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Anya Kamenetz Generation Debt

Anya Kamenetz, Generation Debt

Is College Worth the Cost? Part 1

by Anya Kamenetz

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Posted on Tuesday, August 28, 2007, 12:00AM

Many readers have suggested that I tackle a thorny question: Is college worth the cost?

Obviously, I went to college. Most other financial "experts" did, too. So the opinions we give tend to be biased in favor of the many fine experiences that our alma maters had to offer.

For the purposes of this column, however, I'll put aside the important intangible benefits such as widening cultural horizons and developing critical thinking, civic participation, healthier living, and stronger relationships. In strict dollar terms, is that degree going to be worth the parchment it's printed on for Generation Debt?

A Million-Dollar Education

On average, the answer is yes.

While the earnings of people with bachelor's degrees dropped about 5 percent between 2000 and 2004, they'll still earn an average of about $1.2 million more than high school graduates over a 40-year career. Borrowing for college, as most students do, cuts into the return on education, but not by much.

At the extreme end, say you paid for a private college with private loans -- $133,204 at 9 percent. Over 20 years, you'd pay back almost $300,000 -- still leaving a $900,000 average lifetime earnings premium.

Self-Knowledge Is Key

Unfortunately, you can't answer this question on average -- you have to approach it case by individual case. College isn't the default option anymore for a successful life, and just like any investment, there's risk involved. It takes self-knowledge to determine if college is going to be worth the cost for you.

So before enrolling in any higher education program, ask yourself the following questions:

• What do I want to do?

Only about 28 percent of jobs in this country require a four-year college degree. That percentage isn't projected to increase much in the future. Of the top 10 fastest-growing jobs over the next decade, only one requires more than a BA -- ironically, the position of college instructor. (The Occupational Outlook Handbook is an invaluable resource for this and other job information.)

It's true that many of the fastest-growing jobs are low-wage and in the service industry. But the nation also needs nurses and physical therapists; network systems and database administrators; veterinary and dental technicians; carpenters and plumbers; and retail and sales managers, all of which can be rewarding middle-class jobs with just an inexpensive associate's degree.

There are other careers where talent, moxie, and a head start can be worth much more than a BA: actor, artist, dancer, stylist, or makeup artist; entrepreneurs of all stripes; real estate agent; retail manager; club, bar, or restaurant worker; event planner; web and graphic designer, tattoo artist, and so on.

So, if a job like this calls to you, don't be afraid to sidestep college. Take a licensing exam, a business course, or an apprenticeship, and go for it. If you find that you want more education down the road, your work experience will greatly extend the benefits.

What if you have no idea what you want to do? While this would probably put you in the majority of traditional-age freshmen, it's a big mistake to go to college. It makes it less likely that you'll persevere in school, and more likely that you'll get a degree you won't use.

If you're entering college, straining to pay for it, and are totally undirected, think about taking a year off -- maybe in AmeriCorps, maybe abroad. Earn some money and find a focus.

• Where can I get in?

Now let's say you've zeroed in on a field that requires a BA. Lower-cost institutions such as community colleges and state universities (especially for in-state residents) may provide a better value for the money. But keep in mind that having to transfer from a two-year to a four-year school makes it more difficult to graduate. More-selective institutions generally do a better job graduating their students, too.

There are overpriced colleges and good values for everyone, which is why it makes sense to apply to a range of schools. Private colleges with large endowments may provide a more generous financial aid package and thus lower your cost. But here are two rules of thumb to keep in mind:

1. For-profit "career colleges" tend to cost far more than equivalent programs at public colleges, and there have been serious questions about the quality of the management of these schools. Before enrolling in a certificate program, vet it carefully for quality.

2. Don't pay top dollar to go to a private college no one's ever heard of. Prestige is part of the value of private education.

• How much can I pay for it?

Seek an education at a cost that will allow you to pursue the career you studied for. That means keeping down debt.

