With the rising costs of college tuition coupled with high unemployment for new grads, it is becoming very fashionable to question the value of a college degree. At least, that’s what this long New York Magazine article (via TML) says. Most articles in the past have focused on the pay gap between a median bachelor degree holder and a high school graduate, which recently has increased to $21,900 a year.
Now, there are more articles about how a college degree is worthless. As part of their argument, if you assume a high school graduate goes out, gets a job, and starts earning their lower salary and investing money right away, that person’s nest egg will outpace a college graduate that eventually earns a higher income has to start later and pay off a ton of debt first. Given the head start and lack of debt, the high school graduate actually ends up with more money. This is fed even further with the notion of a college tuition bubble.
Is college worth it? My answer is the most common true answer. It depends! One way I started thinking about it was by going backwards in a way. Let’s look at some possible outcomes and how that may affect how you look at college tuition.
Outcome #1 – You won’t need a college degree.
There are several outcomes that won’t have needed a college degree. You could end up working in a skilled trade such as electrician, plumber, or carpenter that earns a healthy salary. If you add in some business acumen (no MBA required), you could own your own business and end up like the millionaires profiled in the popular book The Millionaire Next Door. You might prefer to be a outdoor adventure guide or flight attendant.
Outcome #2 – Any college degree will do.
There are many jobs out there that simply require some sort of undergraduate degree. It’s just a lazy screening process for applicants, but that’s reality. In this case, the best value would have come from getting your degree from any accredited university for the least amount of money. Perhaps this involves two years of community college and one year of intense upper division coursework at an in-state university (taking additional courses during the summer as possible) to graduate in a total of three years. It’s possible, and you could end up paying less than $10,000 even without any financial aid.
Outcome #3 – You’ll actually use the technical skills you learned.
Professions that come to mind are accountant, doctor, nurse practitioner, engineer, lawyer, professor, teacher. Here, it’s more likely that you’ll use the technical skills you learned in school. If you’re talking about a profession that requires a graduate degree like law or medicine, then the final school is the matters the most in terms of prestige. If you really take full advantage of your education, then your return on investment can be high. I know doctors with $250k of debt, but now they make $250k a year.
Playing The Odds
The fact is, nobody really knows ahead of time which outcome will actually happen. But you probably have an idea of the relative odds based on the child’s interests and motivation levels. I would say take into account all your options, and make a decision based on the individual and your financial situation.
The reason why many pushy parents want their kids to be either a doctor, lawyer, or engineer is that this increases the probabilities that the kid will get a decent job and support themselves. Sure, some engineers or lawyers don’t make that much, but how many of them are starving? Parents are playing the odds. I imagine if I really wanted to play the odds these days, I’d teach my kid a skilled trade (ASE certified mechanic? Electrician?) in high school, and then continue to push them towards college and a professional degree.