By Lynn Carpenter
Our youngest had a natural gift for the French horn. Oh the colleges that would woo her, the scholarships that would land at her feet… it’s hard to find good French horn players. If only her interest had lasted more than a year…
Today, parents hoping for scholarships are likely to meet trouble from the other end. Their children may be steadfast –maybe they will even play the French horn if that’s what it takes–but colleges’ scholarship funds are in a squeeze. Moody’s believes college endowment funds will fall about 30% on average this year.
Even though endowment funds should be conservatively managed, with a healthy dose of high-quality bonds, the stock market has been that bad. If you are feeling unable to figure it out, rest assured, the pros have the same problem and they seem to be handling it worse.
It turns out some endowment managers aren’t so staid. And they are up to things that average people wouldn’t consider safe alternatives. According to the Financial Times, large endowment funds—those with over $1 billion under management—haven’t been doubling down on high-grade bonds as stocks fumbled. They have put a median 35% of their money in esoteric assets like venture capital, hedge funds, private equity, timberland, real estate and oil properties.
Meanwhile, public colleges are likely to see state support drop while parents struggle with the economy and need more help than usual.
Rhode Island and Michigan State raised tuition in the middle of the year. This is an extreme measure of duress. Colleges almost never raise tuitions midyear. Other colleges are looking at funding cuts and tuition increases next year.
The funding crunch has already reduced the number of students who get college educations in some places. The University of Florida admitted 1,000 fewer students last year because of funding shortages. The University of California expects to have the same problem next year.
With all our focus on great, immediate, problems like employment and home sales, the biggest threat to the middle class may go unnoticed for a while. Children may not reach their parents’ social heights if college becomes a luxury that fewer families can afford. We are no longer a country with millions of well-paying blue-collar jobs. Staying middle class in a service economy makes getting a college education more important for the next generation than it was for our parents’ or ours.
Editor– Economists predict the cost of attending state colleges will soar to $120000 by 2015. College tuitions soar each year, advancing far in excess of the inflation rate. So why have College education costs skyrocketed compared to most other expenses?
See the article on Education Inflation.
Virginia College Savings Plan (Check the College Savings Plans Network for similar plans for your state)
- VPEP (Virginia Prepaid Eduation Plan)
- VEST (Virginia Education Savings Trust)
See Also:
- Budgeting Your Family Finances
- The Frugal Guide to Building Wealth
- Eliminate Debt Before You Retire
- Wealth is Only a Decision Away
- The Wealthy Buy Assets, the Poor Buy Liabilities, and the Middle Class Buy Liabilities Believing They Are Assets
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