There has been a lot of discussion lately with respect to the value of attaining a college education and more pointedly, is the return on investment (ROI) worth it? One argument I often hear is that you don’t need a college education to find great success, to attain wealth.
I would not disagree with that. Of course it is possible. One only need to look at two oft cited examples: Bill Gates and Mark Zuckerberg. However, how many Bill Gates and Mark Zuckerbergs are out there?
I don’t believe anyone is making the case that an individual cannot attain wealth without being highly educated or perhaps more specifically, having advanced education. However, for the population as a whole, there is a high correlation between education and income, and income is a significant factor in attaining wealth. You can find any number of studies which support that idea. Although 12 years old, I believe this report from the US Census Bureau, and this graphic from the College Board (with 2009 data from the Census Bureau) nicely illustrate lifetime earnings, based on education level.
I don’t believe it is a stretch to say that for the population as a whole (we’re not talking about individuals), those that have more education tend to have better jobs which pay more and offer benefits. Moreover, those with greater education are more likely to be financially savvy and be comfortable with investing, whether it be in the stock market, in real estate, etc.
I don’t believe the questions are “should I attend college and will it be a worthwhile return on my investment?” The questions should be, “What should I be studying at college and what is the best way to finance it?”
To the first question, I would say parents should sit down with their prospective college students and consider the economy and the job market. While I would not say that someone should not follow a passion, there has to be an honest assessment of the economy and business environment. Do you really want to advise your child to get a degree in a discipline that is being overtaken by other disciplines, is becoming technologically obsolete or is being outsourced?
To the second question, taking out significant loans to pay for an education is not only unnecessary, it is not financially savvy. Previously, I have identified three alternatives parents and/or children should consider:
- Military Service. Individuals can learn a skill/trade while earning decent salary/benefits, use programs like Tuition Assistance (government pays 75% of costs) while on active duty, and the GI Bill once separated from service, all with the added bonus of serving your country. Individuals can earn a college degree (multiple degrees in fact) to pair with their training and real world experience at no expense…other than the service.
- College Savings Plan. Forward looking parents should start a college savings plan (e.g. 529) as soon as possible. Unfortunately, too many parents are financially illiterate which negatively impacts their children with regards to matters such as determining how to finance an education.
- Community College. There is no requirement, or need, to attend a university all four years. A better option is to spend the first two years at a local community college; staying at home and working at least part-time. Overall it is a great way to spend less money and be more prepared. The first two years are primarily spent just taking core courses (e.g. English) and lower level specialty courses anyway.
Summarized, if I was an adult in a position to counsel a young person with respect to employment, income and wealth, I would advise them to attain a degree (an advanced degree preferably), choose their field of study wisely (I’m thinking STEM – science, technology, engineering & math), learn about personal finance in the process and look beyond the traditional methods for financing their education.
Is college grossly expensive and getting more so all the time? Yep. Even more reason why the approach taken to attending college has to be carefully considered. I don’t believe the answer is to jump on the “college isn’t worth it” bandwagon. In fact, I believe that is a dangerous belief to adopt, particularly as I believe the need for advanced education will be even more pronounced going forward.
What say you SavvyReader, is college still worth it?