6/2/2011 12:38 PM ET|
Should your kid skip college?
Soaring costs and the burden of student loans are giving plenty of people pause. Is a college education really worth it?
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.
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.
"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.
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What a significant portion of these people DO have to show for their education is student loans. Higher education is creating a Pool of Educated Poverty.
The article kicks off by say 6 out of ten say a college education isn't "a good value for the money."
But then it says 86% of college grads say college was a good investment!
In other words, those who think it's not worth it are those who didn't go and wouldn't know! So why does the article focus on them? They're rationalizing like the fox from Aesop's fable who couldn't jump high enough to get the hanging grapes and said to himself, "They were probably sour anyway."
But it's really sad, if you think about it, that some editor thought it was a good idea to make as many people as possible think college is a bad idea! What's the motive, save the good jobs for the children of the well off?
Note that the unemployment rate for 4-yr college grads, now in the middle of the worse economic period since the Depression, is ONLY 4.8%, which the rest of the population would find good in strong economies.
I grew up in the "armpit of the county" where few went to college. When my sister and I did, by the time we graduated we took jobs paying less than the three kids of a neighbor who had gotten jobs right out of high school and had had some raises. The neighbor asked my mother, "What good was college?" Within a decade I, a master chemist, was teaching the gifted and talented in Physics and Chemistry at Maryland's largest public school and my sister, a nurse, was the Bone Marrow Transplant Coordinator for Johns Hopkins Hospital. We were never laid off and were making more than his three kids combined and it permanently stayed that way.
As usual, Liz Weston writes another under-researched, highly subjective, heavily weighted, incorrect article.
Her statistics are atrocious, vague, and skewed. Someone should pay to send her to a statistics class so she can learn how useless and utterly un-empirical most statistics really are. Let's use some inductive reasoning, since she loves that so much:
Those who make it through 4 years of college are already in the "elite" of society, as they had the discipline to continue and complete their studies. She's already pointed out that dropouts are are a large percentage, so clearly everyone is not cut out for college (and I'm sorry, but if you can't figure out how to pay for community college or an online degree with financial aid & a part time job, you probably aren't capable of getting and holding a good job anyway, degree or no degree).
1 in 2 college grads end up in a field completely unrelated to their major (all those liberal arts degrees are virtually useless). Assuming that IQ and personal drive and discipline played a part in the fact that those students completed college, what would happen if they chose not to go to school and spent those 4+ years working their way through the ranks, getting certifications paid for by their employers, gaining valuable on the job experience? Or better yet, what would we find if they didn't end up working for a big-box corporation and start their own business in those four years? Or lived completely off of investments?
I'll tell you (because I'm one of those very very smart people that decided not to go to school, even after being accepted to some of the best in the country). They have zero debt. They have real-world experience (which is becoming increasingly difficult to find from college grads). They have 4+ years of time to better figure out what they are good at and what they are interested in. They have a chance to change careers several times and to experiment. They are not in a rush to make a ton of money. And if they are smart, they often will make more than their school-going peers (because the businesses they start out in at entry level quickly notice how different they are an start elevating and sending them to training, giving them more responsibility, and with it, higher wages.)
I am under 25 years old. I didn't go to school and am now a quality manager at a small company. I worked in 2 fields before this and discovered what I liked and didn't like. I make a ton of (salaried) money for not being a college grad, while my peers who have graduated are still telling me about their hourly jobs with no benefits (an have nothing to do with their major). I have thousands in my 401k; my peers don't even know what a 401k is. My credit is excellent and allowed me to buy a house, which I intend to turn into an income property shortly. Most of my peers are still living with their parents or with roommates. The concept of not living paycheck to paycheck is foreign to them. They eat ramen 3 nights a week.
College is only necessary for technical, scientific, medical, etc. jobs that absolutely require it, or for the dumb dumbs of society that can't prove their worth without a slip of paper saying they were able to finish school. This article seems to be encouraging everyone and their brother to go to college, but what it fails to consider is that college doesn't make dumb people smart, it doesn't make lazy people motivated, it doesn't turn leeches into producers, and if everyone goes, it makes the value of a college education the equivalent to a high-school education, until only graduate studies mean anything for the losers of society.
Meanwhile the producers will get along just fine without going to school.
Try an APPRENTICESHIP. Work full time and go to school after work. Most apprenticeships have college LEA’s and class is recognized as college credit. The NECA/ IBEW Apprenticeship is partnered with over 100 Electrical Contractors. Apprentices earn on the job OJT and go to school two nights a week. Over the course of apprenticeship they earn over $250,000, have access to family health care, Dental and vision and contributions to a defined benefit pension. It’s been called “The best kept secret” but all the money contributed for training goes to training not TV and radio ads so it usually takes some effort to find on locally. Search NECA, IBEW and NJATC for programs in your area. This comment page doesn't like hyperlinks. Good luck and go help build America!
I do not believe a college degree was necessary 40 years ago to make a decent living and build a retirement. I happened to grow up with a father who absolutely did not believe in education after high school. He was born in 1915. I did not finish college, but had some good opportunities during my working career and worked my tail off to build a retirement. I'm now 59, retired, and go fishing and hunting any time I want. That all came from a very disciplined attitude towards saving and money in general and a whole lot of sacrifice.
Now however, I think every one needs some type of higher education. It does not have to be a four or six year degree, but you do need a skill and one that is in demand. The days of going to work for a company and retiring from it are all but gone. Get a degree in some thing that you like, even if it's a two year degree. You are going to need it unless you are born with a silver spoon in your mouth.
Today, any old college degree ain't gonna do it - that was your parent's era.
You better know going in, what you are going to be coming out and understand that with so many people coming out of the diploma mills today, you need an MBA to work in the mailroom now. Many careers require certifications and licensing beyond the BA.