In a study last year, the federation of state Public Interest Research Groups (PIRGs) found that, based on their debt, 23 percent of public four-year-college graduates can't afford to become teachers, and 37 percent can't afford to be social workers. For private college grads, the numbers are 38 percent and 55 percent.

So if you want to be a social worker, don't borrow the full cost of attendance at Hampshire College or Sarah Lawrence.

The highest-earning BAs are engineering and computer science students, who pulled down starting salaries of around $50,000 in 2006. According to my calculations, applying the affordability benchmarks used by the PIRGs in their study, these lucky ones can afford to borrow up to $45,000 in federal student loans. Liberal arts grads, by contrast, earn just over $30,000 in the first year out of school. If that's your bent, it would be prudent to borrow no more than $16,000.

• How well am I prepared to do?

College definitely isn't worth it if you're going to drop out -- people with only "some college" don't earn much more than high school graduates. Yet it's a sad fact that the six-year graduation rate for students at four-year colleges in the United States is only 57 percent. Notice that that's a six-year rate. Graduating in more than four years is obviously going to raise your cost of attendance.

So how can you buck the trend and get that degree? Do an honest assessment of yourself and your abilities.

If you're deciding between colleges, choose the one that does a better job of graduating its students. Huge public universities have particular problems with this because of overcrowding and students getting lost in the shuffle. Unless you're exceptionally dedicated and motivated, working more than 15 hours a week and/or attending part-time will hurt your chances of graduating.

Finally, if you need to take remedial classes in order to do college work, get those credits out of the way at a community college. Don't pay university tuition for them.

Make It Pay Off

In the end, almost any college experience can be a good value. It depends on how you take advantage of the resources and connections offered, and what you're willing to put into it.

Professor William Coplin, director of the Public Affairs Program at Syracuse University and author of "25 Ways to Make College Pay Off," emphasizes the real-world skills you'll need. "I don't think it's very important what school you go to," he says. "The more hands-on doing stuff, the better."

That means taking internships, volunteering, working jobs in a field related to your interest, and doing everything you can to get ready for the real world.

(In my next column, I'll discuss whether grad school is worth the cost.)

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162 Comments

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  • Jeremy - Friday, September 14, 2007, 8:55AM ET  Report Abuse

    • Overall: 5/5

    An excellent article that helps cut thru the propoganda that high school students are bombarded with.

  • Yahoo! Finance User - Friday, September 14, 2007, 12:50AM ET  Report Abuse

    • Overall: 2/5

    She fails to mention that you can earn money for the four years that you are not paying for college tuituin. That brings down the $900k even more.

  • Yahoo! Finance User - Thursday, September 13, 2007, 10:00AM ET  Report Abuse

    • Overall: 1/5

    "On average, the answer is yes." What a useless comment. That is the equivalent to the statement that an individual is comfortable with one foot in hot water and one foot in cold. The value of education depends wholely on the talents and abilities on the individual in question. Consider the individual with the talent and academic ability to become a mechanical engineer. It might be a great and highly lucrative career choice-- but one cannot argue that s/he will necessarily earn more than if s/hegets a certification and opens a repair business of some kind. In fact, it will be hard for college going contemeporaries to catch up to such an individual, earnings wise, unless the high school graduate is totally lacking business accumen. But then again-- 4 years at a pricey college is no guaranteed fix for that either.

  • Yahoo! Finance User - Wednesday, September 12, 2007, 8:16AM ET  Report Abuse

    • Overall: 1/5

    I don't know were this girl does her resesarch, but one can not become a physical therapist with an associates degree. Currently, the minimum degree for becoming a physical therapist is a masters, and the American PT Assoc. is considering upping that to a DPT (Doctorate in PT), which 85% of new PTs currently earn.

