Why Day Care for a Child Under 4 Costs More Than College

cost-of-childcare-in-usa

To understand some of the difficulties facing America’s families today, you need to examine only one shocking data point: Day care for a single child under age four costs more than college and just about the same as monthly rent. At least that’s according to a recent report by the New America Foundation.

I’ve spent a lot of time writing about how average salaries don’t support purchase of average-priced homes across the country, why inexpensive starter homes are disappearing and how that’s driving Americans nuts.

But young parents have it even worse. The New America Foundation report laid out the stark statistics:

• The average cost of full-time care in child care centers for all children ages zero to four in the U.S. is $9,589 a year, higher than the average cost of in-state college tuition ($9,410).

• In four states — Kentucky, Montana, Oregon and Wisconsin — the cost of full-time care is more than the median rent in the state. In 11 states—Idaho, Illinois, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Ohio, South Dakota, Vermont, Washington — and the District of Columbia, full-time care is greater than 90% of the typical cost of rent.

• Full-time infant care in centers ranges from a low of $6,590 in Arkansas, about 15% of median income, to a high of $16,682 in Massachusetts, where it costs one quarter of the median income.

• Full-time in-home care costs range between $25,774 a year in Wisconsin and $33,366 a year in Washington, D.C.

Consider now that these data points reflect the costs of a single child — families with siblings see those numbers rise accordingly.

For parents of the 12 million kids in America who are too young for kindergarten, the numbers simply don’t work.

Brigid Schulte, author of the New America report and director of the advocacy group’s Better Life Lab, had something perhaps even more shocking to say about her data: It isn’t new.

“Child care costing more than college … it’s not like that’s a new statistic,” she said. “The Economic Policy Institute had it, for example. But it just doesn’t seem to sink in.”

In my discussion of what I believe to be the broken housing market, I have often cited data showing that housing prices have risen far faster than incomes, which shouldn’t happen in a normal market. Prices of goods should rise roughly in line with the amount of money chasing after those goods. This disconnect, which has many causes, is the source of much strife for American families.

Child care is an equally broken market, and perhaps with even more dire consequences. While families are paying exorbitant prices to provide care for their children, child care workers barely earn more than the minimum wage. This contributes to high turnover — workers sometimes leave for more pay at fast-food restaurants, Schulte said — and quality issues.

With parents paying so much, why are workers paid so little? It’s a simple math problem, Schulte said.

“There’s a lot of misunderstanding out there … It’s about bodies. About labor costs. To have a high quality infant care, you need a ratio of 1:4. For toddlers, 1:6. Compare that to a kindergarten teacher who might have 1:12, or an elementary school teacher who might have 20 or even 30 kids,” she said.

While some large child care providers that contract with corporations earn decent profits, the punishing mathematics of child care mean most outfits are mom-and-pop operations clinging to thin profit margins. It’s a recipe for stress.

“We are subsidizing child care on the backs of paying low wages,” Schulte said. “We are limping along in this system where we pay the least we can [to workers], and the vast majority of child care in America is mediocre at best. And a portion of it is dangerous.”

In such an ad-hoc system, parents understand well the stress of finding day care for their kids. But a different study suggests they don’t understand its shortcomings. NPR, the Robert Wood Johnson Foundation, and Harvard T.H. Chan School of Public Health released survey results earlier this month showing a stunning disconnect about perceptions of child care quality. Far more than half of parents in the NPR poll (59%) rated their child care as “excellent.”

But experts think otherwise. The National Institute of Child Health and Human Development Study of Early Child Care and Youth Development, for example, found in 2006 that less than 10% is “very high” quality. Other expert studies have come to similar conclusions.

This could be simple confirmation bias at work — once parents find a child care solution for their families, they nearly have to believe it’s good. Other data in that study suggest why. When asked for the reasons they chose a child care provider, “location” ranked highest at 27%, with “cost” at 18%. “Trustworthy” was mentioned by 20% of parents. “Well-trained providers” was only 12%.

