Facing Reality: The Tremendous Cost of Higher Education
Posted by Cap in Personal Finance |Is it worth it to go into debt for an education?
In my opinion? Totally.
Of course, that’s easy for me to say. So far, I do not have any student loans. My first year at the state university was provided for by federal financial aid and state grants, the second year, out of my own pocket. The times I’ve been at the local community college was out of my own pocket, as the cost was a very manageable $26 per unit (increased a bit but still dirt cheap compare to what some of my friends pay).
When I was riding on the Amtrak last month, I met a nice couple in their 60-70s; I invited myself to dinner with them (heh) and had a nice chat in their spacious cabin after dinner. As we cruise pass the Salton Sea, we talked at length about finances and some of the financial challenges young people face these days. One of the subject? The rising cost of higher education.
“The cost of college is a bit ridiculous these days,” said the friendly train mate, “when my wife and I went to school — and mind you, this was way before you were even born — we both finished out paying less than a few thousand!”
My train mate was entirely correct. The cost of higher education has more than almost tripled since the mid 1980s — from about $3,800 in 1986 for public institutions to $9,800 in 2005. Private institution? $9,600 in 1986 to about $26,000 in 2005. The inflation rate of tuition is at about twice of general inflation. According to FinAid.org, this means that a baby born today will pay more than three times the current tuition rate as they enroll in college.
These days, college students are graduating with a hefty student loan, and at times, accompanied by a hefty credit card debt. Saving for your child’s education, and managing your budget while in college has never been more important.
At these mounting cost and the prospect of even more expenses for the future generation, I still believe that it is entirely appropriate to go into debt for your education. The extremely important and crucial part? Facing the cost of higher education realistically — that is, understand fully how much you’re taking on financially (in terms of loans), and how much you can afford (in terms of paying it back via future job income etc.).
Most of my close friends are graduating with mind boggling amounts in student loan. My best friend of will be finishing her B.S. in Nursing at the cool tune of about $58,000 in student loans (and she was only at this school for 2.5 years). My other good friend will be finishing dentistry school with a student loan of about $160,000. My cousin just finished pharmacy school with a student loan of about $90,000.
What is the obvious thing in common among these people, besides the fact that they’re all more successful than me? They have job outlooks that will pay for their education. Their education debt, although expensive, is practical when you consider the income level they’ll generate (and as I type this, they have all become even better friends in my mind. teehee).
How will the scenarios play out if these friends of mine pursue a career in a field that may not pay as well? They will most likely be in financial hardship as they finish college or graduate school. I point these out not because I like to short change anyone’s academic pursuit. You don’t need to justify the cost of higher education with a high paying job; however, you do need to go into debt with your eyes wide open.
College is not cheap. The financial cost and debt (if any) that you’ll incur is no joke. It is still entirely affordable if you plan for it, but if you’re not careful with your choices, you may pay for it financially. Too many people choose certain institutions without considering the financial cost and a means to repay the cost. If you pursuit higher education and it’ll put you into debt, you will need to have a plan in getting out of that debt. This also applies towards those who are furthering their education to earn a better income — consider this, will getting that graduate degree really increase your earning potential?
Again, this isn’t about the decision you make concerning your educational pursuit. It’s okay if you want to study sociology at an expensive private university — you can never place a concrete return on investment towards the cost of higher education — just be fully aware of the potential income level you may earn, and the means & steps you can take to pay back your debt. If you head into debt without a clear idea of its consequences and tackle on more than you can handle, you may be jeporadizing your financial future.
Many of us have a large student loan hovering over our head. Some of us may still be paying them off, and these debt are most likely a constant source of stress. But let me ask you this question, if you have a large student loan, do you regert purusing higher education? You may regret incuring more debt than you can handle, but I believe most people will value their education and the experiences they have received as they pursue their degrees.
Higher education is entirely worthwhile. In a perfect world, everyone would be able to pursue the study of their choice without the worries of the financial cost. The reality though is that higher education is expensive and it will become even more expensive. The minute you realize the tremendous cost involved, the better you will be able to prepare and plan for the cost.
