Questioning the Value of a College Degree

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.

Comments

  1. Great post, I think it’s true. Sometimes, college degrees are a waste.

    I graduated with a finance degree from my state college and started working at a bank. Some of my high school friends come in and apply for a loan and their incomes are double, sometimes almost triple mine. They are welders, linemen, utility workers, etc. They do have to work in tougher conditions than me, but it is frustrating thinking I spent nearly $40K for an education when they spent nothing and starting working and earning good money. The only consolation is that they aren’t very thrify with their money. I would say my net worth is higher.

  2. I think it’s also important to note that the value and cost of the same degree can vary widely across colleges. A degree might be a requirement to become a nurse, accountant or engineer, but a $50,000+ per year college is not. I see so many kids (or really their parents) who pay for expensive colleges that have neither the name brand or alumni networks to land them a good job in their field simply because they think it’s more prestigious than the local state school.

  3. My degree cost about $10,000. It was WELL worth it. My husband also got a business degree for $10k. He doesn’t know what he wants to do when he grows up, but a business degree gives him a wide range of opportunities.

    Our degrees were most definitely worth it, but we balked at paying private school prices for the same degrees (there was no added value). Regionally, the State school we went to has an outstanding and highly regarded business program.

    We will strongly encourage our children to weight the costs/benefits of the schools they choose. There is an abundance of excellent public schools here in Northern California. The UCs are a little more costly, but nothing in the realm of private school. Our alma mater still costs $15k-ish for 4 years.

  4. I didn’t get a degree and it hasn’t held me back at all. I took classes at a Community College pursuing computer science, but it was so far beneath my level, and I had work outside of school, so it seemed a waste of time and money. I have had several decent IT jobs, and college hardly came up. It came down to my experience and confidence in my ability to perform the job.

  5. I should also mention, I know several friends from high school that went off to a 4-year college and now work at Walmart and local retail stores. College certainly can be a benefit in certain fields or areas of the country, but it is definitely not a golden ticket.

  6. Playing the Odds? Both of my kids changed their minds, interests, and focus repeatedly during and after high school. Save the money — even if they don;t need it for college, you’ll find a use for it, and you’ll learn to live on less in the process.

  7. hawks5999 says:

    I’m sorta torn on this. We put my wife through school (debt-free) for a Master’s program that got her a job paying slightly more than a grocery checkout clerk (but it was a field she felt passionate about and had a “helping people” aspect to it). After 2 years we decided to start having kids and she became a stay at home parent. OTOH, I didn’t go to school but taught myself through hands-on, entry experience and clearance sale books and can now pull six figures very easily. So, I agree that it depends. We are now thinking about our kids’ future. We are leaning toward your final suggestion of helping our kids learn a skill in primary/secondary school that they can parlay into a business or career. To me the risk is choosing the wrong skill to focus on and find that skill set has been offshored or automated. But we monitor those trends and it appears that most college degree jobs are going the same way.

  8. I was child number 4 out of 6, and all of my siblings went to college. I didn’t want to do school (albeit, couldn’t *appreciate* it), so I did a stint in the Army.

    Panned out very well for myself. I am from Northern Virginia. I worked hard in the Army, entered a Special Operations unit and received a TS clearance. Now I am out, have a good amount of money saved up (5 deployments) and I am going back to college. With the GI Bill, tuition is 100% covered (George Washington University) , I get $1k for books, and a monthly living/housing stipend of ~$2000.
    I will be doing simple internship at various locations that require a clearance to maintain it, but come graduation, I should have a pretty good position in the job market.
    Army proved not to be so bad. (Spec ops deployments were about 3-4 months long each)

    But to stay on topic, I would definitely be somewhat wary on spending too much on college… have heard plenty of stories where the reward just doesn’t seem worth it.

  9. Sometimes, people miss the point of a comprehensive undergraduate education (Not a technical or vocational one). While that point varies with each individual’s goals, the fundamental aim is to impart a framework for critical thinking, to expose the student to a wide-range of subjects and to focus on a specific area of the student’s choosing.

    More succinctly, it’s about whether you want to be a more knowledgeable and educated individual, not about making more money. If that’s that case then, yes, a true 4-year degree is certainly not the only path, but here’s the rub, it’s not the worst path either.

    Education is a good thing, a great one in fact. Support it and support the individual’s right to choose whether the time, money and commitment are worth it. Good post!

  10. If you cant get into the top 10, the rest are the SAME! Trust me. I did college recruiting. After x years, no one cares where u graduated from.

    I would go for the cheapest possible degree program.

