Revisiting the Value of College

When I was applying to college, I was fortunate to have my parents tell me I could go to the best school I could get into, regardless of tuition. I never underestimated the gravity of that offer, but I am especially grateful now that I’m looking at sending my own children to college. I would love to be able to offer them the same deal, but I’ve realized – along with many other parents my age – this may not be a realistic goal. In fact, college as my generation experienced it may not even be possible. It’s a difficult truth. Of course, we want the best for our kids, but is it still true that college is the one key to their successful future? And what about what is best for us? Have we taken that into account?

Let’s look at the facts. Economically, an expensive degree no longer automatically justifies itself because more than half of college graduates are either underemployed or unemployed. In the finance world, they call this ROI, or “return on investment.” The investment is tuition paid, and the return is the potential for increased lifetime earnings. Over the last 20 years, tuition and fees have increased 184%, while wages for college grads have only increased by 9% according to Labor Department data.

This means there are many degrees that are not producing a positive return. Economist Paul Krugman said in a New York Times OpEd, “It’s no longer true that having a college degree guarantees that you’ll get a good job, and it’s becoming less true with each passing decade.”

Even billionaire Mark Cuban has been looking at universities as an investment, bringing to light the economic health of the institutions themselves in this article: “Is Your College Going Out of Business?”:

“Before you go to college, or send your child to a four-year school you better check their balance sheet. How much debt does the school have? How many administrators making more than $200,000 do they have? How much are they spending on building new buildings — none of which add value to your child’s education, but as enrollments decline will force the school to increase their tuition and nail you with other costs…”

So, what makes this an important issue for women? First of all, as moms, we are often willing to make huge sacrifices for the sake of our kids. Some of us seem to only take care of ourselves when it will benefit our children. It’s hard withholding tuition money from a son or daughter who is an earnest student, and we might choose to pay their college tuition instead of saving for our own retirement.

But with the increased life expectancy of women, the average age of widowhood in our country being 56, and the staggering statistic that more than half of us will no longer be married at the end of our lives, we need to build up our retirement now more than ever. Besides, if you are motivated by doing what’s best for your kids, consider this: failing to save for ourselves may endanger our children’s future livelihood if they get stuck with our expensive long term care bills that may not have been in their budget.

If you decide to commit some of your retirement funds to your child’s education, take a good hard look at your investment. Here are 5 factors to consider:

1. Remember, even college can be found at a bargain price. Get creative. For example, community colleges are enjoying a revival these days, and it’s not just because of an aptly named sitcom. By attending a community college for the first couple of years and transferring to a four-year institution, those first two years can save – on average – half the tuition of a public university and 90% of the price tag of a private university. Look up what is known as “articulation agreements” for your local community college to find the four-year institutions that accept credits and sometimes even guarantee acceptance.

2. In your search for a bargain don’t forget the option of taking classes at a community college while your student is either still in high school, or even when they’re on summer break from a four-year college. Those discounted credits count toward your child’s degree.

3. Remember, there are alternative methods for paying tuition, such as financial aid, loans and scholarships. Opportunities abound in this area. On the other hand, it’s unlikely we will have many alternatives if we can’t pay for our retirement years.

4. If you need help assessing the TRUE value of a degree, check out PayScale’s latest study on this issue by clicking here. If your child’s choice of college is both expensive and has a low “return on investment,” it may not be worth the investment no matter who pays for it.

5. Of course, if you have some time before your child goes to college, set up a plan now to begin saving, I recommend visiting www.savingforcollege.com.

As parents, we wouldn’t want our children to consider any gift we present them as an entitlement, right? The same should be true of college tuition. It’s time to carefully consider the value of each college degree, and you have the tools you need to make a truly educated decision.

Updates:

Renowned financial author James Altucher said, in the case of his own children, “I am willing to support them 100% in whatever they want to do … except college.” Watch his 3-minute video “Why College is a Waste of Time and Money” addressing the ways in which the college decision has changed in the last generation.
Here is a recent post which brings up the decreasing value of some college degrees from the employer’s point of view. Check out this article (note the source) from Harvard Business Review.
It looks like private universities are beginning to respond to the ever-increasing notion that tuition payments are no longer commensurate with the value of certain diplomas. Read “Colleges Cut Prices by Providing More Financial Aid” from The Wall Street Journal.