Families of young children are sensibly prioritizing getting through the day.

The fragility of the arrangement is clear from the study as well. A routine, occasional illness can put the family income in peril. Three out of four employed parents faced with a sick child said they had to miss work, and nearly half (47%) said it had an impact on their job. Of note: Mothers are more than three times more likely than fathers to stay home when a child is sick.

The study’s authors say that has more to do with work flexibility than gender, but traditional views on gender also play a role.

America’s seeming stubborn refusal to deal with the child care crisis has roots in such gender issues, Schulte argued. From the first efforts to establish early childhood programs in the 1970s through today, there’s been reluctance for the government to subsidize efforts that would encourage women to leave their young children for work, she said, or to challenge the traditional breadwinner-homemaker family structure. But that debate has been overtaken by reality: A majority of kids grow up in households where all parents or guardians work, in all regions of the country, the New America report said.

Schulte argued Americans need to think of early child care as education; plenty of studies show critical brain development occurs in the years before public school kicks in. Studies show kids who show up behind on the first day of kindergarten often don’t catch up to their peers, she said. While the wealthiest families find a way to pay $10,000-per-child bills for high quality child care, most of America cannot.

“There is no education in the U.S. that is not subsidized — even private education is subsidized — except early childhood,” she said. “But we have to think of that as education … that is the time your brain is developing the fastest.”

Americans need to consider the broad consequences of kicking the issue down the road, she said.

“What we have now is a crazy patchwork, a fragmented unsustainable system that is a factory for inequality,” she said. “We are creating inequality from the very start. The achievement gap that shows in high school … can be traced back to the gap on the first day of kindergarten. Those zero to five years are really critical.”

Surprisingly, this year’s otherwise incendiary presidential election season gives Schulte a glimmer of hope. Both Donald Trump and Hillary Clinton have talked about the need for family-friendly policies such as parental leave. That might mean America is finally primed for a national discussion on early childhood issues.

“This brings up a very deep-seated argument about the role of government in the U.S.,” she said. “But there is a sea change right now in that both the Republican and Democratic candidates are saying the government should be involved in child care.”

[Editor’s Note: If you’re thinking of applying for a mortgage, it’s a good idea to take a look at your credit first. A good credit score can help you qualify for the best terms and conditions on the loan. You can do this by pulling your credit reports for free each year at AnnualCreditReport.com and by viewing two of your credit scores, updated every 14 days, for free on Credit.com.]

Image: David Clark

The post Why Day Care for a Child Under 4 Costs More Than College appeared first on Credit.com.

TRUMP VS. CLINTON: Where the Candidates Stand on College Costs, Child Care, Family Leave, and Health Care

trpvshfc2

With the election a month away, presidential candidates Hillary Clinton and Donald Trump have just a few weeks left to woo voters across the U.S.

If you’re still on the fence about which candidate to vote for, your final decision may hinge on how their policy ideas could potentially impact your wallet.

We have simplified and broken down each candidate’s stance on three key issues — college costs, child care and family leave, and health care — to help you understand exactly how each candidate’s proposals could affect your wallet.

Read more about their stances on job growth, taxes and housing here > 

College Costs

hillary_final

Hillary Clinton’s college debt plan promises a “debt-free future” for college graduates. Clinton intends to use her New College Compact to erase college tuition at in-state colleges and universities for families earning up to $125,000 annually. The plan caps income at $80,000 to start off, then will rise by $10,000 for the next four years to hit $125,000 in 2021.

The New College Compact also promises to help students pay for the cost of college by protecting the Pell Grant’s funding and restoring year-round Pell funding so that students can receive the grant over the summer in addition to fall and spring. In addition, the plan will invest in Historically Black Colleges and Universities and other minority-serving institutions and grant a 15-fold increase in federal funding for on-campus child care among other factors. The Compact requires colleges to be accountable and pursue cost-reduction efforts, requires students to work at least 10 hours a week, and will reward those who create programs that provide credible education at a low cost.

