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Monday, October 24, 2011

Is Going to College a Good Idea in a Bad Economy?

About thirty to forty years ago, a college degree was almost an automatic guarantee to a comfortable middle class lifestyle. From elementary school, we have all heard the rhetoric about college education being the key to prosperity and happiness. However, times have drastically changed and this seems to be more the exception to the rule. Consider these starling facts:

  •  College tuition costs are increasing at an average of twice the rate of inflation. According to The Bureau of Labor Statistics, the inflation rate for August 2011 is 3.8%. Between 1958 and 2001, college tuition inflation has fluctuated between 1.2 and 2.1 times the general rate of inflation, annually. FinAid.org puts the college tuition inflation rate at between 7% and 8%.

  • The national unemployment rate for the college educated, with bachelors degrees, age 25 and over is about 4.3% (August 2011-seasonally adjusted). This number looks very low compared to the national unemployment rate average of 9.1%, but it does not account for people under age 25 with bachelors degrees. I suspect that the unemployment rate for those under the age of 25, who possess a bachelors degree, is closer to the national unemployment rate.

  • The figure put out by the College Board that college graduates make $1 million more in their lifetime than, people who don’t have a college degree, is largely a myth. This statistic is skewed by a small segment of educated billionaires in the U.S. population. In fact, Sandy Baum of the College Board changed this figure to more accurately reflect that college graduates make about $450,000 more in their lifetime, than others without the education.

  •  Due to the increased costs associated with getting a college degree, the average student graduates from college with $24,000 in debt. This begs the question: “Is college is worth the effort?”
There are some very important questions to ponder in determining whether it is worth it to go college in a poor economy. What is it going to cost attend college? Will I have to incur debt to pay for college? How long will it take to pay off this college debt? What impact will this college debt have on the ability to do other things in life like, invest, get married, and buy a home or car? How much will it take for me to survive and create the lifestyle that I want in the future? Although no one knows how much their starting salary will be, you should have a range for expected starting salaries in the intended career field. There are obviously other questions to delve into and the answers to these questions will vary from person to person.

Prospective college students should examine their reasons for even wanting to go to college in the first place. If you are going just because it is what is expected of you, then you are already setting yourself up to fail. Know that you don’t need to get a college degree in order to be successful in life. Don’t go to college to major in something for which a college degree is neither practical nor required (for example, ethnic studies). Unless you are planning on teaching as a career, most liberal arts degrees are not worth pursuing, at least in an economic sense.

Another important point to consider is that, some people just are not meant to go to college. Some of these people are probably better served by vocational-technical training or entrepreneurship. Vocational training for careers in auto mechanics, plumbing, and cosmetology, often lead to lucrative careers or enterprises. We sometimes thumb our noses at people with vocational training, but at least these people are earning a decent living, without a college debt burden.

College is not the place for you to discover yourself. The best way to get to know yourself is by living, working, self study, and interacting with others. If you are not sure and confident in what you want to major in, I would suggest that you take a year or two off to work, save, and explore. Go to the library and checkout some books on subjects and careers that you are interested in. I highly recommend books that help you to acquire skills that will serve you well in your life, such as managing personal finances, how to communicate and work well with others, and time management. You might also want to read some self-improvement type books like “The Seven Habits of Highly Effective People” by Stephen R. Covey. Jump headlong into books about career advancement, entrepreneurship, and networking. You can literally get an excellent education at a library and through surfing the internet.

Given the horrible state of the economy, a job is not a sure thing upon graduation from college. New graduates are competing with an older, more experienced crowd. New graduates are also competing with more experienced folks, who are unemployed or underemployed after earning a bachelors or masters degree. Indeed, there are individuals who were unfortunately, trapped in a cycle of incurring more debt to return to college in order to earn a higher degree, because they were unable to find a job. Most of these people will inevitably need to come to terms with a mountain of debt.

This all leads to an environment where there are too many college graduates, and not enough jobs to go around, thus diluting the value of a college degree. Employers can effectively choose the cream de-la-crème and refuse all others. Often when a new grad does find a job in his or her selected degree field, chances are likely that an employer will want to start that person off at entry level wages. If the college degree is not required or relevant to the job, then the college degree might be downplayed by the employer. As far as so-called annual “merit increases”, many employers aren’t willing to pay much more than “cost of living increases”. And how many instances have you heard about an educated employee who works in an office somewhere, who makes far less than his or her highly paid, uneducated supervisor?

A few experts in education and economics are calling college a scam. Gerald Celente of Trends Research Institute, says that people are majoring in degrees in “worthlessness.” This argument is certainly cogent, since problems such as declining quality of education, corruption, collusion, and many unethical practices exist within the higher education industry. However, I don’t completely agree with a blanket sentiment that college is a scam. We don’t want to throw the proverbial baby out with the bathwater.

For prospective students who have taken due diligence and planned thoroughly, a college degree can put them on the road to a great career and financial independence. The caveat is that you have to choose the right major and the right school. College students who have chosen a major in a career field which is in high demand, and in which a college degree is required, can come out ahead of the game. Also if you are ambitious, driven, and know how to sell yourself, a college education will no-doubt pay off in the long run. Otherwise, a college degree may not be the best bet for now. It might not be a good return on some college students’ investment of time and money.

Related Posts:

Words of Caution For Anyone Thinking About Going to College

Thinking About Taking out Student Loans For College? Think Again.

What Happens When you default on a student loan? Some of the Consequences of Student Loan Default

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