  • Jonathan - Monday, September 10, 2007, 8:12PM ET  Report Abuse

    • Overall: 5/5

    This article is excellent in that it points out the discrepancies of what we are told by high school guidance counselors, “get a college degree, and get a good paying job” verses real life situations, where some of the best jobs require little, if no formal education beyond an associates degree. Case in point: my wife has two bachelors degrees, and excelled at the top of her class in both, but she struggles to find jobs that pay a little over the going rate for local laborers… 13-15 dollars an hour. I have a college degree and excelled in it as well, but have retained my job in building maintenance because it pays 8-10 thousand more per year than the jobs that my college degree offer me. I now am in the first stages of starting up my own business that is already turning a significant profit. If I had simply left high school and taken some business classes, and perhaps received an associate’s degree in business, I would have saved a total of 30-35 thousand, which could have been used to start my business up four years ago instead of paying off student loans. Sadly our generation has been lied to at several levels, and we need more people to stand up and tell our generation how to truly get ahead in life, instead of listening to the same old lies that will keep us in debt to lenders for long periods of our life.

  • bob - Saturday, September 8, 2007, 1:34PM ET  Report Abuse

    • Overall: 4/5

    A lot of the comments here mention colleges with unusually high costs, such as $135,000 over four years. Those are the most expensive schools, and many people attending them pay far less than those prices. I have taught and taken classes at colleges with very different costs (public and private), and if those $40,000 /year costs seem high to you, don't pay them. Go to a good state school - the best ones are often better than more expensive private schools - and pay half that much or less. If you can attend Ohio State, Illinois, Michigan, Vermont, Colorado, Penn State, UVA, William and Mary, Wisconsin etc., on in-state tuition, you'll go to a great school, and often pay much less for an education as good or better than what you'd recieve at most private schools. No you won't have only ten people in your classes, but if you have about 30 or so, I think that's fine. More than say 45 -- study the school! -- and I'd say it's too many. Also, given the pressure on schools to look better in the US News rankings, students with high test scores and grades will be offered full - yes free - college tuition by many schools if they just look around and apply to several. Finally, several people have suggested that college doesn't make economic sense... it's too general a question: you might like being in school or not, you can pay different prices for schools, have other thing you might do instead, study computer science or The Songs of Crete.

  • AlenK - Friday, September 7, 2007, 8:49AM ET  Report Abuse

    • Overall: 2/5

    Although she makes some valid points, I do not like the tone and expression of her article. She states that one should go to a private college that people have heard of, but that varies by industry (and who cares if the average person doesn't know because I bet there are a lot of people who haven't heard of the many great, small liberal arts colleges out there). Anyway, as previous posters mention, college is not just about the income that you receive after you graduate. It's about the connections, experiences, etc. that separate this time of your life from everything else. College is not for everyone, nor is it a safe haven for some of the top tier graduates. Education, whether it is formal or informal, is always beneficial.

  • guitar player - Thursday, September 6, 2007, 12:46AM ET  Report Abuse

    • Overall: 3/5

    Anya, Thanks for taking a shot at a tough subject. There is a lot more that could be said but I realize you had time, space and political constraints placed upon you. I completed my college education around 1973. I did 2 years at a community college and 2 years at a well-rated state school. My 4 years of college cost me about $5,000. My money and time investment was worth it. I was able to pay off my college loan in 18 months. However, I have questions about the value of my daughters education. The estimated cost for her 4 year education is about $135,000. I am utterly shocked at the inflated price of today's colleges. It will cost 27 times what my education cost. Will it be worth the price? As I approach retirement, I realize that 99% of what I needed to know about success in life, I learned from reading books, studying people, and learning from my own mistakes. I didn't need college for any of that and I did not need college to earn a living. So what real life skills and benefits can I expect my daughter to get for my $135,000? The wages being paid to teachers, administrators, and other workers at colleges are out of line. Students and their parents are being forced to pay scalpers rates for books. The 5 books for my daughters current semester cost about $600! A 7 x 12 foot dorm room is renting for about $2,000 a month. That is a mortgage payment for a large house! My daughter does not qualify for student aid because her mother and father both work. While you say that college is still a good return on investment, I say that college is over priced and over valued. America needs to over-haul what they are teaching and what they are charging for an education. Thanks for the opportunity to comment.