Clinton has also pledged to provide debt-relief help to struggling graduates. Her plan outlines efforts to make sure all graduates can refinance loans, enroll in income-based repayment (no more than 10% of monthly income), get help from employers, defer repayment from debt incurred from starting a business for up to three years, and be rewarded for public service. Finally, she proposes a three-month moratorium on student debt collection to give debtors the chance to get on board with the resources she plans to provide.

trump_final

Donald Trump’s plan to address college costs begins with a proposal to get rid of student loans issued directly by the U.S. government, a system that has been in place since 2010. Trump would take the U.S. government out of the student loan business, leaving student lending up to private lenders.

He says he will work with Congress to enact reforms that will give tax breaks to colleges and universities that make a “good faith effort” to cut back costs and student debt. By doing this, Trump says he will make attending, paying for, and completing one’s education at a two- or four-year college or vocational or technical school more accessible.

Child Care and Family Leave

hillary_final

Child care costs rose more than 122% over the past 10 years for American families.

Hillary Clinton’s plan to address the rising costs includes giving a raise to child care providers to incentivize high-quality and effective child care. She plans on using the Respect and Increased Salaries for Early Childhood Educators (RAISE) initiative with state and local governments to fund the salary increases. Clinton also plans to double federal funding for the Early Head Start and the Early Head Start–Child Care Partnership program to allow room for twice as many children in the program.

When it comes to family leave, Clinton says she will guarantee up to 12 weeks of paid family and medical leave to workers who need to care for a new child or sick family member. Individuals who fall seriously ill or are injured will also get up to 12 weeks of paid medical leave. The pay will be at least two-thirds of an individual’s current wages, but it won’t cost businesses anything extra. It will be funded by money generated through tax increases on the wealthy and tax reform.

Clinton also proposes capping families’ child care expenses at 10% of household income.

trump_final

Donald Trump would change the tax code to allow working parents to deduct child care expenses for up to four children and elderly dependents from their income taxes. The deduction would be capped at “average cost of care for the state of residence,” according to his plan. According to an analysis by the Tax Policy Center, higher-earning families would have the most to gain from Trump’s child care plan, as the poorest households rarely pay federal income taxes.

Trump also proposes creating special child care savings accounts where families can make tax-free contributions toward child care. Currently, families may contribute to similar accounts but only if those accounts are offered by an employer. His proposal calls for a federal match of up to $500 to families who use the special accounts.

On the issue of family leave, Trump proposes six weeks of paid maternity leave.
He hasn’t specifically said how his plan would be paid for, but in a campaign fact sheet he says most of his tax reforms would be paid for by “increases in economic activity that accompany pro-growth tax reform, better trade deals, regulatory and immigration reform, and unleashing American energy.”

Health Care

hillary_final

Hillary Clinton largely plans to focus on continuing and expanding the Affordable Care Act (Obamacare). She says that she will work with state governors to expand Medicaid to the 3 million people who are uninsured because states chose not to expand the program. Clinton says she will allow the Secretary of Health and Human Services to block or adjust health insurance premium rate increases to make coverage more affordable. She also says she will cap prescription drug costs and limit out-of-pocket expenses for families.

Clinton says she will also make efforts to give Americans the choice of a public-option insurance plan, or a government-run health plan, in each state and to allow those 55 years or older to opt into Medicare. The qualifying age is currently 65.

trump_final

The first part of Donald Trump’s health care plan is to repeal the Affordable Care Act and replace it with Health Savings Accounts (HSAs) to help cover out-of-pocket expenses. HSAs are usually coupled with high-deductible health plans to allow workers to set aside pre-tax dollars for medical expenses. Unlike many existing HSA accounts, the ones that Trump is proposing will have no limit and will become part of an individual’s estate and will enable people to pass the sum onto an heir after death, tax-free.

