Is College Worth It?

There has been much concern in the media in recent years about college costs and student debt, and rightfully so.  The question then keeps popping up, is it worth going to college at all?  Some writers point to mounting student debt and argue that young people are delaying life events like getting married, starting a family, buying a house, etc.  According to data from the Bureau of Labor Statistics from 2014, adults with a bachelor's degree earn on average $22,516 more per year than those with a high school diploma.  College graduates are also less likely to be unemployed - the unemployment rate for adults with a bachelor's degree was 3.5%, compared with 6% for those who stopped their education after high school.  I would argue that living in poverty and battling unemployment and underemployment while scraping to make ends meet would also make it difficult to start a family or buy a house.

We've all heard the stories about college educated barristas and retail clerks, and horror stories about students enduring 4, 5, or 6 years of college, collecting large student debt loads, and then not finding a job after college.  While it was indeed a tough time for college graduates during the height of the recent recession, what these stories miss is that it was a tough time for everyone.  Unemployment and underemployment rates peaked in 2010, with an underemployment rate for those with bachelor's degrees hovering around 6.2%.  At this time, the underemployment rate for those with a high school diploma was 12.9%. It turns out the stories of unemployed college graduates are also a bit exaggerated.  While it is certainly true that some college graduates end up working in jobs that don't require a college diploma, the underemployment rate has dropped sharply since the end of the recession, and those with a bachelor's degree have benefitted far more from the recovery that high school graduates.  According to a recent study, even among the underemployed college graduates (those working in a field that does not require a college degree), most are employed in the higher-paid categories of non-college occupations, while those without a college degree are more likely to end up working as low-paid physical laborers or in low-skill, low-paid service occupations. Furthermore, many college graduates who initially work in non-college occupations move into higher-paying jobs that do require a college degree within a few years of graduation. For more details on the study, see this excellent article from Inside Higher Ed: Challenging the Barrista Myth.

The benefits of a college education are not only economic.  Developmentally, the late teens and early twenties is a time of great personal growth potential.  The exposure to new ideas and experiences, a widening of your perspective on your own and other cultures, development in analytical and critical thinking skills - these benefits cannot be quantified in an economic sense. A college degree also opens opportunities to a much wider array of career options.

So, the question remains, is college worth it?  With an average increase of income of $22,516 per year, it seems to me that a $200 student loan payment is not as much of a burden as it might seem. Even after a year's worth of payments, the net gain is still over $20,000 per year.  Of course, students should be savvy about financing college and explore all possibilities for avoiding loans altogether, including maximizing grants and scholarships, creative financing options, and thorough research on college costs to choose an affordable program in the first place, but current economic research indicates that the answer is a resounding YES!  There are also other factors in the modern economy that make a college degree worth more now than ever before.  Job growth in the economy is now almost exclusively in fields that require some training after high school.  Income for college graduates is rebounding well in the wake of the economic recession, but wages for non-college jobs are not rising at the same rate.  Thus, the income gap between high school and college graduates is getting even bigger.

A final rant on this recurring question of "Is college worth it?" - I've noticed that many of those publishing articles or making statements that college may not be worth the investment have themselves benefitted greatly from their own college education.  These aren't "I never went to college and I'm doing great" testimonials; rather they are "I went to college and am thriving, but you maybe don't need to" statements.  I, for one, would be wary of such advice.

Is it important as a nation to take action to control rapidly rising college costs?  Of course.  Should you try to minimize the amount of student debt you take on?  Certainly.  Even if you have to take out some loans and make some sacrifices, is college worth the investment?  Absolutely.

What Does College Really Cost?

What does college cost?  It seems like a simple question, but the answer is a complicated mixture of a variety of factors including, of course, which college you choose to go to, but also your family's financial situation, your academic record, where you live, and any interests, skills or talents you may have. Let's address these factors one at a time:

The college you choose has a big impact on the cost you will pay, but not necessarily for the reasons you might think.  Of course, the cost of tuition, as well as room and board and other expenses will play a part, but what will make an even bigger difference in the price you actually pay is the availability and the policies determining the distribution of grants and scholarships.  For example, although the University of California has a published tuition cost about twice that of the California State University system, low and middle income students on average pay about the same (or sometimes even a lower) net price at UC schools.  This is presumably because there is more financial aid available in the form of grants and scholarships, as well as the policies of state aid in California, which pay either the full tuition (Cal Grant) or a percentage of the tuition (California Middle Class Scholarship, Blue and Gold Program); these grants are therefore worth more at the higher-tuition UC schools than they are at CSU. Similarly, small, private liberal arts schools often have more aid available and can meet a larger portion of a student's financial need, thus resulting in a lower cost to the family, even though the published tuition is much higher than that of a local public university. Finally, some colleges and universities award most of their aid using need-based criteria (your financial situation), and others award a large chunk of their aid using merit-based criteria (grades and test scores).  More on this later.

