Revisiting the Value of a College Degree

A couple months ago we discussed whether or not a college degree is still worth the cost. My opinion is that it's not worth it if you borrow to the hilt and get a worthless degree. On the other hand, if you make the most out of your college degree, it certainly is worth the time and cost. Everywhere in between is a shade of gray, but in general I think the college degree is worth the expense for most people.

The Wall Street Journal recently assessed the value of the college degree in a piece that seems generally favorable to the college degree. They list the benefits of going to college as follows:

• A path to a better-paying job: College graduates in general earn at least 60% more than high-school grads on average, both annually and over their lifetimes, and the income gap has been growing over time.

• Preparing for a rich, well-rounded life: The opportunity "to 'marinate' for four years in an amazing environment" served as a "springboard to lifelong learning and inquisitiveness," she says.
• Finding work you love: This is a good reason to attend college.

• Gaining an influential network: Many graduates of elite colleges swear by the value of their network of campus buddies in opening doors after graduation, and say striving to gain admission to such schools is worth the effort.

I've made my opinion rather clear -- if you can go to a good (not great) school, control your costs (and especially borrowing), and match any borrowing you do to your post-graduation expected salary, then it's highly likely that going to college is a great economic investment.

To illustrate what I mean, look at these two examples:

• Kathy goes to an exclusive, costly, private school that runs $40,000 a year. She leaves college with $100,000 in debt and a degree in social work, where she can expect to earn $20,000 a year to start.

• Kelly goes to a public school that costs $20,000 per year. She leaves college with $20,000 in debt and an engineering degree that will earn her a $50,000 annual starting salary.

Kathy is in deep do-do because her expected income is way too low to pay off her huge school debt. On the other hand, Kelly is in good shape. With some financial discipline, she should have that $20k in debt paid off in a handful of years. Then, with her higher earning capacity, she's set up to really grow her net worth during her remaining work years.

Sidenote: One way to keep costs really low is to get radical about no debt the way this guy did. But who wants to live in a van for several years? ;-)

Comments

[Crystal]

I'm very happy that I never had college debt. I was not very happy that I had to work 2-3 jobs at any given time, live with 3 other people in a 2 bedroom apartment, and consistently take 15-18 hour semesters in order to do it.

At least I didn't have to live in a van. That guy seems a little nuts to me, but not in a bad way, just a little bonkers. :-)

I do see electricity and social interaction as necessities.

[bill]

I graduated in 2007 with no debt after 4 years at a pretty inexpensive priveate university. Tuition and books ran about 2500 a semester. I worked full time during the summer, part time during the school year, and after getting married, a wife who worked to pay the bills. Graduated in Civil Engineering and happy to be employed and not having to worry about school debt.

[Lakita]

I was having a similiar discussion with some teens this past weekend. I went to a private institute for 5 years....I had a mix of scholarships, grants, workstudy and loans. While my loans were not astronomical, they are significant.

I have a degree in Information Technology and I have been putting it to use in my professional career and also my experience and understanding of computers has helped me in other projects as well.

I would say it was worth the investment for me.

However, if I had it to do again, I would probably spend the first two years at a community college and pick up the liberal arts and core courses and then go to school to focus on my professional field of study. I've never been sold on the whole college "experience"...its about the education.

Kita

[MC]

How can anyone talk about the "value" of a college degree without address what degree and what kind of grades you do it with??

English=little to no inherent value to your career even if you get all A's and a masters or PhD in it. Chemistry or engineering=good to excellent value in terms of your future employment even if you only get a Bachelor's degree.

If you don't get A's and B's in all your classes, it's probably not going to be worth it no matter where you go. C's mean you aren't learning the material and will make it hard for you to get into grad school later if that's what you want to do. Oh, and don't think you can save your GPA by withdrawing from classes! Grad schools hate applicants whose transcripts are littered with W's even if they have retaken the class later and did OK the 2nd time.

Basically, if you are bothering to pay for college in the first place, you should be sure to take it seriously and study/get tutoring or whatever it takes to get those good grades.