Every company has raised the bar, simply to manage the horde of applicants that they are getting. We can get 100 applicants for a single position now. The pie isn't that big anyjmore; the jobs just aren't there, even if you have a degree.
Now if you are going to college to major in Philosophy, History or Women's Studies, you better get your license in Heating and Air Conditioning first. Otherwise, it's the french fry machine for you.
I have 3 main feelings about obtaining a college degree in the 21st century:
1- As stated by Educated_ American_Pauper, the required "general education" courses that come attached to EVERY AA/BA are unneccessary. We are continuing the old Renaissance model of college, as a way to produce "well-rounded adults," which in today's laser-focused speciality fields should not be a requirement. If college students could expend their time, energy, and money on only those courses that focus on or support their chosen field subject matter, college could be completed in half the time and at half the expense.
2- High school students are pressured to enter college straight out of high school. Considering the plummeting quality of public education in this country, very few high school graduates have the necessary skills to be successful college students, and lack the discipline needed to finish all 4 years (or more) of a Bachelor's degree. Additionally, if the average retirement age in the US is 65, and most people graduate high school at the age of 18, can we really HONESTLY expect people to know what they want to do for the next 47 years of their working lives when they've never even known a day of not living under their parents' roofs? Most people change careers 3 times (or more) throughout their working lives; what a shame to spend 4+ years of one's youth- and take on a smothering amount of debt- devoted to obtaining a degree, only to have a change of heart 5 or 10 years down the line. Truthfully, very few know who they are or what they want at the age of 18, and, now more than ever, the maturity level needed to successfully complete college is simply not there.
3- We have been essentially brainwashed as a society that college is the end-all, be-all to being a productive, knowledgeable, capable worker. The truth is that nothing provides better proof of ability than on-the-job experience, which is better obtained through internships and apprenticeships. In the past, those with little or no higher education could find jobs in a number of labor industries and make very good livings. Those positions often started with apprenticeships, and were conditional purely on job performance. To put it in perspective, a person would be given a chance to prove themselves, and would be employed based on whether or not they could DO the job as demonstrated (innocent until proven guilty, shall we say?) Today, all but a few "qualified" applicants are shut out from the get-go, which creates enormous competitive pressure and contributes to dwindling morale in this country. And we wonder why we are increasingly socially segregated from one another...
The issue my husband keeps running into is that he has 14 years experience in the Accounting field, but no degree. (Military) AND because he spent 10 of his 14 years on sea duty (most of our marriage his commands were "in and out" (meaning 2 weeks out/3 weeks in, 3 weeks out/1 week in, 2 months out/1 month in, etc) Also, not all the ships allow school websites onboard.
With his 14 years experience he is over qualified for a lot of the Accounting Assistant positions, but not having a degree, they don't want him. I think it's ridiculous that a business would rather higher a college graduate with NO actual job experience than someone that his 14 years proven track record of accountability, trainability, and "getting the job done."
The fact is that the apprenticeship method of the old days was much better in preparing aspiring professionals for their professions of choice (better to be apprenticed to a lawyer or accountant and actually learn the real life trade as it is in the real world....rather than be forced to take 2 years of Gen Eds. designed just to maximize the amount of money you need to spend to get the 4 year degree).
The Federal Government, politicians, university administrators and the banks don't care about educating students....they only care about getting filthy rich.
The gov't publishes all these occupational outlook brochures and makes public service messages telling everyone how valuable a university education is and how widely available positions in almost any field are. It is one giant fraud supposedly designed to boost our economy...look what it's actually done...and believe me it will only get worse as the deluge of defaults start.
Well I managed to go get my degree from a well known and excellent publlic university without loans. I did use financial aid, plus I worked 40 hours a week. It can be done.
My degree BA was in Biology because I thought I was going to be a veteranarian. Now I work in sales and make more than I could with just my BA. So I don't even use my degree and make more than what I could with the BA. However, I still try to tell my 11yr old son, having the degree helped give me an edge over others and he should definitely plan on going to college if he wants to get anywhere. He thinks he is going to be a pro ball (or hockey) player. Oh boy! Wish me luck! His father tries to help and indirectly he does. His dad never went to college and has been unemployed off and on in this horrible economy. The good job he had left and he is making less than half of what he used to when he actually does find work...
As Microsoft and Google know, what employers need to hire for good jobs are smart people. Bill Gates used to claim that his biggest competitor was Wall Street because too many of the "best and brightest" were taking jobs there.
Has anyone ever tried to study the value of a college degree when adjusted for IQ?
Bottom line is that in this day and age for most people a college degree means more lifetime earnings. Yes, there are exceptions. But Vegas doesn't make money betting on the exceptions. One of the most important (in my opinion, at least) ways of obtaining a college degree AT NO MONETARY COST is often overlooked. I obtained my degree with no loans and, in fact, with no costs to me. Both of my daughters did the same thing. Daddy didn't have to pay and there were no loans.
I know that what we did is not for everyone. So if you don't want a free education, ante up! But it can be done! How? G I Bill! Join the military! I went to night school while still on active duty. Uncle Sugar paid me my regular salary AND paid for the school. Same with my daughters. I am now retired (from the military) and drawing a very nice retirement and living the life I love, traveling and doing as I wish. One daughter got out of the military and is drawing a decent salary as a teacher. The other daughter has opted to make the military her career.
Would we be even as well off without the degrees? Nope! No way! Was the knowledge gained from the classes taken actually useful in the jobs we did? Maybe in the case of the teacher. But not for myself and my other daughter. The degree only got us in the door; it was a requirement for a commission. But it was well worth the time invested.
My bottom line point is that you don't have to place yourself into debt to get the paper. You just have to examine ALL your options...and have the determination to accomplish your desired goal.
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