Middle Class and Broke

Families with children are under assault. The assault is quiet, attracting few headlines, no congressional investigations, no knowing conversations at the office or at parties. The assault is stealthy, but the effects are profound.

This year, more families with children will file for bankruptcy than divorce. Motherhood is now the single best predictor that a woman will end up in financial collapse. And, contrary to every popular assumption, the parents who find themselves in the bankruptcy courts are not chronically poor. Rather, when measured by criteria such as occupation, college education, and homeownership, more than 90 percent of the families at the end of their financial ropes are solidly middle class.

The lines at the bankruptcy courts are not the only signs of growing middle-class distress. A family with children is now 75 percent more likely to be late on credit-card payments than a family with no children. Home foreclosures have more than tripled in less than 25 years, and families with children are more likely than anyone to lose the roofs over their heads. Economists estimate that for every family officially declaring bankruptcy this year, seven more have debt loads suggesting they should file for bankruptcy -- if only they were more savvy about financial matters.

Why are families with children under such powerful, disproportionate, and growing economic strain? The costs of educating children -- once borne by taxpayers generally -- are increasingly the responsibility of individuals. The costs are bringing parents to their knees.

Talk with any middle-class parent in a metropolitan area and he or she will describe the time, money, and effort devoted to finding a decent school for his or her children. In some cases, the story will be about mastering the system. ("We put Joshua on the wait list for the science-magnet school the day he was born.") In other cases, they're leaving the public-school system, opting for private, parochial, or home schooling. ("My husband and I both went to public schools, but we just couldn't see sending Erin to the [local] junior high.") But private schools and maneuvering go only so far. For most middle-class parents, ensuring that their children get a decent education translates into one thing: buying a home in the shrinking number of districts that have high-quality schools.

Homes can command a premium for all sorts of amenities, such as two-car garages, proximity to work or shopping, or low crime rates. Yet a study in Fresno (a midsized California metropolis with 400,000 residents) found that, for similar homes, school quality was the single most important determinant of prices -- more important than racial composition of the neighborhood, commute distance, crime rate, or even proximity to a hazardous-waste site. A study in suburban Boston confirmed the impact of school boundaries. Two homes less than half a mile apart, and similar in nearly every aspect, will command significantly different prices if they are in different elementary-school zones. In other areas, schools that scored just 5 percentage points higher on fourth-grade math and reading tests added a premium of nearly $4,000 to the purchase price of nearby homes; the homes were virtually the same in terms of neighborhood, school spending, racial composition, tax burden, and crime rate.

Consider University City, the west Philadelphia neighborhood surrounding the University of Pennsylvania. In an effort to improve the area, the university committed funds for a new elementary school. Before the announcement, the median home value in the area was less than $60,000. When the school opened five years later, The Philadelphia Inquirer reported, "Homes within the boundaries go for about $200,000, even if they need to be totally renovated." The neighborhood is otherwise the same; the commute to work, the distance from the freeways, and the houses haven't changed. Real-estate agents have long said that the three things that matter in determining price are "location, location, location." Today, it may be "schools, schools, schools."

This phenomenon isn't new, but the pressure has intensified. In the early 1970s, not only did most Americans believe that public schools were functioning reasonably well, polling data showed that a sizable majority of adults thought that public education had actually improved. Today, the majority now believes that schools have gotten significantly worse. Fully half of all Americans are dissatisfied with America's public-education system, a deep concern shared by parents regardless of race.

And so a bidding war has emerged, as millions of parents have entered the race to snatch up a home in a good school district. Since the early 1970s, the amount families spend for the average mortgage has increased by 69 percent (adjusted for inflation). By comparison, the average man's income nosed up by less than 1 percentage point during this same period. These median-earning families didn't get McMansions; for these families, housing size increased from an average of 5.7 rooms in 1975 to just 6.1 rooms in the late 1990s. What they got for their money was a ticket to send their children to the new private-public commodity: a viable public school.

As if the public-school chase weren't enough, pressure on parents has intensified as the requirements for a middle-class education have taken a sudden leap. The education race begins with 3-year-olds. Over the past generation, preschool has been transformed from an optional stopover for little kids to an absolute prerequisite for elementary school. Parents have been barraged with articles telling them that early education is important for everything from "prereading" skills to social development. As one expert in early-childhood education observes, "In many communities around the country, kindergarten is no longer aimed at the entry level." And the only way most parents feel they can get their child prepared is through a pre-kindergarten program.

Today, nearly two-thirds of America's 3- and 4-year-olds attend preschool, compared with just 4 percent in the mid-1960s. This isn't just the byproduct of more mothers entering the workforce; nearly half of all stay-at-home moms now send their kids to a pre-kindergarten program. As Newsweek put it, "The science says it all: preschool programs are neither a luxury nor a fad, but a real necessity."

Who pays for this nationwide expansion of a child's basic education? Parents pay. A full-day program in a pre-kindergarten offered by the Chicago public-school district costs $6,500 a year -- more than the cost of a year's tuition at the University of Illinois. High? Yes, but that hasn't deterred parents: At one Chicago public school, there are 95 families on a waiting list for 20 slots. That situation is fairly typical. According to one study, the annual cost for a 4-year-old to attend a full-time preschool program in an urban area is more than double the price of college tuition in 15 states.

As the cost of educating children before they enter public schools has risen, so has the cost of educating children after they graduate high school. Once again, the change over the past three decades is stunning. A generation or so ago, polling data showed that Americans were likely to believe that there were many avenues for young people to make their way into the middle class, including paths that didn't require college diplomas. Today, however, Americans are twice as likely to believe that the moon landing was faked than they are to believe that a college degree doesn't matter. In a diverse culture full of contrarians who relish their differences with one another, faith in the power of higher education is the new secular religion. Americans now report that a college degree is the single most important determinant of a young person's chances of success -- even more significant than getting along well with others or having a good work ethic.

So what have parents done? They have paid and paid some more. After adjusting for inflation, in-state tuition and fees at the average state university have nearly doubled in less than 25 years. To put that in perspective, the price of college has grown twice as fast as the average professor's salary, three times faster than the cost of food, and eight times faster than the cost of electricity. To pay state-school fees, the average family would have to commit 17 percent of its total pretax income to this expense. For parents whose children can't get into state universities, the private alternatives are even more prohibitive. Middle-class parents routinely speak of college educations that cost more than $100,000 -- much of it funded by second mortgages, education loans, and credit cards.

Add it up: The definition of a basic education has expanded to include six additional years (and that doesn't even include graduate school). This means that the public portion of a basic education has shrunk from covering 100 percent of K-12 in the early 1970s to two-thirds of years pre-K through college in the early 2000s. Families with children are left alone to bear the additional cost of six years of education.

The U.S. educational system remains nominally public, holding forth the promise of opportunity for all children. But the reality is quite different. The public-school system is now largely public in name only, as families bankrupt themselves to buy admission to decent public schools by purchasing expensive homes and paying tuition for a third of a basic education.

Federal Reserve Chairman Alan Greenspan recently delivered a speech on "the financial health of America's households." Amid rising bankruptcies, mortgage foreclosures, and credit defaults, he concluded that families have nothing to worry about. "[T]he household sector seems to be in good shape," he said. He typifies today's relationship between the government and families with children: no acknowledgement of a problem and no help in sight.

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