THE REAL COST OF EDUCATION

The following two exhibits illustrate the total annual cost of tertiary education using UWI and one Canadian university as an example. Project this forward to 18 years from now, with four percent annual inflation for education costs, and the dollars really mount up.
 

EXHIBIT 1: University of the West Indies: Estimate of current cost of full academic year in US dollars

 
​ITEM COST​
​BOOKS AND INCIDENTALS $1250
MEALS​ ​$3,125
ROOM​ ​$2,656
MISCELLANEOUS SCHOOL RELATED​ ​$156
FULL TIME TUITION (VARIES BY STUDENT AND PROGRAMME)​ ​$1,875
OTHER LIVING COSTS​ ​$1,562
TOTAL​ ​$10,624
 

Source: University of the West Indies at St. Augustine Undergraduate Fee Booklet

Note: Example assumes student comes from UWI member country and lives away from home. 

Today you would need $31,000 for a three-year degree – but in 18 years, you will need almost $60,000. 

 

EXHIBIT 2: Canadian university example. Estimate of current cost of full academic year in US dollars.

 
ITEM​ COST​
BOOKS AND INCIDENTALS​ $3,921​
MEALS ​ ​$2,745
ROOM​ ​$10,680
MISCELLANEOUS SCHOOL RELATED​ ​$980
FULL TIME TUITION (VARIES BY STUDENT AND PROGRAMME)​ ​$20,006
OTHER LIVING COSTS​ ​$980
Total ​ ​$39,312
 

Source: Selected Canadian university web sites 

Note: Example assumes foreign student status  

Today you would need approximately $115,000 for a three year degree – but in 18 years, you will need over $230,000. 

 

How Will You Close The $100,000 Gap?  

Coming up with a minimum of US$100,000 over three or even four years is a challenge for most households, and if you have more than one child in higher education, the burden will be even greater. There are three possible ways to close the gap: borrow the funds when your child is ready to go to school, pay for their schooling out of your cash-flow at the time , or begin saving and investing to create an education fund for each child. The first two options are not financially attractive, between the cost of carrying that kind of debt and the pinch in cash-flow that you would feel. The third option is by far the most prudent, and the sooner you start, the sooner you will get there. 

TIP: There is some financial help available to students but it varies by institution and country. While these sources of help can make a difference, they cannot be relied on to cover the entire cost for tertiary education.

Below are some of these sources:

• Long-term student loans mature after graduation and must be paid back within a defined period. These loans can leave a debt burden on your child that lasts for years.

• Short-term student loans can help bridge the gap until funds from another source becomes available. 

• Grants may be available for students who achieve high academic standing and may be directed to a particular cost (book grants) or for general use (scholarships).

• Meal subsidies are available in some cases to students unable to cover the cost of food on campus. 

 

You Can Get There From Here

As little as $135 each month, invested prudently for the child’s first 18 years will have an education fund of $50,000 by the time the child is ready to enter college or university at age 18. 

The longer you wait, however, the more you have to invest to make up for lost time. Exhibit 3 illustrates how the power of compounding rewards the early investor. 

EXHIBIT 3: The sooner you start the less you need to save to close the $100,000 gap.

 
Age of child when you start saving​ ​At birth Age 5​ ​Age 10 ​Age 15
Monthly Amount required ​ ​$135 ​$220 ​$420 ​$1,315
 

Note: Assumes a rate of return of six percent per year 

TIP: Even if you are saving and investing for your child’s education, encourage them to earn and save money on their own in preparation for their university or college years. Summer jobs and part-time work can help them build a college-fund savings account that will give them extra spending money when the time comes. This also helps them develop a good attitude towards spending and saving.