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“Is the Cost of College Worth the Investment?” is the Wrong Question

14Nov 2006

A very frequent topic of discussion, books and articles today is the question: “Is the cost of college worth the investment?” Often proponents cite historical data of the cumulative increase in income a college graduate earns over their career in comparison to high school graduates.

This then leads to a variety of issues addressing variations or derivatives of the global issue, such as the high cost of private colleges and arguments that state colleges are a better value, or rebuttals that private colleges provide more “value” and the real cost for graduates isn’t that different (partly because many students attending public universities take five years to complete, while private college students are more likely to complete in four years.)

Another related topic is that of debt – whether parents or students should fund college education by taking out loans. Dave Ramsey, a conservative popular financial advisor, strongly opposes this path. Others such as Eileen Gallo, who advises wealthy families, comes from a different point of view – discussing whether wealthy parents should pay for all of their students’ college education or not. And then there are the rest of us who value higher education, and are asking, not if, but: “How much debt should we (or our child) take on?”

I believe this discussion will continue for several years. And the questions are not easy to answer. The problem is: I believe, that we are asking the wrong questions (at least, initially).

Anytime a question of “value” or “worth” is being raised, there is a deeper set of questions which need to be asked (and hopefully, answered) first. Questions such as:

*What is the purpose of a college education (generally speaking)?
*What is the purpose of my child going to college?
*What do I want them to accomplish as a result of going to (and completing!) college?
*What are the life-long benefits I hope they will experience in their life as a result of this investment?

*What are the risks associated with the process (i.e. the process of going to college)? What are the risks associated with taking out X amount of debt to pay for their college (risks for us as parents, risks for them as a young adult)?

*How can these risks be minimized?

*Who should be involved in making these decisions?

*How will we communicate with each other (parents, student, grandparents, others) about our beliefs, thoughts, feelings, observations – especially over time as circumstances in life change?

Now, let me offer some of my thoughts and responses to some of the questions.

First, I believe using historical data from the 70’s, 80’s, & 90’s to justify investing in college today can lead to erroneous conclusions. The world has changed. A college degree no longer, in and of itself, leads to higher wages or a more successful career. Take a quick look around you and note how much college graduates are working in entry level jobs not related to their field of study. (For financial types, this is similar to using past performance of a mutual fund manager to predict future success – it really depends on the manager, the period of time you are comparing to, and other market factors.)

If the degree is from an inferior institution (on-line “buy your degree” colleges, and some community colleges) or in an area with minimally marketable skills (how about a B.A. in“general studies”?), the time and money may be wasted. There are many ways to obtain skills and knowledge today not possible in the past, (including the Internet.) I have met many young entrepreneurs who are starting their own businesses in real estate, landscaping, construction, or buying franchises, who are not college-educated but who are being trained in alternative ways.

Second, as Thomas Friedman has written in The World is Flat, one of the areas of continued need economically will be service occupations that need to be provided locally. This includes many skilled trades (electricians, plumbers, carpenters, auto mechanics, home builders) for which a college degree is not the way the profession is learned. We have a major problem in our culture in that our educational system is biased heavily toward verbal skills and processing information. But there are millions of individuals who are talented in the visual-spatial, mechanical, mathematical, musical, artistic areas that are not being trained well – and there is already a shortage of these types of professionals in our country today.

Third, it is important to note that, for many, the purpose of college is not limited to developing a marketable career skill. Many also argue that the college experience broadens the person, exposing them to different types of people, different ways of thinking, and new life experiences that will shape them for life. I personally hold to this view – and incorporate this into the “value” I believe college brings to individual’s lives. (The more cynical viewpoint is: “What do I value about college graduates over high school graduates? They are usually older.”) Others (Bob Copeland in Ten Things Employers Want You to Learn in College) have written about the life skills that can be obtained through the college education process (for example, written communication skills, the ability to work with others, asking and answering the right questions.)

Finally, probably the most important issue is the factor is that young people today know virtually nothing about the world of work. They do not know what careers are out there and have only a cursory knowledge of what a professional really does (ask them about civil engineers, occupational therapists, actuaries or an insurance adjustor). The world of education and the work of work are largely in two separate universes today. And young people have little exposure to the world of work – either by working themselves or by seeing what their parents do.

So, in my opinion, (and I will be writing more about this) if parents want to help their children succeed in finding a career they should focus more on educating them about various jobs, careers and industries, and spend less time and money on SAT/ACT preparation courses and finding the “right” college. Where one goes to college is clearly secondary decision compared to having a general sense of one’s life and career direction.

Yes, college is expensive. But to answer the “is it worth it?” question, parents and students need to think through some more foundational issues first.

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