Related Resources:
- Funding Education Beyond High School (2.5 MB PDF) — U.S. Department of Education
- Saving for College — FinAid.org
- School Affordability Analyzer — Sallie Mae
25 Comments to “Facing Reality: The Tremendous Cost of Higher Education”
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April 26th, 2007 at 5:19 am
It took me thirteen years to pay off my student loan. I didn’t get my degree; I ran out of money, left school, got jobs.
One day I looked around me, at the cubical farm in which I sat. The girl on my left had started at that office straight out of high school; the girl on my right had gotten her four-year degree in … something. Liberal Arts? English? I don’t remember. And there I was, with my two-years odd of college education. And we all had the same job.
I would have to say … totally not worth it. I took away nothing of value, essentially, that made the ensuing burden worthwhile. I went in to the school with a pretty broad background; I grew up with a mother who taught us all to love reading, and I went to a grammar school and a high school that did their level best to make sure their students got educations.
Maybe other folks who didn’t get to finish took away something positive to balance out the loan payments.
April 26th, 2007 at 5:45 am
I’d have to echo what BellaDonna said in one respect. Except in professions like your friends’, where the schooling is extensive and specialized, most of the jobs people I know have have nothing to do with their college degree.
And while for the time being I agree on your bottom line that education is worthwhile, at some point if college costs continue to rise much faster than inflation, this will no longer be the case. The opportunity cost of lost wages while attending and the cost of the schooling itself could outweigh the lifetime benefits for many people.
April 26th, 2007 at 7:01 am
BellaDonna states: “It took me thirteen years to pay off my student loan. I didn’t get my degree; I ran out of money, left school, got jobs.”
What I would like to know is, exactly who is at fault here for her not getting the most out of their education? People love to take the loans, love to blow off school and party, and then love to bitch about the fact that college was meaningless and didn’t help their professional lives. What a joke. When are people going to start to take some responsibility for the way they lead their lives? I’m quite sure that were BellaDonna to have applied herself and put a little more effort into her education, she wouldn’t be sitting in a cubicle today.
I completely agree with the author, college is worth every penny, including pennies you don’t have and must borrow. There are countless studies that show just how valuable a college degree is over your lifetime in terms of salary.
So stop blaming schools, student loan companies, employers, the weather, or whatever else it is you use to justify the fact that you are not doing what you want to be doing with your life. Blame yourself.
Just my thoughts, don’t mean to pile on anyone specifically, just think it needed to be said.
April 26th, 2007 at 7:32 am
It completely depends upon your field.
I went to a private college, got a BS in CompSci, and have done pretty well for myself in IT/programming. I had help from my parents in paying for college, but left with about $20K in loans.
My wife went to a state school to get her 4-year degree to become a social worker. Then, to get any reasonable job in the field, she had to get a Master’s. 2 part-time years later at a private school (only one with the program she needed in the area), she’s got 50K of debt for the 6 years of school.
The problem comes in when you realize that the salary that this type of job typically gets means you can’t afford to pay for loans on the education to get the job. Or, put another way: it costs so much to become a social worker, the education is so expensive that you can’t support yourself if being a social worker is your only job.
In other words, if she were single, she’d have to drive a POS car (a reliable car is required for her job), live in a bad apartment in a bad neighborhood, and probably couldn’t enjoy many “luxuries.”
April 26th, 2007 at 7:36 am
I think the important thing is what field you get your degree in. A B.S. in English, History, Biology, or many other fields may not pay off. A B.S. in Engineering, Business (some majors), or Information Technology most likely will pay off. I work at a large university (40,000 students) and know many students who ended up taking jobs that don’t require a degree and some people with advanced degrees (and many years experience) in the sciences who dont even make $40,000 a year. On the other hand I know Engineering majors (with no experience)who will be making over $60,000 a year when they start ther jobs in June.
