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Americans know the costs of getting a college degree are spiraling. They've heard horror stories of students stuck with huge debts they can't repay. They know how lousy the job market has been for new graduates.

And so they've leaped to exactly the wrong conclusion.

Nearly six out of 10 Americans told Pew Research Center pollsters recently that a college education isn't a good value for the money. That opinion was held about equally among college graduates and nongraduates, although 86% of the graduates said college was a good investment for them personally.

Those dissing the value of higher education are right in one sense: A college degree isn't worth what it used to be. It's worth more.

In the 1970s, those with four-year degrees earned an average of 25% more than high school graduates. Today, they earn 60% more.

It's not so much that degree holders have made huge economic progress in recent decades; it's the fact that people without degrees have lost so much ground. Men without college degrees earn 31% less, in inflation-adjusted dollars, than their counterparts did 20 years ago.

Image: Liz Weston

Liz Weston

After factoring in the costs of college and earnings forgone during those years, the typical college graduate earns $550,000 more than the typical high school graduate over a lifetime, according to a Pew Research analysis of census data.

Those without college degrees not only make less; they suffer higher rates of unemployment as well. The unemployment rate for those with four-year degrees remains under 5%. It's nearly twice that for those with only a high school education, and almost three times higher for those without a high school diploma.

The economic prospects for those without college degrees certainly aren't going to get better. The manufacturing and union jobs that used to provide decent incomes for less-educated workers will continue to disappear or go to other countries.

Yet only 30% of high school graduates manage to get bachelor's degrees these days. An additional 10% will get a two-year degree. Those percentages haven't budged much, even as the financial stakes have risen -- which has drawn the attention of political leaders and economists, who worry that America's ability to compete in a global economy will suffer.

The college dropout rate is phenomenally high. At four-year schools, only four in 10 students earn their degrees within six years. Only 20 percent of those who start at two-year institutions graduate within three years.

And it's not necessarily that these kids can't hack it -- that school bores them, or they don't like sitting in class or the classes are too difficult. It's money.

First, you need to understand that college for most students doesn't resemble college as depicted in the movies. Only one in four students attends a residential, four-year school, according to the U.S. Department of Education; the rest go to commuter colleges, and most work. In fact, 45% of students attending four-year schools and 60% of those attending two-year colleges work more than 20 hours a week. So perhaps it's not surprising that:

  • The majority of college dropouts (71%) surveyed in a 2009 Public Agenda report for the Bill & Melinda Gates Foundation cited the need to work and make money as the reason they left school. More than half (52%) said they couldn't afford the fees and tuition.
  • The Pew researchers found similar responses from a pool of 18- to 34-year-olds not currently enrolled in a four-year school -- a group that would include dropouts as well as those who never attended. Asked why they weren't in college, 67% cited the need to support their families, 57% said they preferred to work and make money and 48% said they couldn't afford school.
  • The Public Agenda report found seven out of 10 (69%) of those who dropped out were paying for their education with no financial aid or loans, and 58% didn't have help from parents or other relatives. Of those who graduated, only 43% lacked financial aid, 51% had no loans and 37% lacked parental help.
  • Those who dropped out also were less likely to be convinced of the economic value of higher education, according to the Public Agenda report. Fifty-two percent of dropouts agreed with the statement "In the long run, you will make more money if you have a college degree," compared with 66% of graduates; 50% of dropouts say they knew "many people" who earned a good living without a degree, compared with 40% of graduates; and 43% said they went to college because their parents "always instilled in me the importance of higher education," compared with 57% of graduates.

Some who drop out or never start college point to the outliers -- the small but significant group of people who aren't financially better off after getting degrees.

In "The College Conundrum," researchers for the Center for American Progress found that one in five men (19.4%) and one in seven women (14%) aged 25 to 34 actually earned less than the average high school graduate.

"For those college graduates at the middle and top of the post-college pay scale, college in hindsight looks like a sound investment, but not all graduates do this well," the report noted. "Despite high and rising financial returns on a college degree, an important share of college graduates still make less than the average high school graduate in the same age range, even without factoring in the direct costs of college."

(There are outliers on the other end of the scale, of course -- the Bill Gateses and Richard Bransons of the world who got rich without college degrees. As a friend of mine told her kid, "Those people are extraordinary. You're not that extraordinary, sweetheart. You're going to college.")

Public Agenda is preparing a follow-up report, to be released later this month, that explores the roles played by financial aid and loans in people's decisions to attend and complete college. But based on a couple of decades answering questions about money and education, I'm going to venture the following about people who don't get college degrees or whose degrees don't pay off:

Many don't understand the financial aid process. The fact that so many dropouts didn't have financial aid or loans jibes with what I often hear from people, especially those whose parents didn't attend college: that financial aid is for somebody else. Many people don't understand how to apply for financial aid, or that people without extreme need can get help, or that anyone can get federal student loans, regardless of need.

Many don't understand debt. Some people view all debt as bad, while others view all student loan debt as good. Both are wrong. A moderate amount of federal student loan debt can be an investment in your future -- as long as you limit your borrowing and get your degree. Federal student loans offer relatively low, fixed rates, numerous repayment options and the possibility your balances can be forgiven.

That's in contrast to private student loans, which are variable-rate and carry far fewer consumer protections with no forgiveness options. When you hear nightmarish tales about huge student loan debts, it's typically people who overdosed on private student loans.

They don't pick the right majors. A majority of students understand that college has an economic payoff, but they may not understand that all majors aren't created equal. Colleges can and do train people for dying, poorly paying fields. If you want your degree to pay off, you need to research which jobs pay well and are in growing industries and get your degree in one of those fields. The U.S. Department of Labor can help.

If you want your kids to succeed in the 21st century, getting them into and through college is all but essential. Here are the messages they need to hear:

"College is not an option -- it's an expectation." The Public Agenda report shows the strong impact that parental expectations, or the lack thereof, have on their kids. Maybe you and your parents didn't need degrees to succeed, but your kids will, and you should make that clear.

"What you study matters." College can teach you to think logically, research effectively and open your mind to a variety of learning experiences. But if you want the investment in money and time to pay off in financial terms, your kids will need to study for fields where there is actual demand for their knowledge and skills. The salary difference between the highest-paying and lowest-paying majors is vast, according to a recent study using U.S. Census Bureau data.

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"Get an education you can afford." A good rule of thumb is to borrow no more for your education than you expect to make your first year out of school. If students can't afford to pay for school with that level of borrowing, plus any parental help or savings, then they can't afford the school they've chosen. Other options could include attending a community college for a year or two or switching to a more affordable four-year school.

"Borrow smart." Limit your borrowing to federal student loans only.

Undergraduates can borrow up to $31,000 in total for their degrees. (Graduate students and parents can borrow more but should be careful not to overdose on debt while doing so.) Private student loans are like paying for college with credit cards and generally should be avoided. To learn more about loans and financial aid, visit FinAid.org.

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.