Is college still worth it?

I have no idea if he actually said this but I saw it the other day and thought this is cool.

The picture to the right might sound a little aggressive if you have hardcore beliefs of “A COLLEGE DEGREE IS A MUST HAVE. IT PROVIDES A BETTER LIFE. YOU’LL HAVE MORE OPTIONS AND A BACK UP PLAN.” However, I only put it up there because sometimes you need to look at things a little more critically. Some would argue that thinking more critically is the purpose of college. So if you are one of those people, take a step back and let us just analyze for a little bit on the question: “Is college still worth it?”

My history and own experience with college

If you want a little bit of history about me. My wife and I have graduated from the University of California, San Diego (UCSD). I have a Bachelor of Science in Management Science (think economics with more math) with a minor in Computer Science. I have greatly benefited from my degree, so I won’t argue the fact that it has opened the doors that I needed to have opened at the beginning of my career. However, I don’t even use the main area of study from my degree. I ended up becoming a Software Engineer. Also, from my experience a lot of the friends and family members that have finished their secondary educations don’t even use the degree they have. For example, one of my best friends has a Masters in Criminology from the University of California, Irvine (UCI), but he runs a successful Martial Arts Studio. I guess my point in saying my history and experience is to kill the argument of “Well, you didn’t go to college so how would you know?”. (I saw this happen in the video below and laughed SO hard I couldn't stop for about ten minutes).

Why I chose to write this article?

Personally, I have talked to my friend about this and she is one of those hardcore “college is a must” people. I tried to ask “What if your kids don’t want to go to college?” and I was immediately shut down with “They have to go.” To me, this was how our parents thought. However, our parents could afford to go to college if they wanted to with non-crippling costs (I’ll get to that later). Unfortunately in the current times, we need to think about the cost of college that could potentially hold us back financially an entire decade or longer. The main difference, I believe, between her and I when we think about the cost of college is our experience with student loans. I had about $40,000 and she didn’t have any. It was stressful to think about the loans when I was working for $40,000 a year at the start of my career. I’ll stop digressing because I can write about that later on. The point of this was just to show that I have a personal reason to write this. Maybe I can save my nieces in the future if they have a good plan that doesn’t involve college. KEY WORDS: GOOD PLAN!

Secondly, I really wanted to research the numbers myself when I saw the video to the right. I was amazed at some of the figures they were throwing out. Also, just by some of the audience polls that they took in the middle of the show. The biggest one for me was how many of them didn’t actually go into careers that their field of study was in. There are some things I agree with and things I don’t with all of the panelists, but I won’t bore you with typing a reaction blog. (A reaction video is probably better, but I’m not brave enough yet to do something like that. YET!)

Assumptions

I will be the first to admit that there will probably be a few assumptions that will affect this blog article.

1) Colleges are in it for the money. Now, it might not be because they are greedy, but even research colleges need money to keep up with their research. They need to be able to fund the entire college experience from academics to athletics.

2) A college degree isn’t a good “fall back” plan if you are going into debt for it. The amount of debt people take out for college seems is increasing. In 2012, the total student debt was around 1.2 TRILLION. At 2018, it increased to 1.5 TRILLION. Just shows that the average college student probably will need some sort of loan to attend college. The potential fall out could be a decade of financial expenses before you can think about starting other aspects of life such as marriage, buying property (not even a house), and having kids.

3) The majority of people don’t understand the way student loans work. Yes, loans are generally the same. You borrow money and need to pay it back with a little bit of interest. But, it’s not that simple for student loans and wealth management isn’t something that’s taught in high, middle, or elementary school. You need to take your income at the end of your degree into account. If you are going to school for engineering, medical, or law. You might be able to work everything out. However, the one thing I think a lot of people miss is that as of 2020 student loans CANNOT BE WIPE AWAY WITH BANKRUPTCY. So whatever you take out in loans will follow you no matter what. If you went to college and took out $35,000 in loans and only make $40,000, life is going to be tough for the next ten. I’m talking from personal experience.

4) I am a very cynical individual especially when it comes to money. This means that I believe that people are motivated by self-interest and distrust most people’s sincerity or integrity. I think it’s only fair to put this out there. My own mentor came to me the other day because he wanted to start a non-profit to help kids experience different life milestones before the end of high school. In other words, he wanted to help kids get internships at big companies, help them learn financial responsibility, and learn life skills such as coping mechanisms for mental stress. However, he didn’t come to me because he needed my help. He wanted me to find the weaknesses to his plan because in his own words “you are one of the most honest and cynical people, I know.” Challenge was accepted and I came up with at least one potential problem that I could see happening: Helicopter parents over pressuring their children to enter the program and “succeeding.”

