I just noticed that perhaps my most “Liked” post is one comparing how rising cost of college tuition crushes the housing bubble and even the rising cost of healthcare:

The current rate of tuition hikes is clearly unsustainable, and I believe that within the next 10 years there will be a big disruption. The traditional 4-year college experience won’t go away, but what if you could also earn credits with an online class taught by an Ivy League professor and graded to equivalent standards of mastery? What if it cost less than community college?

Below is a recent TED talk by Daphne Koller about her startup Coursera which offers university courses online. Now, there is already lots of free lecture material online. That’s easy.

What made this talk different is that they are tackling the hard problems of making a affordable, accessible education both effective and legitimately recognized with grades, credit-hours, and eventually degrees. This means scaling the little things that usually work best in small groups – encouraging discussions, grading homework and exams, answering questions and providing feedback. How do you manage this in a class of 100,000 students? The ideas of peer-grading and peer-teaching are very intriguing. Also, they point out that technology can make eduction more personalized to the student as compared to traditional lecture-based classes.

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The NY Times Economix blog had a provocative post a few days ago about student loan debt, pointing out a government study that showed that 90% of bachelor degree holders had less than $40,000 in student loans shortly after graduating.

The chart below, using data taken from the Beginning Postsecondary Students Longitudinal Study (BPS) by the Department of Education, shows the percentage of beginning undergraduate students who, six years later, had accumulated more than the indicated levels of debt. One bar is for college entrants, and the second is for the ones who actually received a bachelor degree in that timeframe.

• In a follow-up, the author clarifies that the study includes both federal loans and private loans via student survey.
• The study does exclude PLUS loans (Parent loans). About 15% of bachelor’s degree recipients have parents who took out PLUS loans.
• The chart does not include loan debt from graduate school.
• The chart does not include credit card debt incurred during school. According to a 2009 survey by Sallie Mae, the average student leaves college with $4,100 in credit card debt.
• The chart does not include other debt (home equity loan) taken on to pay for education.
• Debt amounts may grow over time as interest accumulates.

Only 10% with more than $40k in student loans? Only 1% with more than $75k? That’s still a lot of money, but somehow seems less than I would have imagined. I could have easily left school with more than $40k in loans, and that was a decade ago.

I feel like something is missing. Perhaps part of it is the exclusions I listed above. Perhaps I’m thinking about how fast student loan debt is growing overall. In 2010, there became more student loan debt outstanding than credit card debt for the first time. Via Fastweb:

Alex Tabarrok of Marginal Revolution writes that College Has Been Oversold:

Education is the key to the future: You’ve heard it a million times, and it’s not wrong. Educated people have higher wages and lower unemployment rates, and better educated countries grow faster and innovate more than other countries. But going to college is not enough. You also have to study the right subjects. And American students are not studying the fields with the greatest economic potential.

He shares the chart below comparing the number of graduates in various fields in 1984 vs 2009. Amazingly, compared with 25 years ago, there has been no increase in the number of students graduating in science, engineering, and math. Meanwhile, the number of students graduating in visual and performing arts, psychology, and communication and journalism has doubled.

This is a touchy subject. Just because you have a humanities degree does not mean you won’t find a meaningful career or financial security. The problem is the upfront price tag: can you really justify spending $100,000+ without a clear path to earning that money back?

From a supply and demand standpoint, the chart may help explain why college graduates are having a hard time finding jobs. For example over the last 25 years, I doubt the demand for psychology majors has doubled, and I really doubt the demand for engineering majors has stayed constant.

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.