{"id":27317,"date":"2014-10-11T12:39:04","date_gmt":"2014-10-11T19:39:04","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=27317"},"modified":"2024-12-07T08:54:17","modified_gmt":"2024-12-07T16:54:17","slug":"black-coffee-ferraris-teslas-and-the-cost-of-a-harvard-education","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id27317-black-coffee-ferraris-teslas-and-the-cost-of-a-harvard-education.html","title":{"rendered":"Black Coffee: Ferraris, Teslas and the Cost of a Harvard Education"},"content":{"rendered":"

\"\"<\/a>It’s time to sit back, relax and enjoy a little joe …<\/em><\/p>\n

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.<\/p>\n

Let’s get right to it …<\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> Stocks took it on the chin<\/a> this week. As a result, the Dow is negative for the year, and the Russell 2000 is now at a 52-week low. As for the S&P, it was down 3% for the week.<\/p>\n

Debit:<\/strong><\/span> Meanwhile, the Nasdaq suffered its worst week since May 2012. You know things are getting serious when a stock market darling like electric car company, Tesla, loses more than 9% for the week<\/a> — including a big 7.8% decline on Friday. No, really.<\/p>\n

Debit:<\/strong><\/span> The damage wasn’t limited to US stocks; fear of a global economic contraction had markets around the world<\/a> struggling this week, including Germany and France, which saw their bourses fall 2.4% and 1.6%, respectively.<\/p>\n

Credit:<\/strong><\/span> It’s no coincidence that stocks are dropping as the Fed wraps up its market-backstopping quantitative easing<\/a> (QE) program. That means the stock market bulls — who until recently considered all news as good news — can finally test their convictions.<\/p>\n

Credit:<\/strong><\/span> <\/strong>This week Zero Hedge highlighted the cost of living in 1938<\/a>; back then the average annual US income was “only” $1731. Of course, that’s when a dollar was still worth something.<\/p>\n

Credit:<\/strong><\/span> <\/strong>So, how valuable was a dollar way back in 1938<\/a>? Well, take the annual tuition at Harvard, for example: it was $420 — or just 24% of average annual income.<\/p>\n

Debit:<\/strong><\/span> Today, the typical US household income is approximately $51,000 per year<\/a>. As for Harvard tuition, it’s $58,600 per year<\/a> — that’s 112% of household income. I know.<\/p>\n

Credit:<\/strong><\/span> <\/strong> All else being equal, at 24% of today’s household income, Harvard tuition should run the typical family about $46,000 less<\/em> per year. Don’t tell that to the faculty and administrators though.<\/p>\n

Debit:<\/strong><\/span> Then again, the negative financial impact of exploding university tuitions on the typical family is even more<\/em> onerous considering that in 1938 most American households had one breadwinner; today, it’s usually two<\/a>.<\/p>\n

Debit:<\/strong><\/span> The reason for skyrocketing tuition costs since 1978 is no mystery: It’s due to federal spending on higher education, including “low-cost” student loans and the expansion of Pell Grants<\/a> in 1978 to middle-class families. Yes, yet another example of government meddling run amok.<\/p>\n

Debit:<\/strong><\/span> You’d think the high cost of a college education would deter a lot of folks from getting one — especially considering the large number of university grads who end up earning the minimum wage<\/a> — but it doesn’t. At least not yet.<\/p>\n

Debit:<\/strong><\/span> In fact, there are currently 40 million Americans<\/a> who have student loan debt on the books. Incredible. I hope all of those grads have a science, technology, engineering, math, medical or law degree — otherwise, they may never see a return on their, um, “investment.”<\/p>\n

Debit:<\/strong><\/span> Heck, today many Americans are burdened with so much student loan debt that they’re delaying marriage<\/a>, postponing a home purchase, and — worst of all — refusing to set aside any money for their retirement.<\/p>\n

Debit:<\/strong><\/span> By the way, I’m sure those unfortunate Ivy League grads who paid $200,000 for a degree in underwater basket weaving will be interested to know that Walmart just stopped providing healthcare<\/a> benefits to employees who work less than 30 hours per week. Yep. Obamacare strikes again.<\/p>\n

Credit:<\/strong><\/span> In the old days, people with a college degree had much better odds of earning enough money to buy a Ferrari. Not any more.<\/p>\n

Credit:<\/strong><\/span> Speaking of Ferrari, the company debuted their latest model<\/a> this week in Beverly Hills. The price tag: $2.5 million. Hey … If you think that’s expensive, just imagine how much more those super-cars would cost if the government started offering loans for them.<\/p>\n

By the Numbers<\/strong><\/p>\n

More facts on the incredibly high costs of a college education, and where those government subsidies are being spent:<\/p>\n

$8,900<\/strong><\/span><\/span> Average annual resident tuition cost for a four-year college in the US in 2013.<\/p>\n

$13,400<\/strong><\/span><\/span> Average annual college student expenditures in 2013 for room, board, books, transportation, and other expenses.<\/p>\n

147%<\/strong><\/span><\/span> Increase in the typical family income since 1982.<\/p>\n

115%<\/strong><\/span><\/span> Increase in the consumer price index since 1985.<\/p>\n

500%<\/strong><\/span><\/span> Increase in the cost of a college education since 1985.<\/p>\n

15%<\/strong><\/span><\/span> Increase in college student enrollment between 1993 and 2007.<\/p>\n

40%<\/strong><\/span><\/span> Growth in number of college administrators per 100 students between 1993 and 2007.<\/p>\n

66%<\/strong><\/span><\/span> Increase on administration spending per student between 1993 and 2007.<\/p>\n

Source: Forbes<\/a>; Lumina Foundation
\n<\/em><\/p>\n

The Question of the Week<\/strong><\/p>\n

[poll id=\"29\"]<\/code><\/p>\n

Last Week’s Poll Result<\/strong><\/p>\n

What was the hourly pay rate of your first ‘real’ job?<\/p>\n