The College Board

When I was about to pick a college during the Senior year of high school, my parents told me that they would only pay for the best college that I got into. In all honesty, I just wanted to go to San Diego State University (SDSU) and chill with my buddies while getting an education. However, I got into the University of California, Riverside (UCR) and was forced to go because of its “ranking” in the colleges out there. The way they decided on the rank: “The College Board”. This was their main source when trying to get me to choose a college. They also brought out little articles from US News and other news outlets. However, the college board was always a standard that I heard regularly. So I will be reading the research that this organization puts out. You can find it here. <COLLEGE BOARD: Trends in College Pricing and Student Aid 2020>. IF YOU DON’T WANT TO READ THE ENTIRE STUDY, THERE IS A HIGHLIGHTS SECTION ON PAGE 2 and 3. You’ll be able to just see the trends and overall picture there. In fact, the top paragraphs of each page make up the highlights.

The Price is Growing

In 2020-21, the average published (sticker) tuition and fee price for full-time in-state students at public four-year institutions is $10,560, $120 higher than it was in 2019-20 (1.1% before adjusting for inflation).

Ironically, when you adjust for inflation school is actually cheaper today than it was last year (based on an average 2.0% inflation rate. Although, I just googled the inflation rate for 2020 and it’s seems a little low. I’ll need to find a more credible source). Maybe this is a good thing! We are heading in the right direction. However, think about what your income was during college. I was working at Kohl’s at the time making less than $10 an hour. This would mean I could only afford tuition and maybe gas for the car for the year. So I’m lacking food, rooms and board, books, etc. If you look at the numbers with absolute values (meaning no inflation), the cost of college is rising so the someone one would need to borrow would need to be higher. The “Table CP-1” below is on page 10 of the study and “Figure CP-1” is on page 11.

ONE THING THAT’S CRAZY TO ME IS THAT, THIS CHART SHOWS ONLY ONE ACADEMIC YEARS WORTH OF COSTS. So if you are starting college this year. Take the top row of your enrollment situation and multiple it by 2 or 4. You’re looking at 40k+ for a four year university.

Now there isn’t a comparison here from a previous year, but it gives you an idea of what the total cost per year for a college student is.

It’s worth to note that these prices are PER YEAR COSTS. So this isn’t total cost to go to college, but only one years worth of expenses. This is shown in the “Also Important” section of page 10: "The prices shown in Table CP-1 are for full-time students, who enroll in 30 semester hours or 45 quarter hours per academic year. Prices for part-time students are typically less than those for full-time students.” and “The prices shown in Table CP-1 are for one academic year. The total price of a college education depends on how long a student is enrolled before completing a degree—frequently more than four years for a bachelor’s degree and more than two years for an associate degree.”

If you look at the rest of the over time pages you can see that prices have been steadily growing as well, but since everyones living situation at college is different. I will only cover tuition at the moment. This is covered in Page 12 called “Published Tuition and Fees over Time.”. The highlight for this section was “Between 1990-91 and 2020-21, average published tuition and fees increased from $1,810 to $3,770 at public two-year, from $3,800 to $10,560 at public four-year, and from $18,560 to $37,650 at private nonprofit four-year institutions, after adjusting for inflation.”

Found on Page 12.

So from the study, prices of tuition at college have more than doubled the last 30 years. However, I also find the “Also Important” section of each page the most interesting.

• The increases in the net prices that students actually pay, after taking grant aid into consideration, have been smaller than increases in published prices.
  See Figures CP-7, CP-8, and CP-9 for details on estimated average net prices over time.

• Over the 30-year period from 1989 to 2019, median family income in the United States increased by 26%, after adjusting for inflation. (U.S. CensusBureau,2019IncomeTableF-7;calculationsby

  the authors)

Why this is important for you? For the first bullet point, even when students are given grant aid and students might be paying less than they did before. Where does the money from the government based grants come from? Also, the loans that student still need to take out how are they covered? Guess who at the end of the day might have to pay for their student loans via taxes? That would be all the taxpayers in the U.S. So even if you didn’t go to college, you would have to pay for everyone else’s education if they can’t handle their student loans.

For the second bullet point, if college cost doubled you would hope that the family income would double to cover the costs. However, the median is only grown 26 percent. Also, the fact that they used median vs. average to me is very concerning to me. But it is safe to say, that there is a clear signal that the cost of college is out growing the growth of a families income.

Conclusion

Is college worth it? In my opinion, (and I really hate to say this because it sounds like a cop out) it depends. What are you studying, will you be able to handle the students loans taking average income of your field of study? For example, a Software Engineer probably makes ~100k a year and student loans at about ~40k is possible to pay off in a timely manner without the loans digging into your income for very long. However, if you become a teacher where the average pay in the US is ~60K and still have a 40k loan. After taxes, it would probably take you a while to pay everything off, which means putting off your life for a long time too.

If you want to put the extreme examples to the test just watch this video by Graham Stephan. He explains at what age do doctors and plumbers reach the same net worth when they both make sound investment decisions.