Is College Worth The Cost?

Costs of college

The cost of college has been increasing for years and according to reports from College Board, the average private four-year college costs over $39,000 per year, while the average public university costs over $30,000 out-of-state or $19,000 in-state.

Students have a few choices when deciding where to go to college: They can go to a school that costs on average from $19,388-$39,028 per year, they can have their parents pay for school, or they can take out student loans.

Since most parents don’t have tens (or hundreds) of thousands of dollars saved up for their children’s education, two-thirds of 4-year undergraduate students graduated with some debt in 2007-2009 with the average balance for those who had student loans being over $23,186 (finaid.org). That doesn’t sound so terrible: the average amount of student loans for a graduating student is slightly than one year’s worth of expenses.

It’s fairly apparent that student loans are necessary for most students who want to pursue higher education, but for the extremely high cost, is it worth the investment?

Benefits of college

A 2007 College Board report shows that median lifetime earnings for individuals with bachelor’s degrees are 61% higher than median lifetime earnings for high school graduates with no college experience. For those with even higher degrees, the lifetime earnings are are 93% to 187% greater than a high school graduate’s (collegboard).

Taking into account loan payments, the typical student who borrows to cover all tuition and fees* begins to exceed the total earnings of a high school graduate at age 33 and has total lifetime net earnings of over 35% more.

*That is a big assumption, as we saw earlier that the average student has less than $24,000 in student loan debt upon graduating while the average cost of attending an in-state public college for one year is over $19,000. The average student would exceed the total earnings much earlier and have greater lifetime net earnings.

On average, the total net earnings of those with college degrees greatly outweigh those with just high school diplomas, so the choice of going to college seems very much worth it.

Now that we’ve determined that higher education is worth the cost, and since the costs are high, student loans are likely the way to go, we’ll investigate the different types of student loans in part 2 tomorrow. Sign up for the RSS feed or get email updates and make sure you don’t miss it!

8 Responses to Is College Worth The Cost?

  1. Craig Ford says:

    I think the value of a college education depends on what you put into the education. I think too many people falsely assume that a degree is all employers are looking for. Instead they want someone who has actually learned something from their degree.
    The degree has no value in and of itself, but can be leveraged to make you marketable.

    • Daniel says:

      @Craig Ford, I think that goes for a lot of things, not just education. Your experiences are only as good as the amount you value them.

      I highly doubt that most high school students are doing a cost-benefit analysis on the benefits of going to college, but if they did, they would find that on average, it’s worth it.

  2. Simple in France says:

    I must agree with Craig. If you graduate with a Bachelors in business and a “C” average plus no work experience or internships. . .uh, you’re not exactly lined up to make a lot of money or even find work very easily. The line of work you intend to go into and your ultimate credentials for finding that work really do make a difference in your earnings.

    Also. . .do your calculations take into account that people who do not go to college get into the work force earlier and start earning money and building up seniority faster? I feel like I say this often, but I went to 6 years of university to become a teacher and ultimately found myself making the same yearly salary as a friend of mine who dropped out of high school and eventually opened her own beauty salon–except she’d been earning the whole time I was in school–luckily my student loans were small.

    But yes, I do see the merit in taking out a student loans IF you intend to use your degree and IF you’re not putting yourself into unreasonable debt.

    • Daniel says:

      @Simple in France, Yes, the reports include breaking into the workforce earlier. It’s actually a pretty detailed report that has a lot of good information.

      I’d take the “A” average and irrelevant jobs over the “C” and internships.

      I was probably a mix, I got As/Bs, had some decent internships but nothing directly related. I turned out fine, but I know friends who had relevant work experience but their grades prevented them from getting the top jobs.

  3. Another assumption that is being made is that the students graduate. In some cases, the students don’t and end up with the loans plus no degree (the worst of both worlds).

    • Daniel says:

      @Roshawn @ Watson Inc, That is a worst case scenario. If you’re going to get student loans, be confident in your decision and make sure you are willing to go the distance!

      • @Daniel, yes, but nearly EVERY student and their family believes that they will finish, but life happens. I have seen this scenario play out many times. Often the student may end up saddled with several thousands in student loans and little means to pay them. Personally, I think a good financial plan should allow for the possibility of a worst case scenario. It’s not being negative… just prepared.

        • Shona says:

          @Roshawn @ Watson Inc, This happened to me! I had earned my AS degree; but dropped out before earning my BA. I had about $60K in student loans at the time! I defaulted on them, but through a series of consolidations and forbearances…got in good standing again. I then returned to school to finish my BA and the straight to graduate school (before I could become ineligible for student loans yet again!)

          I actually made more money as a college dropout than I do now. However that is not really the point. Without a degree I felt trapped and not as competitive to move upward. After 5 years, I am finally back at what I made before salary-wise. But at least now, I don’t have BOTH the student loans and the unfinished degree looming over my head.

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