The Sums of Education

Generations Higher Education Investments Millennials

Graduate Piggy BankMillennials, people born after 1980, who went to college in the early years of the 21st century, now have young families or are starting to think about it.

Considering the oldest Millennials are currently cresting 30, the timing seems right. But what sets them apart from other generations is this age group’s indebtedness to education loans. It’s not just a possibility that they will be saving for their children’s education while they pay off theirs, it’s a fact.

According to Pew Research Center’s report “The Millennials,” those who came of age at the turn of the 21st century, are the most educated generation in American history and have the loan balances to prove it. Education is always a good investment and has historically made a huge difference in lifetime incomes, but what’s unknown is the impact of a generation whose average debt on leaving college is $20,000 – and much more for those who attended graduate school. Also consider that, for many, The Great Recession began at the same time they graduated and started their careers.

Millennials therefore have to reflect on some different strategies. Currently, there are more tax-advantageous-education-saving tools for the children of Millennials than there were for their parents. Starting a 529 “qualified tuition” plan at the same time the birth announcements are sent gives families a chance to get ahead of the education cost curve. In a future post, I’ll give more details on 529 qualified tuition plans and who can contribute to them. (Hint: grandparents!)

Now let’s think even further outside of the box. Sometimes we get trapped into coming up with solutions that are based on faulty assumptions. Traditionally, parents felt that if their children got accepted to a college or university, then they would find a way to pay for it. However, the price of higher education today and in the future may far exceed our children’s potential earning power. It is important to consider that brick and mortar institutions may not be the way to go. This doesn’t mean that they should skimp on educational quality, but choices today are available that weren’t there before. Consider respected institutions offering online curriculum or places like the Khan Academy, whose mission is to provide a free world-class education for anyone anywhere.

At Harvard Business School, I was honored to have Clayton Christensen, Disruptive Innovation Expert, as a professor. You can read further on his thoughts about changing education in The Innovative University: Changing the DNA of Higher Education from the Inside Out



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