  • Heroine Worshipper - Tuesday, September 4, 2007, 3:12PM ET  Report Abuse

    • Overall: 1/5

    College loans: $100,000 Home price during freshman year: $300,000 Home price after finishing college: $1,000,000 The college loans were worth nothing after finishing.

  • John W. Zimmer - Tuesday, September 4, 2007, 1:07AM ET  Report Abuse

    • Overall: 5/5

    Great article! This sparked lots of discourse and rightly so. I don't think anyone is owed anything so I'm not sure where some of the folks are trying to evaluate college in pure dollars and cents. Part of deciding on a college is one's ambitions and how much education one need's to advance to the level he or she wants to attain. This will be different for everyone and possibly vary at different ages. I wanted to own a karate business so I did not go to college but after that had failed along with a string of blue collar jobs (lots of work but not great paying jobs) I went back to school in my mid-thirties. I've just finished an MBA (I'm 50) and I am starting to climb the corporate latter. Anyone can attain anything they want - they just have to have a burning desire and a long term goal (what they want life to look like in their future) and everything is possible. Anyway - before I go too far off track - I think the article had enough food for thought that any reasonable thinking person could find plenty of fodder to think about the pros and cons of higher education. I think one can always get more granular but this is a great overview!

  • s - Monday, September 3, 2007, 11:10PM ET  Report Abuse

    • Overall: 1/5

    As others have pointed out the article lacks the true financial picture of investing college dollars upfront and allowing them to grow over a 40 year period. $40K @ 8% compounded monthly for 40 years would be close to 1 million . Now try the current approx $160K for ivy league and you wind up with $3.8 million. I would be thinking very hard about college now if I knew then what I know now.

  • Anthony - Monday, September 3, 2007, 11:06PM ET  Report Abuse

    • Overall: 5/5

    I wish I would have read this before I chose to attend college. She hit it right on the mark.

  • RR - Monday, September 3, 2007, 9:19PM ET  Report Abuse

    • Overall: 1/5

    You raise a good question but like all these experts give a lousy answer. I don't see where you show what would happen if you took that same money and invested it in CD's or stocks and how much money you would have 40 years from now. I have just a BA in Communications and would not be able to afford to go to school full time time today. I would have to go to a commuter school part time and pay as I went. I luckily paid off my loans years ago but the debt wasn't nearly what the kids are getting hit for. You also don't show how "tuition inflation" is far outstripping earnings and even other inflation meanwhile not adding any more value to the earnings of their student graduates. And, this unbridled rate of increase is not stopping; it is only worsening by the greed of education administrators who like all governments czars grow power with their position by growing dollars collected. You don't point out the possibility of going to school while you work. You mention interns but if a person got practical experience and then went to school while working and possibly having an employer pay some or all of the costs this would be much more cost effective. I also don't see any references to jobs like nursing or teaching where you can be forgiven some or all of your debt for working in a field or for a hospital or state for a certain amount of time. This is the usual horrible column advice that you see in all of the news where someone raises a good question but is afraid to piss off the advertisers like the for-pay schools by saying there are a few cost effective solutions/alternatives to going to and financing school but you say nothing in the end. You, woman, have joined the ranks of Ben Stein, Penelop, Ouzy Suzy and the rest. You have reached the pinnacle of the mundane!

  • Bahrfeldt - Monday, September 3, 2007, 6:30PM ET  Report Abuse

    • Overall: 2/5

    This leaves a few questions. Can you get the loan? What will paying back the loan do to you lifestyle, especially in the early years when earnings are less. Wait until 40 to have a family? It is a national disgrace that so many Americans are denied their potential because of the cost of higher education. We have to import many doctors and technicians because of it.

  • Yahoo! Finance User - Monday, September 3, 2007, 12:39PM ET  Report Abuse

    • Overall: 4/5

    Sound summary. Facts about RNs, Nurses, Physical Therapists need more detail, to say the least.

