going to start paiding it back for 20 years. Add up the number, you get 20 years. At that time the original $11,000 is worth $29,182 and will cost $0.85/hr for 40 years. Now how about the 12th year of high school? When he starts paying it back at age 25 it is worth just $15,477 and will cost $0.45/hr. I think it is clear from the numbers that Head Start will cost the person twice what the 12th grade of what high school did in the long run. We also know from studies of the Head Start program that it had zero impact on how well kids did in school. Even if it did have some impact, it would have to be twice as good as the 12th year of high school and we know that is not possible. You can apply this same principle to Kindergarten and the earlier years of school and you will find the same results as above. This has to make you think about the worth of grammer school vs high school and how serious we need to be about performance in high school.
Here is my final proposal. First clean up our colleges and eliminate 90% of the "fluff" classes and I know that you know what these are. Cut down on the total number of classes by eliminating these "fluff" and "optional" classes so that good sound degrees can be earned in 3 years. Punish those who take more than 3 years to graduate. This might take some efforts back in high school to make this happen. If a person needs a remedial class, make them go back to high school to take the class. It will be cheaper there and tell the student that the tax payers mean business. In the senior year of high school, I hear stories of kids who are taking all "fluff" classes because they already have the minimum credits to graduate. I say that we need to "pack" high school with classes that are needed and eliminate any "fluff".
Now grammar school. Don't take kids into grammar school until about age 8 or 3rd grade. Make the parents teach their own kids to this point. Home schoolers seem to be able to do the job just fine so why can't everyone else. Grammar school is too expensive to be used as a baby sitting service. Parents can ban together or send their kids to private schools, but don't expect the tax payers to pick up the bill. As you can see from the numbers, these early investment that don't pay back until many years in the future are just not worth the cost.
You do some calculations of your own and see what you come up with. I am going to end here, but will go thru the number next time and show what the impact is of the changes that I have proposed and notice that I have not changed the cost per year yet. Interesting isn't it?
