This past December, I worked with Sandy Baum, a long-time friend and co-author, on revising a paper we had originally written in 2010 on “affordability” in post-secondary education (PSE). The quotes surround “affordability” because the word is often used without much effort to define what it means. One particularly troublesome issue for us has been the question of “affordable for whom?”
Economists are quite clear on this. Those making the decision are the potential students and they will choose to go to school if the present value of their expected future earnings (and other non-quantifiable benefits) exceeds the present value of the costs, including the earnings foregone by going to school. As long as that benefit-cost calculation is more favourable than any other option, and as long as the potential students can borrow enough, at low enough interest rates, to pay the out-of-pocket costs, they are on their way to class. Income-contingent student loans — borrowed by students to pay for PSE and then repaid after leaving school, with the size of the monthly payments depending on their post-school earnings — would either break or greatly weaken any link between parental income and the students’ ability to pay for PSE. Family income remains relevant, but only because some potential students can count on getting what amount to non-repayable grants from their parents and others cannot. As long as student loans are widely available, using the word “affordable” for PSE is not really appropriate and “worthy of the investment” really is.
Parents are far less clear on the issue than are economists. For many parents, paying for the education of their children is an obligation no different than paying for their food and clothing as they are growing up. Perhaps the children will be the ones to decide if and when to go to college or university, but the familial assumption is that the parents will pay. Not all parents feel this way, of course. Some are willing to pay part of the costs while expecting their children to pay the rest, either by borrowing or by working while in school. Still others feel no obligation and expect their children to make their own way.
To the extent that parents feel at least a partial obligation to pay for PSE, the question becomes whether the parents have enough savings to pay the out-of-pocket costs of PSE or whether the parents can borrow enough to pay the costs and then have the ability to make the required monthly repayments. Post-secondary education is a gift given freely by parents to children as an expression of both love and obligation. Is this gift affordable? For some, it will mean giving up other expenditures — cars, vacations, home renovations — that they dearly want but might not need. For others, the gift will cut into necessities such as food, shelter and clothing and would be unaffordable in the same way that housing is unaffordable if not enough is left over, after paying for it, to maintain a basic level of non-housing expenditures.