  11. Naveen says:

    Excellent comments on this post. Here’s one idea in response to the first two paragraphs: Why not do both? Instead of choosing between working and going to college, anybody can choose to do both. It’s a great way to earn a living, save for retirement, improve your future prospects, and graduate debt-free all at the same time. Sure, it’s hard for the first week or two, but you are also forced to learn time management skills!

  12. anonymous says:

    I don’t see why one would go to a state u for undergrad if they’re aiming for a top grad school , I would think an Ivy League law or medical school would always prefer to take one of their own with the same or even slightly lower gpa over a state school grad.

  13. Personally I think the real problem is that too many people are going to over priced private colleges and either dropping out or getting degrees that have very little demand. You don’t hear engineering or nursing students complaining about how their public school degree was a waste of time/money. You hear social worker and psychology students with piles of private loans from expensive private colleges declaring that college isn’t worth it.

  14. Good post. Especially outcome #3 has valuable point.

  15. I agree with the other post that if you don’t get into top 10/Ivy League types of school, it does not matter in term of job seeking opportunities. I think the only time that my college education was a factor in my job search was my very first job. However, college is valuable for intangible reasons: broaden your knowledge, critical thinking skills, educated network of friends, but it seems not everyone picks up critical thinking skills :)

  16. @jim: what about that pinnacle of education that is supposed to save us all with innovation, the PhD?

    http://www.nature.com/news/2011/110420/full/472276a.html

  17. Newlyfrugal says:

    I have three family members who earned their law degrees at a state university. All three are now established attorneys, doing well and earning six figures. So in my family’s case, going to an Ivy League law school was not necessary to have a successful law practice.

  18. just_a_mom says:

    Sometimes going to an expensive school is good for networking. Kate Middleton met William at school.

  19. Chandra25 says:

    I’m a community college counselor. I see all kinds of people. Some already have degrees but are back in school to obtain a credential that is more marketable. I think it all boils down to the individual’s personal initiative. People can be both educated AND financially secure without a college degree. I really support technical education where someone can learn a marketable skill in two years or less. They can later go on for a bachelors / masters degree if the goal is to be more educated or get into a specific career field, but it’s good to have the means to earn an income first.

  20. “Me” nails it with his/her post.

    The purpose of a university/college degree is not a job, if the institution is true to the purpose of higher education. That should be an outcome, certainly a desirable outcome, but not the goal. Traditional four-year undergraduate educations are supposed to be places in which you have the opportunity to expand your knowledge, develop critical thinking, analytical, application, etc. skills. Even for those majoring in the hard sciences, there is a liberal arts requirement for that very purpose (the irony is the number of industry people from engineering and technical firms I hear from who say they don’t care as much about the engineering/science/CS stuff, they need engineers who have the soft skills (critical thinking, collaboration, communication, writing, etc.) necessary to build companies).

    And, if you take advantage of college, it will offer you much more than just skills for a particular job or field. You should leave with a variety of transferable skills plus some exposure to ideas, people and maybe places you otherwise may never encounter. You may get a job, but you may also discover a life-long passion (a hobby, an interest, etc.) that truly changes your life. That passion could even turn out to be a career, making a job more than just the next 40 years of your life.

    Pragmatically, a college degree does increase your chances in the job market. Right or wrong, many employers require either a two- or four-year degree just to apply for jobs. And the rising cost of higher education makes it a very careful decision (personally, I believe we have lost our way as a society in this regard – nobody should have to go that far into debt for school, whether they want to be a mechanic, a plumber, a doctor or a teacher).

    Sure, I know people who have a four-year degree and ended up in low-paying jobs. But I know far more in low-paying, dead-end jobs without degrees. And the statistics bear this out.

  21. Newlyfrugal says:

    Good point, just a mom. I agree that going to the best professional schools (law and medical) pay dividends in networking. However, not all of us are able to attend such schools. For the rest of us, we must work hard with the circumstances that we are handed, do the best we can, and make our own successes in the world.

    I come from a middle class family whose parents held menial jobs to help put four kids through college and professional school. Ivy league colleges were not in our destinies, but fast forward 20 to 30 years later: all four of us are doing well with the college degrees that we earned at state universities. We did not meet Prince William in school, but hey, we are pulling six figure incomes. Good enough for me.

  22. Sofaking Nuts says:

    When my wife and I have children, our plan is to suggest they attend a community college for the first year or two – this would expose them to higher education, allow them time to figure out what they want to do, etc.
    I agree with Clark Howard when he suggests that your college loans shouldn’t be more than what you’ll earn in the first year of employment post college.

  23. People tend to treat “A College Degree” like High School. The fact is that it really depends on what major you study in college where as High School is just, well, high school. I am going to generalize here, but in general, degrees such as psychology, film studies, sociology, communications, etc. most of the time are not worth the money. In contracts, Engineering and Science degrees tend to payoff pretty well.
    Another point I want to make is that, it’s not just the degree you are getting from college, it’s the process, the people, the learning experience, all these things in education add up to make a person much well rounded and better person in society.

