Is College Worth It?

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.

The Rising Cost of Not Going to College | Pew Research Center

I don’t believe it is a stretch to say that for the population as a whole (we’re not talking about individuals), those who 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?”

Don’t Send Your Kids to College | James Altucher

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?

Why Getting a College Degree Doesn’t Always Payoff | PBS NewsHour

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? Have you determined the ROI on financing a college education? Have you taken the time to calculate the repayment on a loan?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

25 Comments

  1. I think college is worth it but it is not worth it at any cost as many used to think. Unless you go to vocation school with an in-demand skill, a college degree is still important in getting a job. However, just a college degree won’t ensure that you’ll get a good paying job…and a job at all. So I think it’s important to pay attention to tuition costs and pursue different options to reduce the costs. It is also important to major in something where you will be able to find a job.

    • “I think college is worth it but it is not worth it at any cost as many used to think.” My thoughts exactly. A degree – in the right discipline, and for which a reasonable amount was paid – is still quite valuable.

      Interestingly enough, I am currently on a board reviewing resumes. One of the eight categories [1 – 10 based scoring in each] is education/training. While a degree itself won’t get someone a job, it certainly helps with getting a foot in the door and still carries some weight.

  2. You sparked a big debate. I know college was a big part of shaping who I am today, but in hindsight I wouldn’t go. Only because I have natural talent and enjoy programming which doesn’t require a degree and I could be Financially set for life by now instead of barely beginning.
    It’s a tough call, hindsight I know exactly what I would do, but when I was fresh out of high school I didn’t know much about the world, how to manage money, invest and didn’t know I had programming talent. All of those things I learned later in life may not have came along without me going to college.
    I’m not saying college is bad, it’s just damn expensive, time consuming and most don’t direct you very well to actually get a job anywhere afterwards. You’re point about picking the right discipline is extremely important, too many kids I met when I was in school went for archaeology, history, math, geography majors and didn’t want to teach. What was their plan exactly? Too many didn’t have a plan and too many already had a degree, realized it was worthless and went back.

    Basically what I did was look at classified ads online and looked into the jobs that interested me. The jobs that most interested me most were scientific or engineering based. Like your advice I went to a community college and got my Associates and transferred to a university to get my bachelors degree. The downside to that method is your associates degree is mostly filler classes and when you transfer you either take more than 2 years to complete or you cram(what I did) a lot of your major’s difficult advanced classes on top of each other. I can’t say I regret college either. If I ignore my first mistake year in college, I spent 9 semesters to graduate. Total was almost 6 years though. Parents didn’t help financially and I graduated with just over $20k in student loans about 5 years ago. Hindsight, I would’ve taken out less loans too.

    • Thanks for sharing your thoughts and experience, my friend. No doubt that college is not for everyone. I would say there are three general groups of people that don’t need a college degree: the super bright (e.g. Mark Zuckerberg, Bill Gates) that either don’t go at all or drop out early to take an entrepreneurial path, those that are pretty sharp and know they want to pursue a discipline that does not require a degree (e.g. apprentice as a plumber), and those that pursue a discipline (auto mechanic) for which some type of vocational training – a shorter time commitment and less expensive option – which will suffice.

      For pretty much everyone else, I believe it is in their best interest to attend college. It is a hyper-competitive environment and there is a serious risk of getting left behind without that education and piece of paper.

      As you note, young people often don’t know what exactly they want to do. Because of that, and the fact that a career change (by choice or not) is likely for most, I always suggest people pursue a dual major, or major/minor. The first major should be what they think they want to do and the second major, or minor, should be business administration. My rationale is that regardless of the product or service an organization is selling, it will require business disciplines such as marketing, management, advertising, accounting, etc. In short, a business degree avails itself to any type of organization. My education based on my belief? B.S. (dual major)Communications Technology and Business Administration and an MBA,specialization in management.

      As I note in the blog post, for those that have decided to pursue a post-secondary education and have wisely chosen a discipline, the second part of the equation is to limit cost to the greatest extent possible, maximizing the ROI.

  3. I’ve recently been thinking that I would not advise students to go to college – at least not right away. I would also have them take a deeper look at the school and what their dollars will be paying for. For instance, I think students should be aware of the number of adjuncts versus full-time faculty, since adjuncts often teach at a number of universities and have a harder time acting as mentors to students. (It’s not impossible, but it is harder.) I also think we should talk to students about their debt load versus their choice of major. I once heard a freshman who would be paying $160,000 for her elementary education degree say, “I’m going to make it back.” She very well might, but at what cost?

    I also think that STEM is great, but there must be a way to talk about the benefits of humanities courses. I’ve seen far too many college graduates who can’t write well. Nor can they understand irony, subtext or satire. I personally think those are important to know, as is rhetoric.

    This is a really important topic, and I’m glad you posed the question. There’s so much more to say about it, and so much more to explore on both sides.