  • Radiology Physician - Monday, September 3, 2007, 11:30AM ET  Report Abuse

    • Overall: 5/5

    Hang in there! You're doing an outstanding job! Don't let the detractors and simple minded critics deter you.

  • Frank - Monday, September 3, 2007, 11:30AM ET  Report Abuse

    • Overall: 4/5

    Your article on assessing the worth of a college education is very well presented and covers most of the points a prospective student should take into consideration before taking the road to a higher education. In my life experience, practically all the people I have know who have become independently wealthy have done so without the benefit of a college education. I would like to see the results of a study that excludes doctors, lawyers, teachers and other professional types where a college education is a necessity versus the career earnings of non-college people including entrepreneurs who often times earn millions sometimes without even completing high school eg. Dave Thomas of Wendys.

  • Mike - Monday, September 3, 2007, 9:00AM ET  Report Abuse

    • Overall: 1/5

    I would suggest that anyone considering college today make sure the job they hope to get from it is not outsourceable.

  • Yahoo! Finance User - Sunday, September 2, 2007, 2:55AM ET  Report Abuse

    • Overall: 1/5

    I am not sure were to start. Some of the jobs you mention needing an ass. degree actually require graduate education. Case in point, Physical Therapist nowadays get doctorates. You ignore affordable state school educations and working while going to college. No says it is easy, but doing it part time, looking for grants and scholarships help to offset costs. Also, no distinction is made between accredited programs and these fly-by-night educations which have become popular. Certifications in something is not a college education.

  • Josh - Saturday, September 1, 2007, 1:20PM ET  Report Abuse

    • Overall: 3/5

    The biggest exception I take with this article is that it fails to mention the intangible value of meeting professors, alumni, or other students who have a similarly high-level education and are thus much more likely to act as a positive network. In college opportunities are created by what you learn and who you meet. In some instances, the latter component can be worth more in real income than the former.

  • Yahoo! Finance User - Friday, August 31, 2007, 9:32PM ET  Report Abuse

    • Overall: 3/5

    I agree with the previous comment: do not agree with the idea of transfer from two-year to a four-year school makes you difficult to graduate; it worked well for me and cut the cost of my first two years in school tremendously. Public school worked well for me; of course, it is crowded, but you go to school for a reason and you will find the way to succeed. I do not understand what you mean "highest earning BAs"; did you mean Bachelor of Arts? and engineering and computer science earn BA? Anyway, you cannot set the amount to borrow base on the field study. I would borrow at least as possible, work only in summer to earn enough to qualify Financial Aid.

  • George - Friday, August 31, 2007, 7:10PM ET  Report Abuse

    • Overall: 1/5

    I have an AAS in Electronic Engineering Technology and a BS in Elementary Education, and had no success earning a living with either of them. I am working a high school graduate job in security. To me, college is just a place to support jerks who jerk you around.

  • ROLLINGAMERICANMUSCLE - Friday, August 31, 2007, 7:08PM ET  Report Abuse

    • Overall: 4/5

    I believe this article was well-rounded and accurate. If one wants to work in the world of corporate business, as a suggestion, if he/she gets a BA in liberal arts, as I did, they might want to take some business courses as their electives to strengthen their resume. I work in the corporate world and my BA in history with an english minor has made my writing skills improve dramatically. In addition, I have taken business courses in accounting, economics, marketing, finance, and management to supplement the marketability of my BA. I believe this combination is more useful and marketable in the real business world rather than getting only a degree in business or liberal arts. It's my opinion that many of the requisite business degree courses are much too theoretical in nature and a waste of time. This combination of courses has worked well for me.

  • Yahoo! Finance User - Friday, August 31, 2007, 5:42PM ET  Report Abuse

    • Overall: 1/5

    Unless you mean physical therapy assistants, PTs go through graduate level training. Nurses often have at least bachelor;s degrees.

