With college costs soaring, many families are looking hard at the potential payoff of various schools and degrees.
To be sure, few dispute the economic value of an undergraduate degree: Research from the Georgetown University Center on Education and the Workforce shows that students with undergrad degrees will earn more than $1 million more during their working years than those with high school degrees alone.
At the same time, many families are questioning whether they can justify paying more than $50,000 a year for tuition, especially if the student is targeting a career with modest earnings potential and/or if he will have to go into hock to earn that degree.
In this week's Discuss forum thread, I asked Morningstar.com readers to address the extent to which return-on-investment considerations had factored into their decision-making about college--for themselves or for their children.
Not surprisingly, responses varied far and wide. Several posters--and I'll put my 18-year-old self in that camp--said ROI never came up when discussing college or choice of major. Acquiring knowledge is valuable regardless of the financial payoff, these posters believe. Others said that they had considered ROI and adjusted college plans accordingly.
Yet, others said that the individual--not his degree or alma mater--is the most influential factor in an individual's success, so parents and students shouldn't get overly hung up on the prestige of a school if a young person has talent and discipline. Posters also weighed in on the skyrocketing cost of college and noted that alternative (and cheaper) routes to higher education beckon.
To read the complete thread or share your own take on this question, click here (http://news.morningstar.com/articlenet/article.aspx?id=616203).
'Going to College Changes a Person'
A contingent of posters believes that college's main benefits aren't financial at all, and therefore calculating a return on investment isn't a worthwhile exercise.
GregLee wrote, "You might as well ask the ROI for attending church on Sunday. It's not something people do for the money, though it surely does impact the bottom line. The purpose is social or spiritual. A college degree has become an essential credential for a respectable, middle-class life in our society."
Dlprice--speaking from experience after sending four kids through school--agreed that the return on an investment in higher education goes way beyond dollars and cents. "All four kids are greatly changed for their experiences," she wrote. "They are more broad-minded, analytical, and politically/socially/globally aware. Like having children, going to college changes a person in a way that's hard to describe to those who haven't experienced it. Not all impressive ROIs can be measured in financial terms."
Marimoore, also speaking from experience, agreed. "My husband and I paid for our three children's college education with the belief that college will teach them to think clearly, communicate effectively, and connect with the great thinking of the ages. Vocational school, whether it be law school, business, medical school, comes after. Their lives would be richer and more fulfilled if they became an educated handyman or educated corporate executive. ROI was not and is still not a factor in our belief in a college education."
FidlStix, who received a Ph.D. in physical science, agreed that some of the best returns on higher education can't be quantified. "Looking back, I'd say the ROI of my education is inestimable, not from a narrow dollar perspective, but from the panorama of an ability to think critically and delve deeply into concepts only collaterally related to physical science--including researching stocks and funds for investing."
Several posters were unequivocal: ROI considerations had played no role in their college decision-making process, perhaps because tuition was a lot lower back in the day.
Peter5 was one such respondent, but said that the return has been there all the same. "Neither my parents nor I did any calculations prior to or after college to figure out the ROI. In the 1980s it was just expected that I would go to college (my parents had both gone to college as did most of their friends, and so on) and that the expense would be worthwhile. And indeed it has been, in spades."
'Any Grad Can Succeed or Fail'
Numerous posters were skeptical about a return on investment for college expenditures simply because each person is so different.
In Bubbygator's view, the individual matters a lot more than his degree or alma matter. "It's difficult to 'personalize' the ROI on a four-year-degree," this poster wrote. "The bachelor's degree, in whatever, is simply the key to open the door. Once you get inside the door, what you make of your opportunity depends on you, not that piece of paper. There have been large-number studies of this question, and results categorized to certain types of schools/degrees. But on a personal basis, any grad can succeed or fail based on what he does after college."
On the same page is Jomil, who wrote, "I believe that the prestige of your alma mater can open doors to employment, but job availability, contacts, resume, and personality are probably more important."
A story from Catherine72 testifies to the importance of the individual rather than where the degree is from in shaping one's career trajectory. "I have my master's in chemistry," she wrote. "For the undergraduate portion, I was on scholarship. I had to choose between a 'lesser' school with full scholarship and a 'better' school with only a half scholarship. I choose the full scholarship. When I tried to enter the field, where I had attended may have negatively influenced if I was accepted for an interview. But my personality/creativity/intellect could get me the job. Once I had my first job--it was easy from there."
'Getting the Most Out of the Meager Bucks Available to Me'
Other respondents, however, said that ROI considerations were in the mix when helping their children make decisions about college, or when making their own decisions.