    • Agreed that it is an important topic with a number of factors to consider. As with most things, educating yourself – or the young student you may be working with – with respect to the different options and the pros/cons of selected (or not selected) options is key to long-term success. Thanks for stopping by, MJ and adding your voice, and insights, to the conversation.

  4. I think college is most certainly worth it. There are a ton of intangible benefits of obtaining higher education. Sure, you may make more as a plumber, but you miss out on the other benefits of college.

    • Great point. Attending college isn’t just about monetary matters. There is a lot to be said about being in a learning environment and attaining education simply for the sake of knowledge. Thanks for stopping by and adding to the conversation, Tony.

  5. I do believe college is worth it. My hubby has done quite well with his college degrees. On the other hand, I know many people who own their own businesses and work jobs that they are very satisfied with. I don’t have a degree and I don’t think I would have done anything differently. Times have changed though and our kids will go to college.

    • Thanks for stopping by, Jayleen and adding to the conversation.

  6. I completely agree that an education “at any cost” is not the answer at all. In the past, when earning a degree want as burdensome, it made more sense to attain a degree “no matter what” but these days the insanity called tuition had made it absolutely necessary to consider the alternative methods of paying for higher education.
    The massive debt weighs on a marriages, future financial goals, retirement plans, dealing with costly emergencies etc.

  7. I have taken a bit to consider my position and exactly how to respond to this important question. SavvyJames and I agree on almost everything but this is where we part ways on a few points.

    Is education important? Absolutely. I believe the more you know the better many aspects of your life will be.

    With that said, I just can’t justify the high cost of traditional education. I know too many people with Masters degrees in varying fields who cannot find a job. One friend said she attained a degree in the medical field because all the studies she read as a senior in high school stated that the medical field “will always be in search of applicants”. Well six years (and thousands of dollars in debt) later, she remains unemployed. I know you sighted a study and a graph James and I completely respect the information. I just want to know where the study is that represents those who have degrees but are unable to put that degree to use.

    I read a book called “Where Did My Money Go?”. I read one particular paragraph of it to my wife and son. My son’s response made me proud, “Ok, I think a vocational school would be best”.

    The reason for his reaction was that the book compared the cost of a degree with the “additional” income the degree was supposed to yield. It just didn’t seem worth it to my then 14 year old son and my wife and I agreed.

    As suggested alternatives like military service and community college can help reduce or elliminate the cost of a degree program. I would also suggest creating a “Graduate Debt Free” plan if one decides to attend a traditional higher education institute. More than likely this plan needs to be in place before the child is even born. Foresight is essential, hindsight is of no use.

    Vocational schools are often looked down on as if they are second rate. Truthfully this is far from the truth. I know more successful, debt free folks who attended a vocational school than those who attained a traditional degree. These people don’t have college debt hanging over their heads. They have taken their real-world training and started businesses or have been hired by someone based on their experience actually “doing” the work, not studying it in theory.

    Then there is the documentary (Inside Job, I believe) that touched on the fact that the government actually tells universities what they can and cannot teach. They have proven that certain methods of attaining wealth, staying out of debt, etc. are elliminated from the list of “approved teachings”. That’s a major red flag in my opinion.

    So while I respect “research, graphs and studies” I just don’t see hard, concrete evidence of what they claim. In fact the evidence I see is in sharp contrast to it. When a doctor is still paying off his student loan THIRTY years after graduation, something just isn’t right.

    • Perhaps we are saying something similar? Perhaps not. I don’t believe that you are saying the answer is not to go to college. I believe we are both saying individuals need to find a way to get a worthwhile education in a financially prudent way. You offer vocational school. That is great; however, what if someone does not have the aptitude (or interest) for a particular vocation?

      I absolutely agree that the cost of college has gotten out of hand and the financial burden it places on individuals is a problem…not only for the individual, but for our society as well. However, at the end of the day, if I was counseling a young person, I would suggest they attain a post-secondary education. In fact, as I noted, I would suggest they attain a graduate degree.

      As I laid out in the post, part of the problem is that too many people unnecessarily spend a lot of money for a degree that offers a low ROI. The solution? 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. If someone spends an obscene amount of money for a degree that leads to a job that pays $8.35/hour, they largely have themselves to blame (our society, which pushes the idea that education at any cost is worth it bears some blame) for the difficulties they find. There are alternative approaches to gaining a worthwhile education at a reasonable price.

  8. A Google+ reader notes…

    “Although it is too late for me (already buried in student loan debt), I believe that the social interactions and contacts (that I should have) made during college are worth more than the degree.” 

    • Student loan debt has become a significant reason why many dismiss the value of a college education.

      The key to maximizing a college education is to limit the debt and choose a degree that fits into the current business environment.

      • Following my response, the Google+ reader offers…

        “Choosing the degree is the easier part of the process. The difficulty lies in finding a decent school that won’t charge an ungodly sum for the education. Making an assumption that one can pay off student loans with a decent job right out of college is smoke and mirrors. Granted the names look good on paper, i.e. resume fodder, they do not reveal one’s abilities to complete a task, at least not in the technical field.”

