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Many of today's parents who worked their way through college or university are in for a rude awakening. In contrast to their personal experience, it may no longer be realistic to expect their children to earn enough from a summer job to cover tuition, books, residence, transportation and food. Furthermore, it's not safe to assume that they'll be eligible for federal and provincial student loans to make up the difference.
Tuition fees continue to rise faster than inflation, especially in professional programs where post-graduation employment is more assured. Student loans may have all but disappeared for middle-income families, and the banks have responded with lines of credit for students of up to $30,000. Today, many graduates are already carrying huge debt loads into their first entry-level positions. Federal estimates place the average debt for four years of study at over $25,000 for 1999. What will it be like when your children enter college in six, 12 or 18 years?
Why are education costs rising?
Blame soaring operation costs. Few universities set funds aside for financing, maintenance and repair of buildings erected during the expansion of the '60s and '70s. Government funding that once paid 75 per cent of the cost of an education has been cut back, and revenue is down as we move to a user-pay model similar to the one in the United States.
In conflict with the need to downsize and get operating budgets under control, enrolments have increased. Plus, the cost of educating professionals in specialized careers means increased faculty and infrastructure costs.
There is a new practicality being exhibited by the presidents of some Canadian universities. They now recognize that students expect their education to lead to gainful employment on graduation, preferably in their field of study. Unfortunately, that has not been true for many arts and science grads.
To their credit, as funding is cut, many institutions have endeavored to increase their bursaries and scholarships. Food banks have been set up on many campuses to address the needs of students with serious financial problems, particularly towards the end of an academic year when their funds have run out.
What does an education cost?
Get ready for a surprise. The cost of university tuition has soared as much as 135% in the last 10 years. When you add up tuition, books and the cost of living away from home and the price tag can be about $60,000 for a typical 4-year program.
Estimated cost of an undergraduate degree*
Today $60,282
In 6 years $71,980
In 12 years $85,948
In 18 years $102,627
*Based on 1996 figures from Human Resources Development Canada for tuition, books, accommodation, personal and health costs, food, recreation and transportation, and assuming a three per cent annual increase.
Today's 3-year-old pre-schooler can expect to pay about $12,281 this year for a 2-year college diploma program and about $18,442 for a 3-year program if they choose to live at home. That cost includes tuition, books, supplies, recreation and local transportation. The cost jumps to $36,122 for the 2-year program and $54,183 for 3-years, if the student lives away from home. The extra costs include shared accommodation, personal health and clothing costs, food and return travel home. If that same pre-schooler decides on a 4-year university program, they could expect to pay $46,236 if they live at home and $93,918 if they go away to university.
Even a conservative estimate of future university costs based on three per cent inflation can be shocking, as you can see from the table. Unfortunately, costs may continue to outpace inflation and the reality could be even more daunting. Some Registered Education Savings Plan (RESP) marketers have estimated the cost of an undergraduate degree for children born in 2001 to be as much as $219,624 based on actual education costs continuing to rise at 6.8% per year. It is possible that such projections carry an element of marketing hype. How you and your children prepare to deal with this challenge can make a major difference in the cost, and the debt load they'll carry into their careers.
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