Somehow I went wrong as a father. The other day my two daughters informed me they eventually want to go to college. I said, "No way!" and they attempted to argue with me. I have no problem with them talking back to me but somehow they've been brainwashed by society into thinking that college is a good thing for young, intelligent, ambitious young people. Let's look at the basic facts about higher education.
The average tuition cost is approximately $16,000 per year. Plus assume another $10,000 in living costs, books, etc. $26,000 in total for a complete cost of $104,000 in a 4 year period. Some people choose to go more expensive by going to a private college and some people choose to go a little cheaper by going public but this is an average. Also, a huge assumption is that its just for a 4 year period. According to the Department of Education, only 54% of undergraduates graduate within 6 years. So for the 46% that don't graduate, or take 10 years to graduate, this is a horrible investment. But lets assume your children are in the brilliant first half who finish within six years (and hopefully within four).
Is it worth it? First, let's look at it completely from a monetary perspective. Over the course of a lifetime, according to CollegeBoard, a college graduate can be expected to earn $800,000 more than his counterpart that didn't go to college. $800,000 is a big spread and it could potentially separate the haves from the have-nots. But who has and who doesn't?
If I took that $104,000 and I chose to invest it in a savings account that had interest income of 5% per year I'd end up with an extra $1.4 million dollars over a 50 year period. A full $600,000 more. That $600,000 is a lot of extra money an 18 year old could look forward to in her retirement. I also think the $800,000 quoted above is too high. Right now most motivated kids who have the interest and resources to go to college think it's the only way to go if they want a good job. If those same kids decided to not go to college my guess is they would quickly close the gap on that $800,000 spread.
There are other factors as well. I won't be spending $104,000 per child when my children, ages 10 and 7, decide to go to college. College costs have historically gone up much faster than inflation. Since 1978, cost of living has gone up three-fold. Medical costs, much to the horror of everyone in Congress, has gone up six-fold. And college education has gone up a whopping tenfold. This is beyond the housing bubble, the stock market bubble, any bubble you can think of.
So how can people afford college? Well, how has the US consumer afforded anything? They borrow it, of course. The average student now graduates with a $23,000 debt burden. Up from $13,000 12 years ago. Last year, student borrowings totaled $75 billion, up 25% from the year before. If students go on to graduate degrees such as law degrees they can see their debt burden soar to $200,000 or more. And the easy borrowing convinces colleges that they can raise prices even more.
So what should people do instead?
One idea: start a business. You don't need to be an entrepreneur to get valuable experience selling a service, or buying some set of goods cheap and selling them expensive. A year or two of that will be a massive education in salesmanship, finance, and how to deal with the ups and downs of any business. And if you're missing out on the 500 page books on The Deconstruction of Television then buy a Kindle and read in your spare time. Maybe travel a bit. Or learn to paint. All of these things can be done cheap, will provide massive life experience, and maybe even make some money.
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Best Regards, Bill
You advise to simply invest the money one would otherwise spend on tuition. It seems as if you're implying one has a lump sum of around $104,000 to immediately invest, which is a bit ludicrous. You later go on to ask how people can afford college. Here's an idea. Perhaps you should take your own advice and begin to invest some of your money, so the fund will potentially have enough after 18 years to allow your children to get an education. Besides, what type of society do you intend on creating with a bunch of uneducated, "rich" people?
And, since our economy hasn't been creating many middle class jobs in recent decades, the hope that a college education will lead to a better living may be a cruel illusion.
you know of a savings account that is offering 5% interest?
As far as employment skills are concerned, one probably is better off becoming a plumber, electrician, mechanic or salesperson. I have had too many friends who have spent a lot of time and money on a college degree and have not reaped huge rewards for their investment. Having grown up in a university town, I am too familiar with PhDs who make a living bussing tables, being store clerks, or finding a job as a minor bureaucrat.
Get the college degree because you enjoy learning or because you want to expand your world, or to find a good spouse. But don't think of it as the path to riches.
My big sister thinks that my desperation has eaten away my nerves and composure and I should chill, accepting fate as it is. She's probably right.
But was it all worth it? No, absolutely not - should have worked as a sun-kissed long-legged blonde bar tender somewhere in Brazil, dispensing advice to lovesick drunkards instead. Or anything, for that matter.
There's too many people going to college, the world does not need all of us.
Unfortunately many of the colleges assumed these tuition dollars would inflate forever and they decided to use the money to build research facilities, country club residences, etc. This means it is financially difficult for them now to lower tuition.
The biggest problem for Americans is their 'perception' of college. We bought into the concept that 'if my child gets accepted, he deserves the education, and price of tuition should not matter'. This "blind need' idea increased demand at colleges, and they continued to increase tuition fees. At what point will we say the small liberal arts college isn't worth the price? At $30,000 / year? $60,000 / year? $90,000 / year? Colleges have been marketing for 30 years to this concept of "deserving" an expensive education. No one was willing to say the emperor wears no clothes.
Maybe the top 30 universities in the country are worth $40,000 / year (Ivy's and the west coast Ivy's and a few of the Techs like Cal Poly and MIT). The rest need to rethink their mission and expenses.
If your daughters want to go to college, you should support their hopes and dreams. But I don't think you - or they - should borrow money to achieve a college diploma. They can attend community college for 2 years and then switch to a state school, and graduate debt-free.