I graduated in 1985 in 4 yrs from a no-name private liberal arts univ that charged about $10K/yr tuition (BS Chem), with only $1500 in GSL loans. I received a merit scholarship 2 years, and I worked summers full-time and all 4 years 20hrs/wk during school. And yes, I took all the English and liberal arts classes in addition to the classes in my major--it was fun, but I could tell even back then that that stuff wouldn't pay the bills.

Later, I did my PhD (Biochem) at a top university in my field (it was easy to get in even coming from my lame undergrad school because my grades were stellar, I had had an outstanding internship experience at a big name univ, and my GRE exam scores were near 100%). While doing my PhD my tuition was waved and I got paid as a graduate teaching assistant, so I had no debt when I graduated with my doctorate. Or since then, actually.

Students these days have it really tough with the high tuition, but going into the sciences as an undergrad is still much more likely to pay off than something in the liberal arts. In fact, there are great jobs in my own field going begging right now because there are no qualified candidates available!

[Eugene Krabs]

Van Man is my hero! :D That's a much more detailed article about him than the ones I've seen in the past. It even included pictures! Thanks for sharing.

[Terry]

I lived in my Chevy Vega for four months. I needed the car for my job delivering pizzas. Later, I lived in my (different) employer's storage area (in the basement of an apartment building) for the last four months of Ronald Reagan's second term, which left me with an indelible impression of his presidency.

Funny how my impression of Obama is no better than my impression of Reagan.

[Crystal]

Terry, the presidents aren't why you are poor.

I'm getting tired of everyone blaming someone else for their problems. We lost $15,000 in a collapsing business in 2007...it wasn't Bush's fault. We shouldn't have backed a failing game store just because we liked the owners. I might not have liked Bush as our president but I know better than to blame him for my personal problems.

Grow up.

[TheDebtHawk.com]

I think that people need to really understand the earning potential of the type of work they want to do. Too many people graduate with art degrees and then are shocked that they don't make more money.

However, if you keep your costs low and are okay with the amount of money you will make as an artist, this can be fine too. The key is knowing what you will earn when you graduate.

[Terry]

Crystal,

I'm blaming Reagan not for my poverty but for the fact that under his watch, my rent increased 500 percent, I faced five rent increases in five years, I had to move three times in those five years (because I could not afford the new higher rent), and ultimately pounded the pavement for four solid months to find housing I could afford. (And I was very proud of the effort I put into it.)

Reagan had nothing to do with my income, but I think he had a lot to do with the rising tide around me which capsized my living situation. (Tip: A rising tide does NOT lift all boats, and capsizes those not lifted.)

And Obama isn't doing anything to me that he's not doing to the rest of the country, so I'm not taking it personally.

[Terry]

DebtHawk:

"What you will earn when you graduate" is a moving target which is largely a function of not only the degree you get but also whatever cumulative experience you have gained (e.g. internships) AND economic conditions at the time and place you graduate.

It's hard to accurately anticipate future earnings, especially when the economy can go south (or north) between now and when you graduate...or (as in my case) YOUR regional economy can go in the tank while a different region is booming.

[billyjobob]

Probably one of the most valuble lessons I learned while I was in college was how to live frugally. It probably started me on the road to the way I live today. I had very little money. I borrowed very little and recieve some help from my parents. But I also drove an old VW that was falling apart. My groceries consisted of the cheapest foods you could buy. I remember Soft Twirl bread, 3loaves for a dollar. Those bulk bags of cereal. I bought dryed milk. And a date night with my girlfriend consisted of playing scrabble and sharing a cheap bottle of wine. I also had to sell my beloved Fender Telecaster Guitar ( really wish I hadn't done that) As a result of my frugality, when school was done I only owed my parents money. I paid some back and then as a gift to me they forgave the rest that I owed them. Anyway... my post probably doesn't have much to do with the subject as it's presented. But it should be pointed out that when your a poor college student you can live like a poor college student.

