To my young friends considering college, or in college; and my friends with minor or college aged children: PLEASE do not fall into the trap, espoused by our political leaders for selfish reasons, of assuming your default choice is a 4-year degree as preparation for a financially independent life. The law of unintended consequences has kicked in HARD with federally guaranteed student loans at the root of the problem: university administrators have failed to control costs, and state legislatures have slashed support for public higher education because student loans are there to fill the gap. Todays student loans are a far cry from what we experienced in the 80s and 90s. If the student is not an academically excelling scholar, it is highly unlikely a BA program funded by student loans is a financially sound model. And, the future trajectory is even worse, as so many older, more experienced college graduates with liberal arts degrees are already occupying, often working 2-3, of the jobs for which no college education is required. I saw a recent survey of Fortune 500 companies asking if they had future plans to hire, specifically, employees with a BA. I believe the answer was ZERO - if not, it was close to it. That doesnt mean they wont hire any - most will - but supply so exceeds demand, employers dont have to plan to get them - they are readily available, and will start at low wages that dont have a prayer of making a BA a worthwhile investment. Meanwhile, politicians and higher education administrators are still espousing an obsolete rhetoric showing that students with a 4-year degree earn a million dollars more than their high school graduate counterparts. (First, that crap lumps BA and BS degrees together, and second, a BA earned 40 years ago was worth a hell of a lot more when far fewer students earned them, and didnt have the crushing student loan debt that accompanies todays fractionally valuable BA). If your student is in the top 20%, grades and PSAT/SAT/ACT; or there is family money to pay the costs of college; or the student is eligible for grants and scholarships that cover MOST or all of the costs; a BA may still be a good idea. Otherwise, look to learning an actual skill - trade school, certification programs, apprenticeships, etc - that cost far less and leave you with better earning potential. There is not much sadder than a mediocre student, with a bullshit BA from a second tier school and a low GPA, who after 4-5 years intense study and struggle is working 2 low-paying jobs 60 hours a week, living with 3-4 room mates, and is still broke because of their loan debt. I will use my own example to demonstrate the change. (I qualified for both need-based grants and academic scholarships, worked an average of 15-20 hours/week while in school, and made up the difference with student loans. I paid off my small student loan debt by 1990, before attending graduate school. It was a good deal.) In 1988, our senior year, UNH in-state tuition was $2,754. Escalated using the CPI, that is $5,498 in 2014 dollars - almost a perfect doubling. In 2014, UNH in-state tuition is $13,670 - tuition cost alone has outpaced inflation by 248% (exclusive of inflation, cost has nearly quintupled). I believe this actually understates the escalation, as fees, $2,826 in 2014, actually exceed the dollar amount we paid for tuition! I dont know what the estimated total cost was in 1988, but in 2014 it is $27,752; a 4-year degree from UNH is now a six-figure investment (given the prior rate of increase, I estimate total cost for a student who started this year and graduates in 2018 will be somewhere north of $130,000). If the student comes from a family with a household income of $75,000 or greater, almost none of that total cost will be covered by grants; and without academic scholarships, youll end up paying for all of it, through a combination of savings, earnings and private and federal student loans (all of which will eventually have to be paid, or replaced, with earnings). According to UNHs own data ( collegecalc.org/colleges/new-hampshire/university-of-new-hampshire-main-campus/), an average resident student receiving $10,036 in grants and scholarships annually who borrows $73,756 to cover their entire financial responsibility, will have 10 years of paying $770/month. In order to afford that, at a recommended maximum of 10% of income as student loan payment, that students average first 10 years income postgraduation needs to be $92,411. If they are unlucky enough to fall into that family annual household income > $75,000, that extrapolates to approximately $1,086 monthly loan payment for 10 years, requiring an average income of $130,304 to repay. I suspect only a minority of UNH grads make $92k/year even after 10 years in the workforce; much less, $130k. The middle class can no longer afford college as an economic investment; only the poor and rich. This bubble must burst, inevitably, as the cost of paying for college cannot be supported by earnings. This is not the cost of higher education challenge we faced, dont get caught in a financial trap that cannot be economically discharged.
Posted on: Thu, 08 Jan 2015 20:08:30 +0000
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