Another factor to consider is the total amount of time it will take to get a degree.  If you end up at a lower-priced, but overcrowded college or university, you may not get the proper advising or access to classes to finish your degree in 4 years.  An extra year or two can make a big difference financially, so when considering costs, be sure to look at average time to graduation and consider the total cost of attendance, not just the annual cost.

Perhaps the biggest question in determining the actual cost of college is what sort of financial aid you will get.  This, of course, depends on your family's financial situation, and is a complicated, confusing, and sometimes frustrating issue to tackle.  When you complete the Free Application for Federal Student Aid (FAFSA) - which you should do as soon as possible! - you will get an estimate of your Expected Family Contribution, or EFC.  This is NOT the amount you will have to pay for college; it is the amount the formula used in the application predicts you should be expected to contribute.  The actual price you pay may be more or less than this, depending on all the other factors discussed in this post.  Your EFC determines how much need-based financial aid you are eligible for:

Cost of attendance - EFC = Financial Need

 You can receive need-based aid up to this amount.  Obviously, the lower your EFC, the more aid you will be eligible for at any given institution.  If your EFC is low, it may be worthwhile to research the average financial need met at the schools you are considering.  For example, if your EFC is 0, a school with a cost of attendance of $25,000 that meets 50% of demonstrated student need will cost you $12,500 in the end, while a school with a cost of attendance of $33,000 that meets 80% of student need will cost $6,600 after all financial aid is applied.

Your academic record may also play a significant role in your college costs, particularly if you are looking at colleges that offer a large amount of merit-based aid.  For example, at Fort Lewis College in Durango, Colorado, a 3.5 GPA along with a 28 ACT (or 1250 SAT) score is worth $6,000 for in-state students, $10,000 for out-of-state students.  That's right, good grades and test scores actually have monetary value at many schools.  If you're in the right range, a 0.1 increase in your GPA and/or a 1 point increase in ACT scores (or 100 points in SAT score) could be worth $2,000 in merit aid.  Many other schools also have merit aid and automatic scholarships based on high academic achievement; this information can usually be found on the scholarship page of the school website. Obviously, good grades will also be useful in private scholarship applications.

Where you live affects how much you pay for college for obvious reasons (in-state vs. out-of-state tuition, different costs for public universities in different states), but can also affect your cost when you go out of state.  There are a number of regional exchange programs that offer reduced tuition (significantly less that the out of state cost) for students from nearby states.  These include the Western Undergraduate Exchange, the Southern Regional Exchange,  the Midwest Student Exchange, and the New England Regional Student Program.

Finally, your interests, skills and talents may affect the cost of your education through more specific scholarship opportunities, such as athletic or artistic scholarships. A word of caution here - there is not as much money available in athletic scholarships as many people think, and competition for these scholarships can be fierce.  Even if you aren't at the level to get an athletic scholarship from your college of choice, be sure to research private scholarships - there are many athletic-related scholarships from private parties that are not necessarily connected with individual schools.  You should also search college websites for departmental scholarships in the field you want to study.  For example, a number of scholarships are available through the engineering department at Montana State University, but you have to look for them, they won't automatically consider you for these scholarships when you apply to the school.  If you are interested in a military career after college, all major branches of the military offer ROTC scholarships.  These will generally pay your tuition, books, and a small monthly stipend while you are in school in exchange for participation in the ROTC program and a service commitment of 4-5 years upon graduation.

Unfortunately, there is no way to know the exact price tag of a given college until you have been accepted and received your financial aid offer letter, usually sometime in the spring of your senior year. There are, however, several resources to help you figure out what, ultimately, your cost will be.  Each college has a net price calculator on its website.  These vary in accuracy, but should give you a good estimate of what you can expect to pay (these only take into account federal, state, and institutional aid, you can lower your price more with a thorough scholarship search and application process).  The following sites also provide some guidance in looking for affordable college options:

College Scorecard: A new tool designed by the US Department of Education, compares schools based on average cost, graduation rate, and earnings after college.

College Affordability Guide: After analyzing over 10 million data points related to over 5,000 colleges, this group published a guide ranking colleges based on affordability (lowest cost for low- and middle- income students as well as flexibility in learning and credits) and positive outcomes (based on graduation rates and loan default rates).

Determining cost and affordability of college options is a complicated process.  The point here is not to make assumptions about the cost of college based on the published tuition and cost of attendance; a little further research using the college's net price calculator or the resources listed above will help you figure out how much that school will actually cost YOU, which in general will be somewhat lower than the sticker price.