[Mike Hunt]

I was very lucky in that my parents offered to pay tuition and room & board for me and my siblings. For 4 years of undergraduate college only, anywhere we wanted to go. So I got my undergrad degree at Johns Hopkins in the early 90's - I still remember that tuition the first year was $14,900, rising up to $17,500 the last year. I remember my Dad guilt tripping and yelling at me because I'd always sleep through my classes the first 2 years and he rightly calculated that each class was costing north of $100!

Well I got my act together the last 2 years of college because I knew I wanted to go to grad school and couldn't do it with the 2.3 average I had after 2 years. So I knuckled down and picked up my grades and spend the summers doing undergrad research. This went well enough so I could get a scholarship into 2 different Grad schools- University of Massachusetts at Amherst and University of Virginia at Charlottesville. I chose the latter.

My advisor at UVA was kind of a mis-fit and was pretty abusive to me and all the other grad students in his department. Unfortunately I had to take it since I had limited options because of my crappy grades the first two years (graduated with a 2.85 only because the last two years I got a 3.5 or so).

To save money I lived on "The Range"- a series of cabins on the Lawn at UVA which consist of a room, a fireplace and a sink. I had to walk a few hundred feet, past the 'Edgar Allen Poe room' with tourists taking pictures so I could use the bathroom and / or take a shower. It got so tiresome that it was not long before I was going number 1 in the sink, making sure to aim straight for the drain and rinsing the sink with soap & water afterwards!

The rent at the Range was only $220 per month so I was able to live of my meager grad student allowance / half stipend of $500 per month (tuition was free). It was good to have that experience at 21 and not 51 and it was a great way to start living frugally, one that I've carried with me into adulthood. The other bonus is it was very easy to pick up women as living on the Range with a fireplace seemed to have some cachet. Aah youth!

-Mike

[billyjobob]

Wow Mike. A fireplace? You had it made dude.... :-)

[Bret @ Hope to Prosper]

The most important reason to attend college is to become educated. Being intelligent is it's own reward. And, the value of intelligence is priceless, compared to a degree you hang on the wall.

People are so caught up in the finances of college, they forget the reason a degree is valuable to employers. It's the skills you learn while you are there. That's why science and engineering degrees pay much better than a liberal arts degree. Companies aren't interested in the history of folk music. They are interested in staying in business and making a profit.

I work as an IT Manager and I report directly to the CFO. It's been invaluable for me in my career to solve problems for Accounting. I am a Computer Science major. But, I took all of the business classes for my electives. I could have taken easier classes, but that would have been a waste of time. Instead, I concentrated on getting the skills I needed for my job.

I learned all of these critical skills at my local community college for a couple thousand bucks. It has paid off many times over and I am only half way through my career. You don't have to spend a fortune or go into massive debt to get an education. You just have to work really hard and have an educational plan that makes sense.

[BigBoy]

My friend who graduated with a bachelor degree in engineering at a flagship university (OSU) racked up $20,000 in student loan, but can't find an engineering job, is now working at a call center for $10/hr.

I however did not go to college and see no point. I started in a warehouse at $10/hr also but 4 years earlier. My pay rate increase 50C every 6 months, and after 3 years, I got promoted to a warehouse manager making $15/hr.

Right now the friend with the degree, after one year, still does not have a good job and still making $11/hr. He could not get hired because the engineering company said that he did not use his skill/degree for too long, they will not hire him. I am now making $16/hr.

So by calculation:

My friend- Bachelor Engineering Grad $11/hr * 40hr * 52wk/yr = $22880/yr
Me - High School Grad $16/hr * 40hr * 52wk/yr = $33280/yr
Difference - $33280 - $22880 = $10,400/yr.

By total calculation, let say I made $80,000 for the first 4 yrs ($20,000/yr).
My friend owe $20,000 in loan after 4 yrs, which means I am $100,000 ahead of him and is making $10,000 more/yr. Therefore, if the rate continues for 40 more years, I will make $400,000 + $100,000 = $500,000 more than engineering grad in my working life time; that is if I am to retire when I am 62.

Hey what do I know, I am just a high school grad.