  24. I used to agree with the idea that higher education was about developing critical thinking skills and all that. After meeting more people who don’t have college degree as I grow older (easier once actually OUT of college and a college town), I think that most of that development is simply the process of going from 18 to 21.

    If you managed to learn how to work in a fast-paced work environment outside of college and learned something useful like manage a computer network, build a house, or assemble a car, you also learn critical thinking skills.

    I’m still pushing my kids to go to college 100% no question about it, but I’m not going to blindly pay for private tuition on the hopes that they’ll get something out of it without putting anything in. Like everything else, I’m looking for value.

  25. hawks5999 says:

    I think that Networking effect is more important in the MBA level. I’ve talked to several friends who have pursued/are pursuing MBA’s and their number 1 stated benefit is making connections.
    In the undergrad stage this may apply but I think to a lesser degree. Probably more so if your career path involves sales (from my observation).
    It’s a sad commentary on primary and secondary school that college is required to learn critical thinking skills. We intend to homeschool so that we can teach critical thinking when our child is ready and not when the slowest of 30 other children are ready to progress. (me: puts on flame proof flak jacket).

  26. Get a degree! There are few fields where you can get to the same level in the same amount of time as someone with a degree if you don’t have one. Sales, maybe IT or Programming, and of course if you want to start a business of your own you need no academic qualifications.

    I got a Bachelor of Fine Arts in music and the first question I am asked when interviewing for secretarial work is, do you have a degree. What does music have to do with being a secretary? Nothing, but without a degree most companies won’t even interview me.

  27. Lots of good discussion here. I agree with a lot that’s been said, especially about joining the military. If you aren’t what to do with yourself after high school, 4 years in service sure helps you sort that out. Hell, I think *everybody* should be required to serve, but that’s another discussion altogether…

    It doesn’t matter whether you go to a “good” school or no school at all. It really comes down to luck, your personal network (the only way people get jobs these days), and your ability to “hustle” (i.e. personal initiative). Without one of these, your PhD won’t keep you from living on the street.

    As for the college affordability thing, here’s an easy solution… stop the gov’t from subsidizing student loans! Consumers aren’t very sensitive to price otherwise.

  28. I think getting a degree is worth it. Contrary to what someone else posted, it is a golden ticket. At least in the sense that it is a lifelong certification that no one can take from you. This fact alone distinguishes yourself from the people without.

    Something that has not really been mentioned is that your window of opportunity is realatively small to go to college. You can go when your older but once you establish a “lifestyle” it is harder to go back to school. People with degrees have, generally speaking, been always more in demand than counterparts without.

  29. I’m finding that a lot of new college grads or people who have been out of school for a few years have no idea what they want to do. I was in the same boat, as were/are my siblings and friends. They end up working odd jobs, or jobs that don’t require a college degree. Sometimes the companies do require a 4 year degree, but the job itself isn’t exactly rocket science. I also have friends or know of people who seem to believe holding a degree = good job. These are friends who have no “professional” work experience – not even internships or volunteer work. Their resumes have a lot of white space, and I’m not quite sure how they expect to magically land that good job.

    No matter what, a college degree has some type of value. It’s a sense of accomplishment, you’re likely to have more “knowledge” than the average high school graduate, and even if it’s no use to you now, it may come in handy in the future. Finding a job has been increasingly more competitive, and having a college degree is the standard in most places. My company does not hire anyone without a 4 year college degree. Whether or not you agree/disagree with this mentality, that’s just how things are these days.

    I’d also like make a point about going to grad school. I’ve had many people ask or tell me to go to grad school. Supposedly, it’s guaranteed to open doors for me and give me a bump in $$. I don’t think grad school is for everyone. Personally, while I’ve been in the workforce for years, I’m still trying to figure out what I want to do when I grow up. I know I’ve held myself back in terms of career and salary growth as I don’t have a direction to go. Going to grad school is just going to put my wallet in the hole and still leave my in the same predicament – not know what to do when I grow up. Grad school isn’t for everyone. For people who want to pursue business or have a direction – definitely go for it. For certain fields like engineering, grad school is almost a must.

    However, if grad school was free – sign me up.

  30. vijaianand says:

    After reading the full post, I really like your idea in the last line. Teach him a trade at high and let him go higher using degree or not. Atleast he can survive with the trade you taught him whether his college degree helps or not. May be I would do that for my sons who are just 5 and 1.

  31. “Matt” hits on an important point – it is really tough to go back to school once you have established a life which may include a spouse, children, mortgage, job, etc. It can be done, and plenty of people impressively slug through it. But it is a lot easier when you are 17, 18 or 19, with no obligations and little or no objects/debt. And most of your classmates are in the same situation, giving you a built-in support group.