        • Agreed that choosing the right degree program is the easier part of the process. Unfortunately, too many people get that part wrong and then compound the problem by taking on significant debt.

          Did you have a chance to read the blog post? I mention three approaches (one of which requires forethought and action by parents) for lessening the burden of financing a college education.

          Unfortunately, too many people get caught up in the idea, the traditional approach, that they have to go to a 4-year school right after high school…costs be damned.

          It can’t be stressed enough. Most institutions are not only in the business of education, but also in the business of making money. Savvy individuals have to navigate the post-secondary minefield carefully.

  9. SavvyJames,
    This is an extremely important question you ask in the title. On the whole the answer is yes, but not for everyone. I agree with most of what you’ve written here. Getting the right degree at the right price is much more important than simply saying more education is better no matter what. More education is sometimes better. I have an undergraduate degree, but the cost to get an advanced degree in my field would not increase my salary, making a waste of time and money. One thing you don’t touch on here is trade school. There’s a group of jobs out there that require training but not a college degree. Plumbers, HVAC certified, electricians, welders, some jobs in health care etc. These jobs are growing and the average age of the workers is quite high. Plus those jobs don’t disappear, they are growing. I will strongly encourage my kids to get a college degree or more, not trade school. But for many that can’t pay for college or aren’t cut out for it, that’s a good path.
    -RBD

    • First, thanks for stopping by, RBD. It is always good to get your feedback. You are absolutely correct in noting that one option that I did not address is trade schools. They are definitely an option for those that have an aptitude for the skills/disciplines that are covered in those institutions vice college; and the education can typically be acquired for significantly less than a college degree.

      While I have an advanced degree – an MBA – I will be the first to acknowledge that there haven’t been any direct benefits (e.g. an immediate promotion at work). However, I did not pursue the degree with the expectation that it would. I pursued it because I knew I would not incur any debt in earning the degree – courtesy of the Montgomery G.I. Bill – and I approached it strictly from an educational perspective. While there have not been any direct benefits, I believe there have been tangible indirect benefits, such as establishing different contacts and a greater understanding of business, economics and finance which has helped me with respect to personal finance.

      • Very good article RS. The question you ask gets the essence of the decision on an individual level. It is also nice to know that there are ways to reduce the cost of a degree.

        I agree that what you study matters. Unless you are wealthy, you need a degree that provides a marketable skill someone is willing to pay a premium for, and you are decently good at. In addition, how much you end up paying matters as well. I took an advanced degree, which resulted in “losing” 1 year worth of salary. However, I ended up earning more money, so the degree paid itself off in less than 3 years.

        • Thanks for the great feedback. There is no doubt that a post-secondary education can be expensive. However, I absolutely believe there are ways to mitigate the costs and that in the long-run, there are financial benefits to more education.

      • I believe a college degree is absolutely still “worth it”, with limitations. I have numerous co-workers with kids in college as well as our daughter who’s finishing her junior year at a state university. Your comment, return on investment is the key. I’ve listened to many parents who’ve paid/financed in excess of $50,000 per year at a private university for their kids to get a degree in elementary education. The student then goes directly on to graduate school further digging themselves into debt. Paying/financing over $200,000 (plus grad school) for a $30,000 per year job is the real issue. This same BA degree could have been attained for approximately $40,000 – $50,000 total through two years at a community college followed by two years at a state university, based on tuition rates in Arizona. The popular thing for graduating high school seniors is to go to the big name schools without regard to amount of debt they’ll incur.

        Although my wife and I have been very fortunate to have my parents pay for 75 percent of our daughters undergraduate education, we missed a great “teaching” (no pun intended!) opportunity with our daughter going to a community college first. This, and having her have more skin in the game in regards to her being more aggressive in scholarships and grants was the other issue. She’s going to finish her degree in Animal Science debt free. Any graduate level education beyond her BS is on her nickel.

        Speaking of parents funding their kids college education, they (parents) should only assist their kids if, and only if there retirement plan is intact and that this plan won’t be put on hold or worse yet, they dip into their retirement funds to help pay tuition costs. Once a parent has hit what I call the finish line, that being their kids have graduated from high school and are headed to college, their financial obligation has pretty much ended when it comes to their kids career endeavors. Sure they can help out here and there but the kid(s) can now take the financial ball and run with it.

        Learning financial responsibility at this early age is an area that I feel this millennial generation could use.

        • Great points and thanks for sharing your personal experiences with respect to your daughter. Your observation, “The student … . Paying/financing over $200,000 (plus grad school) for a $30,000 per year job is the real issue,” is exactly right. While I appreciate that a young person might want to follow their ‘heart’ or ‘dream,’ they have to remain tethered in reality. That is where the parents have to be prepared to step in and ensure they are heading down a viable path. And of course, as you note at the end of your comment, hopefully parents have laid a solid foundation with respect to financial responsibility long before the child is 17 or 18.

          As always, thanks for adding to the conversation, my friend.

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