The most important think is the type of degree you get.
April 26th, 2007 at 7:43 am
“…consider this, will getting that graduate degree really increase your earning potential?”
Well, I’m not sure if my MBA will increase my earning potential, though I sure hope it does. But in my field (computer programming), sometimes education helps to simply remain marketable. I went into a position making >$60,000 a year in Denver during the dot-com boom, but with only an Associate’s degree. I finished my Bachelor’s while there, and two months after graduating I found myself laid off. Ugh! At least I had the degree, along with thousands in student loans, but I was still employable. However, I’m still not back to $60,000 a year, and have had to relocate from the Rockies to find work (that hurts the most). Now I’m working on my MBA, in the hopes that at least I can maintain a $50,000 or so a year income. And that’s no joke. Programming isn’t what it used to be back in the dot-com days, where if you could spell programming you got a job doing it, and paid a lot of money. With H1Bs and offshoring, you have to be more educated and better just to maintain.
I’m paying for my MBA out of pocket as I go, at a public institution to save on cost. Maybe I can take my background and education and land in management, but I won’t know until I finish my degree.
April 26th, 2007 at 8:15 am
Becky, you can frickin’ BITE ME. I did NOT party, thanks. I applied myself like a good little grind, and I carried a 4.0. I see YOU learned to be JUDGMENTAL; learn any judgment to go with it?
I didn’t say I didn’t learn anything. I said that what I learned wasn’t worth the cost – which was, in fact, the question.
Bite me TWICE. I hope the karmic wheel spins for you in a truly enlightening way.
April 26th, 2007 at 8:20 am
I also call BULLSHIT:
“Just my thoughts, don’t mean to pile on anyone specifically, just think it needed to be said.”
No? Then what the hell does:
“I’m quite sure that were BellaDonna to have applied herself and put a little more effort into her education, she wouldn’t be sitting in a cubicle today.” mean?
I answered a question honestly, and you took it upon yourself to spin a nice little tale that had NOTHING TO DO WITH ME OR THE LIFE I’VE LED. I wouldn’t normally give a goddamn, but you had the temerity to put MY NAME on it.
I really, really hope you get at least half of what’s gone on in my life happen to you. Good luck surviving it.
April 26th, 2007 at 9:57 am
okayyy, to lighten the mood a little, Let’s all be happy that we at least had the opportunity to attend college.
In other news…I first went to a jr. college my first 2 years for free. I saved money, and was able to go to the private university I really wanted to attend for the last 2 1/2 yrs.
I graduated with 30k in student loans. I have now been paying on my consolidated loan for a year. What makes this loan not seem overwhelming for me is that every week when i get paid, I make a payment WITHOUT FAIL.
It is very important to be consistent in paying your loan each week, no matter how little you have…make a budget and it will work. So now, instead of paying for my education for 20 years, it will only be 10. Also, I will get my MBA for free, compliments of the company I work for. It won’t get me a raise (I work in engineering), but it is a free degree that I can’t wait to start earning! I believe that once one is out of school, he or she should find a job before deciding on spending his or her own money on a master’s. Your company just might pay for it instead. (I understand that is not possible for everyone, but fight as hard as you can to get into a company with good benefits/tuition reimbursement program.)
April 26th, 2007 at 1:26 pm
I think the best way to tackle higher education debt is to live as cheap as you possibly can you hit your first job after finishing college. First, as soon as you enter into college get a part time job and try to pay the loan right away with what little you have left over. Don’t get into those loans that say you don’t have to start paying until you finish college. You should always try to put something towards it all throughout college. Then when you are finished and have your first “big time” job continue living like you did in college. Put about half, if not more of your income each month towards your loan. Then once it’s paid off you will be higher up in your career probably with a promotion and a raise so that way you can live the life you always dreamed of. If you just put the bare minimum towards your college loans straight out of college than you will live all your life with it. Just some thoughts….
