The College Conundrum

my alma mater

Back in the day, I put myself thru the University of Illinois taking down diseased Elm Trees.

I was paid $20 a day, @6 days $120 per week.  I saved $100 and kept $20 for pocket-money.  I sponged off my parents for the summer’s room and board.  Over the 12 weeks I put aside $1200.  That covered my rent, tuition, fees, books and food for the entire school year.  Although many dinners were white rice and ketchup.  But that left a few bucks for beer at the local taverns.  25 cents a glass if you went to the right place at the right time.

Then, like now, times were bad.  At least for us English Majors.  It took me two years of menial jobs before I landed my first post graduation “professional” gig.  No problem.  I’d mastered in the art of cheap living while earning my degree.  I graduated debt free.

Here’s my favorite cartoon:

The visual is two guys in a corn field.  They are up on racks dressed in shabby clothes.  Straw is coming out from their shirt cuffs and pant legs. 

They are serving as scarecrows.  One is looking over at the other and saying…

“English Major.  How about you?”

(wish I could get somebody to draw this…)

This spring my daughter finished her second year of university.  $1200 about covers the cost of her books.  $53,562 so far and it’s only that low because she earned a $12,000 annual academic scholarship.  My guess for the grand 4-year total:  160k – 48k scholarship = 112k out of my pocket.  And this doesn’t include the fees for extracurricular activities and spending money she pays for herself.

If she’d gone to NYU, her second choice, it would be 60-65k per year and no scholarship.  240-260k total.

One of my friends discribes it this way:

“It is like going out and buying a brand new BMW, driving it for a single year and then throwing it in the trash.

Oh, and you do this for four consecutive years.”

Breathtaking.

But what’s really breathtaking is what happens when we run some numbers.  Let’s hop over to our pal Dave Ramsey’s site and borrow his calculator.

We’ll plug-in a projected return of 8%, very reasonable for VTSAX over time.   We’ll figure a 40-year working life span and we’ll plan to add -0- more $$ along the way.

$112,000 grows to $2,718,619 by 2052 when our graduate turns 62.

$250,000 grows to $6,068,347.

I’m a huge believer in education but still, on a cost benefit analysis, it’s tough to see the value.  Of course, this depends on a couple of unlikely situations to actually play out:

1.  You have the cash to invest in a lump sum.

2.  Your kid actually having the discipline and courage to leave it untouched and invested for decades.

Here in a nut shell you can see the reason the value of a college education is coming into question in more and more quarters.  This before we even consider student debt.

Today in the US the overall student debt stands at over $1 trillion dollars.

Total credit card debt = $693 billion.

Total auto loans = $730 billion.

Here’s the real kicker.  Unlike other kinds of debt, as truly awful as they are,

you can never walk away from your student loans.

They survive bankruptcy.  They will follow you to your grave.  Your wages, and even Social Security, can be garnished to pay them.  No wonder banks are falling all over themselves to issue this debt.  I am a firm believer in personal responsibility, but the ethics of encouraging 17 & 18-year-olds who likely have little financial savvy to almost automatically accept this burden gives me serious pause.  We are creating a generation of indentured servants.  Hard to see the ethics or benefit in that.

One of the more unfortunate results of spiraling college costs and debt is the astounding amount of pressure tied to this process.  My daughter is surrounded by friends who are stressing out.  Worried about making the “right” choice.  The choice that will get them that all important job.  Their parents are stressing even more.

Rubbish, I say.

If college is nothing more than a job training program there are better things to do with your time and money.

Education has value in and of itself.  Or at least it should.   It is a time to expand your mind and your horizons.  To explore, not contract, your options.  You have your whole life ahead to figure out your career, and you’ll likely have five or six different ones before you’re done.  Unless you wind up living a really boring life.  Which, of course, most people do.

Here are some things for parents to think about:

  • College is a luxury and like all luxuries, not easily afforded.
  • It’s not about you.  Is it right for your kid?
  • If you want college for your kid they are going to need your help.  Lots of it.  Prepare now.
  • College loan debt is a huge cloud under which to begin a life.  Not something I want for my kid.  You?
  • Is your kid academically inclined?  If not there are better choices.
  • Will a 4-year degree be a career help?  Sure.  Depending on the career.  But other things will help too.
  • On a purely ROI basis two-year vocational degrees, apprenticeships and trades likely offer a better return for many kids.
  • A university degree is only the beginning of one’s, hopefully, life-long education.

Here’s what I’d do as a student doing it on my own:

  • Work.  Full time.  You’re young and tough.  You can handle it.  Ideally some place with a college reimbursement program or as an apprentice for a trade.
  • Live dirt cheap.
  • Enroll in your local state university.  Full time.  You’re young and tough.  You can handle it.  These provide the best education at the most reasonable cost.
  • Evaluate your commitment to a university education after a semester or two.
  • Figure this is going to take longer than four years.
  • Avoid any other financial commitments.  Don’t be taking out car loans or making babies.
  • Consider the military first.  You’ll enjoy veterans’ benefits the rest of your life, not the least of which is the GI bill paying for your education.

Finally, here’s why we’re biting the bullet and sending our kid to college:

  • An education is forever.  It is the only thing you can buy and never lose.  I’ve met people who thru war or natural disaster have lost everything.  They were left absolutely penniless.  But they still had their degree and the skills and education it represents.
  • She is academically inclined and a great student.  As we figured, she’s getting the most out of it.
  • She is getting paid $12,000 a year with her academic scholarship.
  • She appreciates it.
  • We can afford it.
  • She’ll graduate debt free.
  • Plus, it is simply a lot of fun. I had a grand time in college and so is my kid now.  There’s something to be said for that, too.
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