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Is College Worth The Money?

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2 comments Is College Worth The Money

Is college worth the money?

 

This is a question that, in my opinion, must be asked by all parents who have college bound students. The problem of college costs must be viewed as a business or investment proposition. You have to take a look at what the return on investment is going to be. This is important because the cost of a college “investment” versus what that degree will provide in an income has changed dramatically over the years.

Let me give you an example

My business partner Michael King, tells this story at our monthly workshops titled, “How To Get Thousands Of Dollars For College” that we do in the Nashville TN area. He enrolled as a freshman in 1981 and graduated from the University of Connecticut in 1985 with a BA in English. His cost of college which included tuition, room and board for all four years was around $12,000. When he graduated his first job paid $15,000 per year. From an investment perspective those numbers work. He was able to earn more in the first year after graduating than his total cost for college.

That same English degree at the University of Connecticut is $27,000 per year in 2013 and $108,000 for all four years, not inflated. What’s the likelihood that a student graduating with an English degree will find a job earning $108,000 in their first year? Not likely. Just in case you think that the U of Conn is a rare example let me give you that stats from the National Center For Education Statistics. The average cost of attendance for a 4 year college for 1980-1981 was $3,499. In 2010-2011 it was $22,092. That’s a huge 531% increase while inflation only increased 165%. So is college worth the money?

college inflation

4 Years? Maybe Not!

The above $108,000 total cost of college example assumes a student graduates in 4 years. What is the percentage of students who started at a 4 year institution in 2005 and actually graduated in 4 years? How about 39%. That means 6 in 10 did not graduate in 4 years. And only 59% graduated in 6 years. Why is this important? This means that the average student is underestimating the total cost of college by as much as 50%. It means that the numbers I showed you above may actually be worse for a lot of students.

College is worth money

College is definitely worth the money. The real question should be this, how much is college worth based on the type of income potential a student will have? There you go. Work the numbers backwards. What will a student earn with the degree they want then determine how much you are willing to pay for that degree. Let’s be smart about this. It’s very easy to get emotionally sucked into a higher priced college. The visit alone may tempt many to throw in the towel and just pay the price. The vibe of the campus, the energy, the excitement. Your student may be jazzed about a hot expensive college and are not necessarily thinking about the costs. Parents, you must keep a cool head and help your student make sound rational decisions. If a pricey college will give your student a justifiable earnings potential then it’s worth considering otherwise make sure you are not overpaying!

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2 comments… add one
  • Regina Thomas

    This article is an interesting look at the ROI for college tuition. Perhaps we should also consider the break-even point in a comparative analysis over a longer period of time. Another way of looking at whether or not a college education is worth it is to compare the earning potential of college v. non-college graduates.

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    • Jonathan Pagano

      Thanks for the input Regina, those are good points. If you have any of those stats please share them!

      Reply