April 26th, 2007 at 10:12 pm
In the end I dunno how I managed but I graduated from U.T. with a bachelor degree in Computer Science and 0 debt/loans. First I lived with the parents for two years, working and attending a community college.
After that, transferred 60 credits to the University, wow! Over the next two years I worked about 30 hours / week at a tech business making $12.50 / hour while attending school full time. Time management was hard, and this barely paid my rent & tuition but 5 semesters later of squeezing work/school together I succeeded. Oh, I transferred about 4 credits (university physics 2 + Lab) my senior year. Saved me about $600 between two different schools.
If you go to a private university or like, Yale, I don’t think this would work though. The expenses for education there are just unreal.
April 27th, 2007 at 9:09 am
Hi – I’m currently a secretary and have been for about four years at this current job. I am starting college this fall at a public university to become a music teacher. I don’t know how much money I’ll make when I get out, but I do know that I am sick of this dead end job that I don’t really like and I am ready to do something fulfilling with my life. That to me is more important than money. Maybe I’m being naive but my dream is one, to have a degree, and two, to have a job where I can sing, and three, to have a job where I can help people. The job I want after I get out of school will help with all three. I’m also a single mother. lol what am I thinking? Oh, that my daughter will have a better role model and I’ll have a better job. :) That’s what I was thinking. :)
April 27th, 2007 at 2:40 pm
I have both of my degrees without any debt, now I just need the full-time job.
I think it was worth it, even though my future job might not pay too well, you’re expected to have an MA of some sort. Plus I’ll have less stress than if I was teaching, or so I think. If I’m wrong I can always start teaching, things are more flexible when you have choices.
April 27th, 2007 at 5:48 pm
What about if I have money invested in Retirement funds (15 yrs worth of savings from a lower income job)…and I can’t get a student loan because of that. I can take some out (Canada govt allows a certain percentage out for education purposes) and have some savings, but I don’t know if taking a regular loan out to cover extra would be a good idea, which means I’d be paying interest the minute I’d take out the loan.
April 28th, 2007 at 8:30 am
Class of 90. I got a BS in engineering. My wife got Sociology. My loans were 3 times higher than hers. She made a third of my salary after two years. We had everything paid off in 5 years.
Including value for life experiences at college and opportunity cost for years lost while in school, it was worth it for both of us.
But that’s in 1990 dollars.
Today, same scenario. Not worth it for her.
In 4 years, looking at wage increases vs. college cost inflation, it wouldn’t be worth it for me (too long til break even).
Funny, we were the first in our families to go and graduate and be “successful”. All the parents were happy and proud. Now we’re not so sure it’s a great idea for our kids – unless they’re gonna be bums otherwise.
In the big scheme, college definitely made sense with too little high paying jobs for too many job seekers. But with our declining birthrate and boomers retiring and taxes increasing everywhere in size and scope – who knows?
It should get really interesting over the next 5 yrs…
April 28th, 2007 at 11:00 am
Ok, I have one more thing to say about this…
I graduated from St. Mary’s University in San Antonio. Sometimes when I look at the amount of money I owe on this 2 1/2 years of school, it freaks me out. But then I remember how much fun I had, the irreplaceable friends I made, studying abroad in Brasil, all those Spurs games, and the small classes with individual attention from the teachers themselves. Oh hell yeah it was worth it!
April 29th, 2007 at 12:41 pm
I’m graduating in May with $25,000 in loans; my boyfriend is graduating with $45,000 in loans. Thankfully we both entered college with an interest in topics that were guaranteed to generate high returns for what we studied- I’m starting off with $60,000 with an engineering degree and he at $55,000 with a CS degree. In speaking with our friends who went into liberal arts majors, in retrospect we all started out with pretty much the same high school foundations and am just surprised at how different everyone ends up from each other after 4 years of school.
On another note, I know at least 2 people who have at least $100,000 in loans to look forward to when payments start kicking. Eeek
April 30th, 2007 at 7:05 am
My sincere apologies to La Belladonna. While I did direct my comments at your post, I did not intend to attack you personally. I was simply speaking to the situation you described, not your specific life.