  • Yahoo! Finance User - Friday, August 31, 2007, 5:15PM ET  Report Abuse

    • Overall: 2/5

    The only disagreement I have with this article is the assertion that transitioning from a 2 yr program at a community college to a 4 yr program increases the difficulty in graduating. I take exception with this as I have a BSN and had no problem transitioni ng.

  • Yahoo! Finance User - Friday, August 31, 2007, 9:29AM ET  Report Abuse

    • Overall: 5/5

    I'm a high school guidance counselor and this story is accurate and "right on the money!" Reading this will benefit all potential college students and their parents.

  • Yahoo! Finance User - Thursday, August 30, 2007, 8:51PM ET  Report Abuse

    • Overall: 4/5

    This is actually a very good article. Higher education has become virtually sacrosanct, and it's time it was subjected to a "do you get what you pay for?" analysis. The points that you will get out of it what you put into it are badly needed for beginning college students as well. The financial wizard who questioned the cost of paying back $133,204 over 20 years at 9 percent probably needs a little more education in compound interest. The payment required at the end of each year for this loan is $14,592. Twenty times this is $291,841, which qualifies as "almost $300,000" in my book. This makes the point that most "financially savvy" people can't calculate their way out of 9th-grade algebra. Make sure you have a financial advisor you can trust if you have this degree of innumeracy.

  • suparna - Thursday, August 30, 2007, 3:15PM ET  Report Abuse

    • Overall: 2/5

    In most of the white collar jobs today one cannot get an entry without a Bachelor's degree and therefore if one's goal is to get a white collar job that has career progression opportunity then a college education is a must. One should look at the long term benefit of college education and therefore cost vs. benefit evaluation should be for the long term. TIf purpose of the college education is to earn a better living then one should identify the area of specialization first before choosing a college. For example an undergraduate in finance, business or engineering from the least expensive public school stands a better chance to pursue a better paying career than someone who has a major in philosophy from an expensive private college.Finally you should consider the brand value of your education at the time of selling yourself to the employer. A better known college, therefore becomes important.

  • Vladomir - Thursday, August 30, 2007, 12:37PM ET  Report Abuse

    • Overall: 4/5

    Overall, a solid article. A couple comments: 1) People can become Database Administrators on Associate's Degrees? I have a degree in Computer Science, and have looked at my share of job listings, and it seems a BS is required for pretty much everything in that field. 2) "The highest-earning BAs are engineering and computer science students, who pulled down starting salaries of around $50,000 in 2006." Don't forget to mention the little caveat that in order to get a job in this wretched industry, you are expected to have already worked a job in this industry. Wonderful, eh? Finally, let me address all the morons who take issue with Anya's, "Obviously, I went to college." comment. A FOCAL POINT OF HER ARTICLES IS COLLEGE DEBT. She wrote a book called _Generation Debt_, which is about economic issues -- many of them college-related -- faced by people in their 20s and 30s. And you're acting surprised that she went to college?! You people are daft. Try doing even a minimal amount of reading before flapping your gums.

  • Yahoo! Finance User - Thursday, August 30, 2007, 12:27PM ET  Report Abuse

    • Overall: 2/5

    I stopped reading this article when she stated that $133,204 @ 9% over 20 years is about $300,000. I come up with about $750,000. My impression of the stress on the BA degree is more about doing what you are told than anything else. If you just want the knowledge you can go to your local library for free. The problem with that is employers are looking for people to do what they are told, not someone that can actually think and figure things out for themselves.

Showing comments 6-35 of 162<< PreviousNext >>

More from Anya Kamenetz

Read the Generation Debt Book

According to economics professor Laurence J. Kotlikoff, Generation Debt offers "a truly gripping account of how young Americans are being ground down by low wages, high taxes, huge student loans, sky-high housing prices, not to mention the impending retirement of their baby boomer parents." Generation Debt will inspire you to take charge of your financial future.

Read more from Anya Kamenetz here and here.

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