Is College worth it?

My wife and I both have PhDs, and we both work in education, so it is safe to say we deeply value education. I have also been a faculty member at a large state university for the last 15 years, and I have seen many students come in, take some classes, and then drop-out for various reasons. Hopefully, the experience was valuable to them, but without a degree, the rate of return on investment (ROI) is likely to be poor. Many of them ended up with $20K-$30K in student loan debt, which will affect their financial health for years to come without getting the boost to their earning potential that a degree provides. There are also students who did finish but have not worked at a position that requires that degree. The ROI here is a little bit less clear as a degree is probably helpful even if it is not related to the person’s job.

Different students also “invest” very different amounts of money into their education. For me, this is most jarring when the education they receive is basically identical, but they choose to pay very different amounts of money for it. Going to an out-of-state public university can cost many times more than going to a similarly ranked in-state institution.

Let’s look at an example. Mary and Beth are both graduating from high school in Wisconsin, and each of their families is able to pay $10K per year towards their college education. Mary decides to go to the University of Wisconsin-Madison (currently ranked #46 in National Universities by US News). She pays $10,725 for tuition and $11,558 in room and board (based on 2019-2020 costs). Assuming costs stay fixed for four years, she will graduate with roughly $50K in debt. Beth decides she wants a warmer climate and goes to the University of California-Davis (currently ranked #39 in National Universities by US News). She pays out-of-state tuition at $43,484 and $15,863 to live in the dorms. After her parent’s contribution of $40K over the four years, she will graduate with almost $200K in debt! And this doesn’t even account for the extra money she will be spending to travel to visit her family.

The value of the degrees that Mary and Beth will start their careers with is roughly the same. They both graduated from well-known large public institutions. They also had approximately the same experiences living on campus and had very similar opportunities to build their social network. However, Mary paid a total of roughly $90K for her degree, and Beth spent a total of about $240K. If you view a college education as an investment, you are essentially choosing if you want to pay $90K or $240K for the same investment. Of course, how your ROI looks depends on how much you decide to spend in the first place.

Mary, the student going to an in-state school, may be able to avoid debt altogether if she lives at home and spends her summers working to make the roughly $2K a year–that is the difference between what her family can afford and the cost of tuition. Or she can live at home and take summer classes to graduate in 3 years. In this case, she will be ready to enter the job market a year early with no debt at all. Her ROI, in this case, would be totally different than Beth’s.

The ROI computations becomes more complicated if a student is choosing between two different types of schools. If instead of going to UC Davis, a large public university, Beth decides to go to Augustana College – a small private liberal arts college where she will get a lot more attention from faculty. While Mary will likely take her math requirement in a class of 400, Beth will be in a class of 15. Beth will be paying about as much in tuition as she would have at Davis (assuming she doesn’t get financial aid), but the investment she will be buying is actually different than what Mary is purchasing. Is it worth it? That depends. Beth will receive a lot of personal attention. If she doesn’t show up to class, her professor will likely contact her to make sure she continues to be successful. That is unlikely to happen in Mary’s school. On the other hand, Mary will have access to a much larger variety of opportunities and will have much broader choices for building her social network. The ROI, in this case, depends on the type of people Mary and Beth are and on their future goals.

In the next several posts, we will explore how to choose the best environment for each student and how to minimize the cost of your investment in every case. We will bring in our experiences both as former students and as current educators. Please put your questions or tips in the comments below.

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