    That said, you do it when you are able.

    To Jonathon’s comment about community colleges – I have worked at public community and elite liberal arts colleges, medium-sized public and large R-1 public research universities. I would not hesitate for a moment to encourage anybody to check out community colleges, for a defined program or for a liberal arts 2+2 sort of path into a four-year school. When it comes to two-year programs (such as construction, nursing, media arts), two-year schools tend to be very good at reacting to the economy and can quickly create new programs to fit a local economic need, usually with strong input from the local industry. For the liberal arts 2-2 type of programs, you will find more and more faculty with doctorates there, who are there in part because community colleges are much more teaching/learning focused – the faculty are there to teach, typically twice or more the load of their colleagues at four-year schools, usually with much smaller classes, with no research or publishing requirements and in a structure with strong student services in place to help students. At a fraction of the cost. Schools vary, faculty vary, but worth looking into (and my state allow high school students to take community college credit courses at no cost).

  32. Honestly, you can get almost any job if you go and ask for it. Show them you want it and tell them you have a little bit of experience, even if it was all volunteer stuff. Are you likeable? That has a lot to do with it, too.

    I went to a top-tier university but did not graduate. Applied for a stable federal job and got it. Most federal jobs no longer require degrees. The key is the following: “An accredited university degree OR equivalent 2 years experience”. Yea, what counts as experience these days? Almost anything under the sun….volunteer work, internship, etc.

  33. hawks5999 says:

    Oh, NickM ,

    You make me feel so much better about my tax dollars. Please tell me you get to retire early with a 90% pension and full health benefits. Please?

  34. If I have kids, I’d much rather pay for them to attend vocational school @ community college for one semester/year and get certified in something before sending them to a university. It’s better for them to have some marketable skills as a fallback in case things don’t work out so they don’t end up earning minimum wage after they get their degree … if they even persevere to complete their degree!

    BTW, I know this happens often with many writers but don’t forget pharmacists in your list of professionals! We often get left out. :)

  35. hawks, we get paid MUCH lower than our counterparts in the private sector. We can’t keep IT talent because the private sector pays much more. Same goes for our engineers, park rangers, law enforcement, etc.

  36. Jenna, Adaptu Community Manager says:

    I think college is important and worth it regardless of the costs. You get to live on your own, engage with people who are different from you and learn valuable skills that will help you succeed in life.

  37. You really have to pickyou major wisely They all for teh most part cost the same. They however, do not pay the same once complete. Picking a math or engineering major as apposed to a art degree wil make a difference.

    If your not going to college you need to know all teh tricks to make up for the possibility of not having a high salary later in life. so you have to start saving early

  38. hawks5999 says:

    And just in time for this discussion:
    College Conspiracy by NIA
    http://www.youtube.com/watch?v=VpZtX32sKVE

    I’ll grant some of the information is shady (95% of the people we talked to said…) and in the Bachmann-inspired ending it turns into an infomercial, but there is some good food for thought related to the cost and value of a college education.

  39. Here’s how I see it.

    Education is like building a wall without cement. Practical experience forms the glue that makes the wall work. Then again this is not a hard or fast rule. Some successful entrepreneurs don’t even have a college education.

    The value of education boils down to how many people you can serve. As an employee, you get to serve X customers. As a passive income business owner, your customer base can reach thousands of people.

  40. Good comments above. I have one thing to add. Comparing the median HS grad to college grad salaries is a bit misleading. Currently the unemployment rate among college graduates is 4.5% whereas the unemployment rate among those with a high school diploma but no college is 9.7%. So not only do college graduates earn significantly more, they are materially less likely to be unemployed.

    So while you could mathematically expect to be ahead by not spending on tuition, going straight to work, and saving your money, one mid-length spell of time out of work could easily wipe out those gains versus the college graduate.

  41. Jonathan: Just a whole lot of interesting things in this recent Pew Survey article, “Is College Worth It? College Presidents, Public Assess, Value, Quality and Mission of Higher Education.”

    Specifically, in regard to cost, the majority (75%) say college is too expensive while among college graduates, an even larger majority (87%) report that college has been a good investment, personally.

    But so much more here, from this single, recent survey:

    http://pewsocialtrends.org/2011/05/15/is-college-worth-it/

  42. Nuno Andrade says:

    The Student Loan Corporation had a recent infographic on the ROI of particular majors. At the end of the day, it’s the major that will determine the career, although the school you go to has a lot to do with the type of job you have as well. Take a look at the SLC infographic here: https://www.studentloan.com/pay_for_college/roicollegemajors.htm.

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