What is a college education worth?
That is the question many American students and parents are asking, including us. Our 15 year old, Aaron, is a sophomore in high school and starting to look at where he wants to attend university. Paying for him to go keeps us up at nights. When he graduates college, our other son, Elijah, will be setting off for university. The thought of eight years of eating peanut butter and jelly sandwiches and no vacations to send them is depressing. As with most parents, we are not being selfish and will do whatever it takes to ensure that they have the best opportunities. However, the reality is money does not grow on trees (or I would be in the orchard business).
Higher education costs in the United States have spiraled up to record levels. Historically on average, tuition has tended to increase about 8% per year since 1950. An 8% college inflation rate means that the cost of college doubles every nine years. So, for a baby born today this means that college costs will be more than three times the current rates when the child matriculates in college. Today, the average cost of a college degree from a public school is $21,000 per year with instate tuition discounts and from a private school is $40,000 per year. Expect to pay $250,000 total for an Ivory League undergraduate degree. Is it worth it?
According to the National Center for Education Statistics, “In 2010, young adults ages 25–34 with a bachelor’s degree earned 114 percent more than young adults without a high school diploma or its equivalent, 50 percent more than young adult high school completers, and 22 percent more than young adults with an associate’s degree.” That is encouraging news. Similarly, in 2012 a new study conducted by the U.S. Census Bureau, claimed that the average college graduate will earn $2.4 million over his or her lifetime. Even more encouraging!
The Brookings Institute did an interesting analysis in 2011. They asked the question, “Where is the best place to invest $102,000.00?” So, if your rich Aunt left you $102,000, you have the following options for investment:
1. A four-year college yields a rate of return of 15.2% per year
2. Stock market – 6.8%
3. Corporate bonds – 2.9%
4. Gold – 2.3%
5. Long-term government bonds – 2.2%
6. Housing – 0.4%
*Based on the last 60 year averages and 65 year retirement age
Clearly, a college degree is the best investment. So, all of the data point to going to college, right? The next question then is where?
Some students are embarking for universities abroad. Sending our son to England might be a less expensive option believe it or not. Even to study in the University of Oxford’s hallowed halls would cost a U.S. student just over $20,000 for an undergraduate program of study. The fee would be about $4,700 for a U.K. student. Every college that features in the top 20 of the U.S. News and World Report’s most recent ranking of best U.S. colleges in 2013 costs at least $34,000 a year for tuition and fees. Most, in fact, are closer to $40,000 a year, and quite a few top that level even. Having lived in England, he has the added advantage of knowing the country and visiting the schools.
My wife and I are educators of 20+ years for high school and college. Every year I tell my students to put in for scholarships because college is expensive and getting more expensive every year. What amazes me is that every year literally millions of dollars of FREE scholarship money goes unclaimed. Many times, only one or a handful of students put in for some of them. You do not necessarily need to go after the big ones and put your eggs all in one basket. $1,000 or even $500 ones add up. You can reach your expense goals if you are motivated to fill out the applications. I told my son to start writing.
The last question is what to study? I am very adamant about following your dreams. However, following your dreams usually requires money. Therefore, I advocate for getting a degree that affords you to pursue your dreams in the evenings and weekends after work. If you can make a living off of your degree, then it is worth the investment. To get a degree just to get one is an extremely frivolous expense and waste of time. Remember, not all jobs require a degree too. Matching up your goals with your higher education choices sets you on a solid path for a bright future.
Kiplinger in 2012 listed the following as the worst majors in college for a return on your investment:
8. Drama and Theater Arts
7. Liberal Arts
6. Studio Arts
5. Graphic Design
4. Philosophy / Religious Studies
3. Film and Photography
2. Fine Arts
Conversely, they ranked the following as the best majors in college for a return on your investment:
10. Medical Assistant Services
9. Management Info. Services
8. Construction Services
7. Medical Technologies
6. Electrical Engineering
5. Chemical Engineering
4. Treatment Therapy
3. Transportation Science & Technology
1. Pharmacy & Pharmacology
U.S. News and World Report in 2012 ranked these as the best fields of study for a return on your college investment:
6. Computer Sciences
Lastly, Forbes in 2012 added this list as best college majors:
10. Biology Fields
9. Computer Science
7. Management Info. Services
4. Construction Management
So, make up your mind sooner than later on what you want to study. Remember, According to a report from the Washington State Higher Education Coordinating Board (HECB), our home state, Washington ranks 1st nationally in the employment of engineers, 6th in computer specialists, and 9th in life and physical scientists. However, we rank 38th nationally in the production of bachelor’s degrees in science and engineering and 42nd in the production of graduate degrees in these fields. Bottom line, we need certain skilled professionals.
The jobs ARE out there for college graduates IF they have the right skill set. So, choose carefully. You are gambling 4+ years and over $100,000 on your selection of college and major. Good luck!