Among the most pragmatic of posters was rllucky, who wrote, "Whatever type of post-secondary education is chosen, it has to be a field of study that can get someone a good paying job and that is relatively affordable. The costs have skyrocketed over time so it makes no sense to attend an Ivy League or other high cost private school to become a school teacher etc., unless they want to practice medicine or law, then the pedigree matters. The lower-cost public universities do more than an adequate job of preparing students for the workforce. I went to a public university, got a great education, and have a decent paying job, with virtually no debt after I graduated. From an ROI perspective, it was the best investment that I ever made."
Cliff, too, was motivated by ROI considerations when pursuing higher education, even though ROI may not have been in the vocabulary. "Without a doubt, getting the most out of the meager bucks available to me at the time hugely influenced not only where I studied but what I studied. I was the oldest of a large bunch of kids, therefore the first out of the nest. In our family, when you were 18, you got handed your pillow and got a pat on the back and an invite to Thanksgiving dinner."
Ridg0008 chose a field that was of great interest, but economic considerations were definitely in the mix, too. "My choice of major [physics] was certainly influenced by job prospects, and I went to a large land-grant university in my home state rather than go into debt to attend a private school. I also didn't rely just on the school in terms of assessing job prospects: I talked to people in the field, and reviewed job openings."
For bnorthrop, maturity brought ROI considerations (and not just financial ones) to the fore. "I attended seven institutions of higher education in five states over many years. I was driven solely by the desire to learn particular subjects, not to get a degree. However, when I finally settled down, it became clear that a degree would open doors to more opportunities with higher satisfaction and compensation. That motivated me to finish my degree which led to a rewarding career in, ironically, higher education. My investment in a college education will allow me an early retirement and expanded resources to pursue other interests. I consider my ROI to have paid handsomely."
Evolence didn't have ROI considerations in mind when making decisions about his own education, but he will certainly encourage his kids to do so. "I hope to instill in [my son] that college is not about learning, not about making friends, and not about studying something that you think is 'fun." College should be about investing in your future, with the ultimate goal being to create opportunities in satisfying employment that will pay far better than other job opportunities. So if you are going to pay for the investment, think about what it will get you in the long run. Philosophy is a great field to study, but in terms of employment prospects. Do you want to work at Starbucks the rest of your life?"
Danielle and her spouse offered their kids a choice that factored in ROI considerations. "We told our two college students (and the third who is still in high school) that we would only be willing to pay full freight at an 'elite' private (high return) or an in-state public school (low investment). Otherwise, they would need merit aid."
The Dragonpat clan also considered career path when determining whether to pony up for tuition with a higher sticker price. "I guess that there was more than just ROI that went into the decision, but it was a factor. I paid out-of-state tuition for my oldest daughter. If she had been attending art school (what my second daughter studied), I would not have paid the $45,000 a year it cost to send her out of state to Michigan, but [my first] daughter studied engineering."
Educator PatrickBr, in a lengthy post that's a must-read for anyone who's interested in this issue, also has ROI (and other) considerations in mind when he counsels students about their next steps. "I've certainly encouraged students to finish up, not start new programs, drop out if they seem to be adrift, and forgo that loan that will make the unnecessary trip to Australia or somewhere else possible. And others, I have helped them to find or get scholarships, take more efficient paths to graduation that include paying internships and jobs, all with an eye toward keeping them away from long-term debt. That to my mind is the best financial ROI--minimize the 'I $' part so that whatever R is, it is a good investment."
'U.S. Universities Have All but Priced Themselves Out of the Market'
Other posters said that because of rising college tuition costs, ROI considerations are necessary--and the math may not add up in some instances.
Danielle opined, "The ROI I experienced having graduated med school in 1988 with debt less than the cost of a new car isn't reasonably going to be duplicated by my kids. The current cost of a college degree compared to future earnings is simply astronomical--there just is no comparison. It's a whole different calculus."
Alpro1 agreed that funding college is a growing challenge. "College is outpricing itself and unless some changes are made soon the next generation will not be able to afford it."
Owing to skyrocketing costs at traditional four-year universities, Michaeltbf expects to see innovation in the decades ahead, "U.S. universities have all but priced themselves out of the market. As the price of all education continues to rise much faster than inflation, the number of degrees that will EVER deliver a positive return gets smaller each year. In fact, universities may well be the future buggy whip industry as more and more knowledge becomes free for the taking on the Internet, like from the Kahn Academy."
Indeed, Carrie is anticipating that the college experience for students a decade from now may well be different from what it is today. "With the rise of MOOCs [massive open online courses], higher education is changing so quickly, I have no real idea what the lay of the land will be in nine years."
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