The Key to Affordable College: Match Costs with Benefits

I've written several times that I think one key to selecting the right college is to match the cost of the education with the income you can expect to earn upon graduation. The more the spread between the cost of college and your lifetime earning potential, the better off you'll be (at least financially.) Of course there are many other factors involved in selecting a college/career, but from a financial standpoint, the cost/benefit issue is a HUGE one (and something that I think very few people consider when selecting a school to attend.)

Recently I found this summary of an education and salary report that highlights these same issues. In particular, here are a few quotes I found interesting along with my thoughts:

Harvard College graduates frequently enter not for profit positions.

Unless you're getting a free ride at Harvard or independently wealthy, it's going to be hard to pay for a large debt load with a not-for-profit career. Can't you go to a more affordable college and still work in this industry?

Major state universities provide exceptional value, with median salaries of graduates in the top five in their states, just behind highly selective national universities and colleges.

No surprise here -- many state universities are very good, relatively inexpensive, and provide great careers/lifetime earning potential. Seems like these should at least be in the consideration set for almost any potential college attendee.

"With great specificity, this report brings home the long term financial impact of the choice of undergraduate school and major. For young people entering college, and contemplating their post-graduate years in the workforce, this is critical information not available anywhere else."

Finally, someone is talking about the cost/benefit issue related to selecting a college and a career/major. Hopefully the fact that more places are talking about this topic will help potential college attendees and their parents consider the financial implications of going to a specific college and selecting a specific major/career. Otherwise, we'll all continue hearing stories of graduates who take out $100,000 in loans and have a $20,000-a-year job.

FYI, if you're interested, you can see how I balanced the college cost/career benefit issue.

Comments

[MoneyGrubbingLawyer]

Keep in mind that you need to look at more than just the starting salary, as even in more lucrative careers this can be discouragingly low. The mid- to long-term salary projections provide a better basis for the cost-benefit assessment. As an example, I spent close to $100k for my law degree, but chose a position with a starting salary of under $40k. Based on this, it would appear to be a bad decision. However, this salary rises fairly rapidly, so the 5 and 10 year salary levels give a much better picture of the true benefit being obtained.

[Sarah]

Unfortunately, the very good state universities (e.g., UMich) have experienced rapid tuition increases just like the rest of them...they are *not* cheap options anymore, even in-state. $5500 a term in-state (plus many fees), over $16K out-of-state at Michigan in fall 2008.

The Ivies are actually more affordable than is commonly realized. For example, Harvard expects no family contribution for families earning less than $60K/year (with a relatively small "self-help" component for the students themselves to contribute). (http://www.thecrimson.com/article.aspx?ref=512386) Other peer colleges have similar programs. Even before this (well before this), I managed to graduate from an Ivy with less than a third of the debt my brother did graduating from a good state university several years later. Richer schools simply have more money to give out and can commit to need-blind admissions.

Where people get screwed is going to the mediocre schools that charge outlandish tuitions and don't offer much in the way of either genuine education or career boost in return. That's a large and ugly dead zone of lies and self-deception.

[dogatemyfinances]

You have a very limited view of not for profit. You think Libby Dole or Michelle Obama were hurting on their non-profit boards? Or, heck, all professors and doctors technically work for non-profits. My local United Way pays over 500K to its lead, and that's just one person in one non-profit.

[Carson]

Your point holds true if you're approaching the concept of education as nothing more than vocational training.

A good college education can, and should be, more than a simple means to a financial end. There are harder-to-measure values at play here. Education has an intrinsic value and a great academic experience isn't just a matter of dollars and cents.

[AndyUrme]

I agree somewhat with dogatemyfinances.. there's tons of money to be made working for "Non-Profit" organization. This is especially true for those organizations that do not publish the details of how they spend their money. I've read news of "Non-Profit" organizations only contributing <20% of what they've raised on the actual cause. Since I cannot find that paper, take it with a grain of salt. But below is an excerpt from Forbes charting the major "Non-Profit" organizations in U.S.,

Our database also includes each charity's top compensation to a single employee. This includes salary, benefits, one-time payments and deferred compensation, and may be for a previous fiscal year. The average is $512,669, up 3% from last year. The recipient is usually the top person, although not necessarily the current one. Eighteen nonprofits paid someone upwards of $1 million.

http://www.forbes.com/2008/11/19/americas-largest-charities-pf-charities08-cx_wb_1119charityintro.html

[plonkee]

I suspect that many Harvard students are either getting essentially a full scholarship or have parents for whom the cost of paying full-freight just isn't that big a deal. If you had no or minimal college loans and wanted to work for a not-for-profit, why wouldn't you?

When you're thinking about college and career, you need to consider what you're actually going to be paying out, not the sticker price. A relatively inexpensive state college a plane ride away is not necessarily a good deal if you are not offered financial aid.