Monday, September 13, 2010

Is Going to College an Economic Mistake?

Another provocative article in the Washington Post last week argues that sending children to college is not a good economic investment.  "Some say bypassing a higher education is smarter than paying for a degree" by Sarah Kaufman suggests that soaring tuition prices are reducing the economic benefits of a college degree.  According to the statistics in the article, the differential in annual salaries between high school graduates and those with a bachelor's degree has narrowed, as has the difference in unemployment rates, particularly now that college graduate unemployment is at an all-time high.  Also, as the article points out, the average college degree earnings hide huge discrepancies between disciplines; the high wages of business majors or accountants look good compared to high school graduates, but those graduating with degrees in anthropology, social work, or preschool education may not be any higher than the compensation for high school graduates.

Compounding the problem, according to these financial advisers, is the burden of debt many young graduates have from their student loans.  Paying off that debt causes many to postpone major steps in their lives:  buying a house, having a family, opening their own business.  Many can't pay and end up defaulting; this not only ruins their credit (and thus, perhaps, their chance to rent an apartment or arrange a car loan), but may prevent them from getting some jobs (or have the government garnish their wages if they do get the job).

What do these experts say parents should do instead?  Invest that money in their children's future.  The $200,000 (minimum) it costs for four years at a highly-competitive private college would, if invested in T bill with 5% interest over 50 years, grow to nearly $3 million by the children's retirement age.  For those with not-such-deep pockets, at least one adviser says to give your children $10,000 to open their own business.  This, he argues, will teach them more life lessons than any college course, and will make them more motivated in whatever college education they do pursue.

Of course, as the article itself admits, there are non-monetary benefits to attending colleges.  It is for the intrinsic value of the college experience that I would want my son to go, not for the guarantee of a job with a big paycheck.  But it is an interesting perspective to keep in mind.  Even in middle school, it is easy to start getting caught up in college-mania, worrying about doing the right test-prep to get high enough scores and taking enough AP classes to ensure our children get into that "perfect" school, whatever it is--Harvard?  MIT?  Stanford?  St. John's?  University of Chicago?  Whatever.  If the voice in your head ever says, "But I'll ruin my children's lives if I don't prepare them well enough to get into (substitute educational Nirvana here)," this article provides some good food for thought.

And regardless of what I think about the article, I just have to ask:  Is there really any bachelor's degree program that is worth a quarter of a million dollars?

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