My karmic conscience is clean. I was encouraging people to go to college because I think, overall, it is a worthwhile endeavor. As a teacher, I personally witnessed way too many intelligent students not going to college for all the wrong reasons. So hopefully you can understand my take on a post which appears to suggest that college is not worth the time, effort, or money. I happen to think education is an extremely important and useful part of life and that was what I was trying to get across in my message.
April 30th, 2007 at 12:18 pm
My zero debt solution:
Spent my 1st 2 years of school in Community College, living at home. CC was easy for me and I was able to work full time at a pretty good service industry job. I also paid for a hefty portion with my Cal Star grant (the one thru Gray Davis, for taking the STAR tests and doing well) and I saved a ton of cash and pulled good grades.
I then transferred for 2 years (ONLY!) to a UC (State School). Key points: don’t change your major or you’ll end up in college for 5 years, transfer over as many units as possible from CC (aka only take classes that WILL transfer), and have a ton of free units from AP classes (even if you barely pass with a 3, you still get full credit). Because I transferred so many major applicable units, I was able to take 9 units a semester (full time is 13). To stay enrolled with below-minimum units, I worked 30 hours a week which gets you an exclusion from full-time school.
Got paid very well as a high-level student worker, and at 30 hours a week combined with the $$$ I had saved in CC I was able to easily pay tuition and room + board. Graduated with zero debt … and that includes credit cards.
Now I have a sweet job and I still live like a college student! Gotta save save save for that 1st house …
April 30th, 2007 at 1:46 pm
College/University is worth it. As long as you don’t bite off more than you can chew. Even if you don’t graduate with a good job lined up, the difference in socialization between a college grad and one that didn’t get a secondary education should make the difference in an interview. But then again, I remember a lot of my classmates and friends that didn’t really mature. Seemed like they only got older. Don’t skimp on an education!
April 30th, 2007 at 2:45 pm
Good post and comments. A couple of thoughts.
Is college worth it? Maybe. Depends on what you study and how much you spend to get a degree. The diversity of comments above bear this out. I don’t think that you can make a blanket statement that college is always worth it any more.
I have two daughters in college at the moment. Thanks to a combination of grants, employer tuition reimbursements, and my help – they are both debt free at this point. It can be done. Some of the commenters above are doing it as well. College will be worth it to them because they will be able to get jobs that they couldn’t qualify for otherwise.
The incredible rate of inflation for higher education calls out for a solution. Saddling a generation of young people with five and six figure debt loads is not a sustainable policy. Even things such as 529 plans are only treating the symptoms. My belief is that eventually a solution will come through the Internet providing an alternative source of education. I think the Internet is already starting to have an effect on the cost of text books, and will eventually have an effect on tuitions as well. I just read today about a website offering unlimited tutoring for $100/month. You will probably be seeing more of that sort of thing.
May 11th, 2007 at 5:28 pm
This is a very interesting entry. I am in the situation with paying a large amount of money for my college education. There were many positive results of this experience. I was the first person in my family to get a higher education degree, very good feeling. The cost of the investment has paid extremely well in approaches and opportunities made available to me.
I am fortunate to have a well paying job. But parents with a college education are more aware to provide for their children no matter their income.
keep up the excellent job!
October 15th, 2008 at 6:46 am
Becky, if you didn’t mean to attack me personally, I would tend to think my name wouldn’t have appeared in your post, per “I’m quite sure that were BellaDonna to have applied herself and put a little more effort into her education, she wouldn’t be sitting in a cubicle today.” Because, of course, nobody with any education or capability sits in a cubical at work. It was not only a personal attack, it was an elitist assumption and assertion, AND you managed to slide in a staggering subtext of a sense of superiority over people who happen to work in cubicles. THAT’S what you actually managed to get across in your comment. However, I’m willing to accept your apology in light of the statement that you didn’t intend your comment to be taken as it was actually written.