Is college worth the cost?
There is an on going debate in this country on just that question given the skyrocketing costs of higher education and the lingering debt burden that can take years for students to repay. The student who graduated in the class of 2009 had an average of $24,000 in student loans. But that's just the average. Some students are accountable for sums totaling $100,000. (See: The Economic Agony of Today's Twenty-Somethings)
A college degree was historically the bedrock of any successful career. High school students were expected to go to college after graduating. But then along come the famed success stories of Steve Jobs, Bill Gates and more recently Mark Zuckerberg. The three tech titans were college dropouts, yet they all managed to amass huge amounts of wealth. When Facebook eventually goes public, Zuckerberg's stake in the company will make him one of the top ten richest people in the world with a net worth of roughly $28 billion. (See: Facebook Creates a New Millionaire's Club…And a Few Billionaires Too)
Venture capitalists James Altucher, managing partner at Formula One and frequent guest on The Daily Ticker, and Peter Thiel, billionaire co-founder of PayPal, have both been outspoken opponents of going to college. As tuition costs continue to rise, both Altucher and Thiel believe there are better options to college that do not cost as much and provide equal or even greater future benefits. Thiel, who graduated from Stanford University, made headlines last year for offering to pay some of the best and brightest under 20 years of age $100,000 to skip college and instead start a business. Altucher, also a college grad with degrees from Cornell and Carnegie Mellion, suggested starting a business, working for charity or traveling around the world instead of going to college straight out of high school. (See: Jame's Altucher's 8 Alternatives to College)
Just how much have tuition costs gone up over the years? From 1958 to 2001, the average annual increase for tuition costs rose between 6% and 9%, according to the student aid website FinAid.org. Student loan rates have typically risen at least twice as fast as the rate of inflation.
For the 2011-12 school year, the average cost for an in-state four-year public college (including tuition, fees and room and board) totaled $17,131, up 6% from the year before, while tuition at a private college was up 4.4% to $38,589, according to the College Board. Public school tuition is rising faster than at private schools due to state budget shortfalls across the country.
Because of the realities facing ever-rising tuitions costs, Bill Gates has questioned the necessity of brink-and-mortar universities. The Microsoft founder has suggested higher education is just as easy, and perhaps cheaper, to obtain on the web.
The Daily Ticker's Henry Blodget sat down with LinkedIn co-founder and chairman Reid Hoffman to get his opinion on the college debate. Like Steve Jobs, Bill Gates and Mark Zuckerberg, Hoffman has been super successful. When the professional social networking site went public last May, his stake in the company was $1.7 billion. But unlike the aforementioned tech gurus, the LinkedIn co-founder has degrees from both Stanford and Oxford Universities.
Now in his mid-40's, Hoffman has become a world-renowned entrepreneur and venture capitalist, having invested in more than 100 technology companies during their infancy, including Facebook and Zynga. He believes college is important, but should be viewed as an investment.
"I think definitely a lot of people should go to college, [but] I think the thing is to be thoughtful about it," says Hoffman. His says it is "critical" to consider the "ROI," or return on investment, one will earn on that college degree after graduation. "For colleges, they are very expensive and that is why you have to be serious about what it is you're doing and think about [whether] this college expense is going to be the one that is right for me."
Hoffman is also the co-author of the new book The Start-Up of You in which he says it is important to manage your career like a Silicon Valley start-up. He tells Henry in the accompanying interview that there are three things "college can be extremely good for."
#1: A Vast Network: "The network of your allies and the people who give you access to opportunities and all the rest is critical and college is actually a very good time for building that," he says.
#2: Baseline Skills: There are many basic skills not learned in high school but can be picked up in college. These skills include communication, reading and writing, the ability to learn quickly, critical reasoning skills and how to use new technologies.
#3: Fallback Ammunition: "If you get into hard times [like we are now with 8.3% unemployment]…the college degree is still useful when you are competing against [people with] GEDs," he says.
Whether you agree with Hoffman or not, his advice is certainly something to consider as it appears a student debt crisis may be looming.
In a recent FICO survey released last month, more than two-thirds of risk managers said they were seriously concerned about the debt loads held by students in the country. 67% of respondents believe delinquencies of student loans will rise, up a considerable 19% from the previous survey. FICO provides credit scores used by both consumers and creditors and is widely considered the industry standard. (See: Student Loan Crisis Looms: FICO Risk Survey)
Tell us what you think! Do you think college is worth the cost?
For more see:
- Bill Gates
- student loans
- Steve Jobs
- Reid Hoffman