One of the goals of this blog is to familiarize lawyers and clients going through divorce with the importance of putting economic issues ahead of emotional ones. But this edition addresses a problem that afflicts all American families when it comes to what can be their largest marital expense; college.
In Pennsylvania, the law has not changed. Since Curtis v. Kline, 666 A.2d 265 was decided in 1995 parents do not have to contribute a farthing to the post secondary education of their kids absent an agreement to do so. Thus, in one sense, the issue is easy. Except that even the greediest of Pennsylvania parents often wince at sending their freshly graduated 18 year old into a world with few marketable job skills. Until recently, it meant the child was sentenced to employment at $8-10 and hour. Today, the post pandemic job market has pushed those entry level wages into the $15-18 range. But, unless an adult child can parlay that wage into building significant job skills, prospects for wage growth in entry level employment are thin.
So, divorce lawyers typically run into families that have done some saving for college in the form of a 529 Plan (which is marital property) or an UTMA account (which is a completed gift and not divisible in divorce). Usually, the savings start out briskly when a baby is born but then peter out as child expenses for travel baseball and/or ballet balloon or the parents elect to use what they could save to fund their own quests for trips to Florida or a second home. In their marital misery they often defer divorce until the children graduate from high school, as if growing up in a house with miserable adults together is a better choice than splitting time with separated or divorced parents.
We have a case now where it is senior year and divorce has been deferred so that the child can have what her parents think will be a happy graduation. Again, there is some 529 money, but it might cover a semester or two of a mid priced college or university. Meanwhile, the child is visiting schools as a pasha might visit his castles; as if expense and college outcomes are immaterial considerations. In most cases, neither parent is having a candid conversation about how much college costs or how much it can yield depending on school and major. The reason; parents feel badly about the marriage dissolving and their child becoming a victim of divorce. The child doesn’t now any better because he or she has never bought anything more expensive than a used car or Playstation PS5.
Well, the New York Federal Reserve just threw some cold water on this kind of non-thinking in a report issued on February 10. Some of this, we know. The rack rate to attend Penn West Edinboro is about $22,000 a year. The same sticker for a year at Franklin & Marshall clocks in at $65,000. But the Fed report breaks down unemployment rates by major and buried in that are some surprises for those of us who thought STEM majors were automatic wins.
Major Unemployment Rate Major Unemployment Rate
Fine Art 12.1 Public Law/Policy 7.4
Philosophy 9.1 International Affairs 7.1 (my college major; ouch!)
Sociology 9.0 Engineering Tech 7.1
Consumer Science 8.9 Political Science 6.9
Mass Media 8.4 Aerospace 6.6
Graphic design 7.9 Marketing 6.6
Foreign Languages 7.8 Journalism 6.5
Performing Arts 7.6
In December the average unemployment for all recent college grads was 4.1%. The majors identified above indicate that if your kid is studying one, he/she is either borrowing money or consuming your “after tax” income to bet that they will get lucky. Some of these are fine majors and may yield a lifetime of better thinking. Some like foreign languages, aerospace and engineering are surprises and may reflect disruption of some industries brought about by the pandemic or disruptions caused by the Boeing 737 MAX issues. But the point is that almost all families, whether separating or intact, need to help college age kids evaluate how much college to purchase. Money allocated to a child’s education, is, by definition, money allocated away from retirement or emergency needs funding. This is not to suggest that funding college is unimportant or secondary. But, all too often, parents are not smart about college. Often, neither parent wants to be the “bad guy” who introduces the measuring stick when an otherwise worthy child downloads college application materials.
In the dark days when this writer went to college and majored in International Affairs, the accepted wisdom was that education would always yielded economic dividends and that kids should go to the best (i.e., expensive) schools because they would, per force, yield the best paying jobs. The Fed Report says to be careful here. Increases in college costs have outpaced rises in college outcomes from an economic point of view. And while your child’s personal experience may produce an entirely different result than the data might suggest, can you really afford to ignore the data.
Put more simply, your beautiful new Alfa Romeo may drive perfectly. But most of the car mags suggest that your good fortune has more to do with luck than the data they have collected on vehicle reliability. We ignore statistics at our peril.
The NY Fed Report is: