This is the first in a series of posts called the “Two-Sided Coin,” where TSD’s Jon Gorey and Holly Johnson take opposing viewpoints on a number of personal finance topics.
Holly: College Isn’t Always Worth the Money
Most of us have been told the same story our entire lives: If you do your best in school, you can get into a good college. And if you put in the work and graduate in good standing, you’ll be rewarded with a great career and a lifetime of financial security.
Sadly, history is showing that this narrative is no longer as true as it once was.
The graduating class of 2015 left school with average student loan debt of over $35,000. When it comes to paying off those loans, the struggle is real – and sometimes, catastrophic. According to an analysis by the Wall Street Journal, more than 7 million borrowers were at least 12 months in default on their student loans as of late 2015. That’s 17% of student borrowers who are desperate and may never dig their way out.
In addition to those in default, another 2.8 million students were in some stage of Public Service Loan Forgiveness (PSLF) or income-driven repayment as of 2015. While PSLF requires only a 10-year commitment in a public service position before loan balances are wiped clear, existing income-driven repayment plans can request 10% to 15% of your discretionary income for up to 25 years. For many people in these plans, that means making payments on their student loans until they are age 50 or older.
In the meantime, millennials are experiencing record levels of unemployment and underemployment. According to data shared by the New York Federal Reserve, as many as 44% of college graduates in their 20s are stuck in low-wage, dead-end jobs. To add insult to injury, 40% of our nation’s unemployed are millennials. That figure translates into 4.6 million young people struggling to find work and earn an income, many of whom are also struggling with student loan debt.
So is a college degree worth it? Most signs point to maybe.
As these sad events play out, students and their parents are right to wonder if the investment is still worth it. While many studies have proven that, overall, a college degree is generally a good investment, I would argue that all families should take a close look at their options – and the potential costs – before sending their child off to school.
A lot of people will say that higher education is always worth it. “It’s good debt,” they’ll say. Or they’ll spew out this lie: “College is a learning experience that all young people need to go through.”
Or, they’ll simply point out that many professional jobs actually require a four-year degree. When you hear someone argue that, unequivocally, college is always a good investment, ask yourself these questions:
- If a college degree was always worth it, would there be 7 million student borrowers in default?
- If college degrees always paid off in spades, would nearly 3 million borrowers be in some phase of loan forgiveness or income-driven repayment?
- If college was always a good investment, would 44% of new college graduates be working as baristas or waiters?
Obviously, the answer to these questions will always be “no.” That’s why anyone who says a college degree is always worth it is either unaware of reality or promoting their own agenda. Sadly, it’s always the students who pay when they believe this advice without doing some research on their own.
How to decide if your college degree is worth it
When an adult tells you that college is always worth it no matter what, don’t listen. Instead, let the research you do on your own serve as your guide.
In an article I wrote last May, I showed how future college students can research the variables of their potential major before making such a huge decision. With sites sponsored by the U.S. Department of Labor, it’s fairly easy to research employment projections and salaries for any college major and corresponding career trajectory.
While there are numerous ways to figure the future return-on-investment of your college education, a cursory look at the numbers can give you a really good idea of what to expect. If your projected out-of-pocket costs for a private school are $40,000 per year, for example, and you plan to pursue a career as a kindergarten teacher, you can easily see that starting salaries for that profession (salaries in the 10th percentile) were only $33,460 in 2014.
If you find that spending well over six figures to begin a fairly low-paying profession no longer strikes your fancy, run from this option as fast as you can. Or, at the very least, weigh the pros and cons of a state school that charges a fraction of the cost.
Likewise, let’s say you decide to pursue a two-year degree in diagnostic medical sonography. After determining the program at your community college will cost you less than $10,000, you find that the starting wage in this profession was around $46,930 nationally, but grew to $68,390 on average. Most people would say that’s a winning combination.
At the end of the day, both sides of the equation matter – not just what you borrow to attend school, but how much you’ll earn once you graduate. Most of the time, the wider the disparity, the worse off you’ll be.
Consider these options, too.
While the idea of attending a technical school or learning a trade may not excite you, it’s important not to sweep these alternative options under the table, either. In the real world, a technical education can serve as low-cost alternative to a pricey four-year degree, but with better job prospects and even higher pay to boot.
We’ve written about the fact that a two-year degree is the ultimate investment before, and it still rings true. While pursuing a career in healthcare, dental hygiene, masonry, or any number of technical fields may not make you feel as fancy, you could experience exceptional job security and good pay for life. And maybe, just maybe, you could avoid walking away from school with so much debt that you’ll be stuck paying it off until you’re 50.
While many people still insist that college is always worth it, the numbers say otherwise. In the real world, the value of your college degree will depend on an array of factors, some of which may not be in your control. Never believe anyone’s advice on college without doing some research on your own. Due to growing costs and economic uncertainty, the landscape has changed. If you truly want to get ahead without spending your entire life in debt, you have to mold your goals to change with it. And sometimes, that means ignoring the advice of your elders and forging your own path.
Jon: College Is Worth the Price (Most of the Time)
I was fortunate enough to get a partial scholarship to my college of choice, as well as a pretty cushy work-study position in the campus snack bar circuit (free chicken tenders and all-you-drink coffee!). This was back when college tuition was only extremely expensive and not insanely expensive.
But truthfully, looking back, I would have paid just about anything for the experience. In fact, if Syracuse sent me a bill right now for $1 million, I would understand.
At today’s tuition rates — which averaged $9,410 a year for in-state students at public universities and $32,405 annually at private colleges in 2015, not even including room and board — it’s only natural (and smart) to second guess whether a college education is worth all that money.
The thing is, even at that price, it usually is.
There is such a thing as ‘good’ debt.
As Holly pointed out, the average student loan debt for the class of 2015 was $35,000 (that’s among students who graduated with loans; some do not). Okay, that’s a ton of money, and it’s admittedly lousy to still be paying for something 10 or more years after you bought it.
But here’s the thing: The average American takes out almost as much debt — $29,000! — just to buy a stupid new car. Many people stretch out that debt over six or even seven years.
And what do they get at the end of it all? An aging vehicle that has lost almost all of its value. When it conks out, they’ll take out a new car loan all over again.
A college degree, meanwhile, remains the single best way to boost your long-term earning potential — by about a million dollars over the course of your lifetime, compared to someone with just a high-school diploma.
Think about that: An extra million dollars, over the course of your career. That’s essentially a winning lottery ticket, where you forego the lump sum in favor of annual payments.
Would you take out a $35,000 loan if it returned an average of $1,000,000 over the next 40 years? Yeah, I would, too. That’s good debt.
It’s not always about the career – at least, not right away.
College doubters also point out that nearly half of 20-something college grads work in dead-end retail or restaurant jobs.
To that I say: So what? Many of these grads were probably liberal arts or communications majors. Engineering may be the best major to land a job the week after graduation, but not everyone wants to leap straight into 9-to-5, wall-to-wall math for the rest of their life. That sounds like my nightmare.
Working a crap job in your early 20s is a time-honored tradition among the creative class. After graduation I worked at a bookstore, and then as a van driver for a radio station, both at minimum wage and while splitting housing costs with literally a dozen different roommates, before finally landing a (similarly poorly-paying) job in my field as an editorial assistant. But those mundane jobs were some of the best I’ve ever had.
Now I have a real job on the straight-and-narrow path of adulthood, on the road to retirement — and frankly I miss those carefree days of driving a gaudily painted van around town and ringing up beach reads and bestsellers. You’re only young once, but you’ll have 30 years or more to act like a grownup and work in a cubicle or some other professional environment; God knows there’s no need to rush into it.
It’s not always about the classes.
This will sound trite and cliche, but college isn’t all about academics or degrees, either. There were only a handful of classes I took that truly formed the foundation of my professional skills, such as Intro to Graphic Design. But the breadth of classes I took and the variety of personal and shared learning experiences I had made me a more curious and successful person in the long run.
What’s more, surrounding yourself with other thoughtful people is the incubator of innovation. Steve Jobs famously obsessed over where to locate bathrooms and common areas to try and manufacture more serendipitous encounters among employees. Physical proximity matters.
Economist Edward Glaeser once summed it up like this, in an ode to New York City’s human soup: “Homo sapiens are a social species; almost all of what we know we learn from each other. Dense cities, like New York, succeed when they take advantage of this fundamental aspect of our humanity. They thrive by enabling us to connect with each other, which then promotes learning and innovation.”
Immersing yourself in such an environment is simply a smart and intellectually inspiring professional decision. Friends of mine from college went on to do amazing things. They author books and work on major television shows and write for Pulitzer Prize-winning newspapers. I’ve literally gotten jobs in large part because of my college connections, and vice versa.
And this who-you-know phenomenon isn’t limited to fancy-pants private schools: Your big, state university already has thousands of alumni working in managerial positions all over the country, and one day some of your friends will hold those positions, too. When you inquire about a job or go in for an interview with such a person, you have an automatic ice breaker at your disposal — especially if your alma mater miraculously made it to the Final Four.
But not every college is right for everybody every time.
Not all colleges are worth the cost, though. If you get into Harvard or Stanford, by all means, take out the loans you need to go. But there’s no sense in paying private-school tuition rates at a college that’s no better than your state university or even your local community college — and unfortunately, plenty of people do just that. By and large, the in-state tuition at your public university system is going to give you the best bang for your buck.
In particular, don’t throw your money away at a for-profit college. That is and always was a terrible idea, and the only way they’ve survived this long is through predatory marketing practices. Millions of the student borrowers Holly mentions who are defaulting on their debt hold loans not from a state university or community college but from these questionable institutions.
Plus, there are plenty of people who just don’t need college. If you’ve always wanted to be a carpenter, you don’t need to go to college: Go to trade school or better yet get into an apprenticeship program, where you’ll make money as you learn the trade. (I would argue that a college degree from a state school is still not going to hurt, even if you have to take on some debt, since you’ll learn the skills to turn your trade into a full-scale small business later on.)
If you simply hate school and always have, then good lord, don’t pay all that money for more of it. Find a career that inspires you, where you can work with your hands or work with people. Many good, growing jobs don’t require a college degree at all.
Likewise, not everyone is ready for college at the age of 18. My brother struggled during his first bout with college, and dropped out of school after a year and a half. He found a regular, decent-paying job, and only several years later went back to school to finish his degree part-time in the evenings. And that time around, he absolutely crushed it. He was focused on what he wanted to do for a living, and responsible enough to take it seriously. Now you can barely fit his income on a calculator screen.
In the end, smart and driven people like my brother will probably be successful no matter what they do. But a college education can go a long way toward ensuring and amplifying that success over the course of a lifetime. On the other hand, some people may struggle to make ends meet even with a college degree, especially if they go to an overpriced school that leaves them saddled with debt, or go at the wrong time in their lives.
So what I’m saying is: Don’t blindly go to college because you think you’re supposed to. It’s not for everyone at all times. But don’t blindly discount it as a rip-off either. In fact, if you’re interested in a professional career, it’s pretty much the best investment you can make.