Trump says he will also allow individuals to deduct their health insurance premium payment from their tax returns. Finally, his plan outlines an effort to work with states to identify individuals who have not had continuous health coverage and create high-risk pools to give them access to health care coverage.

Make sure to register to vote by Oct. 14.

Illustrations by Kelsey Wroten.

Click here to find out more about Trump and Clinton’s platforms on job growth, college costs, taxes and housing > 

The post TRUMP VS. CLINTON: Where the Candidates Stand on College Costs, Child Care, Family Leave, and Health Care appeared first on MagnifyMoney.

The 10 Cheapest States for Day Care

child_care

So you did your research, filled out applications and survived the interview process. Congratulations! Your child is off to the best day care in town. (Yes, day care is now this involved. It certainly wasn’t like that when we were kids!)

But with this accomplishment comes a seriously hefty price tag. The Economic Policy Institute recently released data about child care costs in the U.S. that found 33 states, plus Washington D.C., have day care facilities that charge more than college tuition for a four-year public school. That’s mind-blowing, especially for families with more than one kid.

Fortunately, some states’ child care won’t set parents back more than the cost of a mortgage. Using annual child care cost data from the Economic Policy Institute’s study, along with their stats on annual housing, we’ve listed 10 of them here.

10. Oklahoma

Annual child care costs: $6,788

With the average annual cost of housing at slightly more than $8,200 in Oklahoma, child care costs 17.2% less than average rent in the state.

9. Wyoming

Annual child care costs: $6,541

Wyoming parents face child care costs around $2,785 more per year than the cost of in-state tuition at a local college.

8. South Carolina

Annual child care costs: $6,475

Sending your little one off to child care in the Palmetto State costs around $70 less than in Wyoming, but it will still take about 12% of an average family’s income.

7. Kentucky

Annual child care costs: $6,294

In Kentucky, families look at around $525 of their annual salary going to child care each month — and that’s just for one child.

6. Arkansas

Annual child care costs: $5,995

In Arkansas, minimum-wage workers dropping their little one off for the day would need to work full-time for 19 weeks straight just to pay off the costs of child care. (For more tips on saving without feeling miserly, go here.)

5. Tennessee

Annual child care costs: $5,857

The average cost of housing in the Volunteer State is just more than $8,600 annually, which means caring for a child costs 67.8% of rent in the state.

4. Louisiana

Annual child care costs: $5,747

Parents working to pay for expenses like child care would need to earn minimum wage for 20 weeks on a full-time basis in order to pay for one year of child care — and the costs would still take more than 10% of their income.

3. South Dakota

Annual child care costs: $5,661

While annual housing costs in South Dakota ($8,120) are just $400 more than the average cost of in-state tuition, child care is right up there. In fact, care for one child can take almost 10% of a family’s income. 

2. Alabama

Annual child care costs: $5,637

Although it has one of the lowest price tags in the nation, Alabama still sees residents facing child care costs that are 33.7% less than in-state tuition at a local four-year college. (Read up on how to pay for college without creating a mountain of debt here.)

1. Mississippi

Annual child care costs: $4,822

As the state with the lowest child care costs, Mississippi still sees parents pay around $400 each month to send their little ones to child care.

To think these numbers are tied to the cost of sending toddlers to preschool seems ridiculous, but to put it in perspective, Washington D.C., has the most expensive preschool costs in the nation, at $22,631 per year. Massachusetts has the second-most expensive costs for preschool, at $17,062 per year.

The numbers don’t lie — paying for child care can get expensive and some parents who want the best for their kids may even overextend themselves financially. Just remember — maxing out credit cards or taking on debt to pay for child care can seriously damage your credit. You can see how your credit card balances are impacting your credit scores for free on Credit.com.

More Money-Saving Reads:

Image: diego_cervo

The post The 10 Cheapest States for Day Care appeared first on Credit.com.