Reason # 4 Why College Is A Lousy Deal

College is way overpriced. That’s #4 on my list of reasons why college is a lousy deal, and maybe the biggest reason of all.

College tuition has risen almost 400% over the past three decades, according to the College Board.  It’s very hard for the average student (or parents) to afford paying for college these days without taking out student loans. In its most recent survey of college pricing, the College Board reports that a “moderate” college budget for an in-state public college for the 2016–2017 academic year averaged $24,610. A moderate budget at a private college averaged $49,320 per year. Expenses at the most prestigious schools will run even higher.

If your parents are rich or if you can swing a “full-ride” scholarship due to exceptional athletic skills or some other special talent, then go for it. If not, the only way to pay for college is to take out student loans that in many cases will take a big chunk of your working career to pay off. Or, as I noted in another recent blog, you can squeeze your parents to carry debt to their graves.

The averages just cited translate to between $100,000-$200,000 to obtain a degree in four years. But wait! According to the National Center for Education Statistics, only about 40% of full-time students graduate within four years. Federal financial aid programs consider students to be full-time if they take 12 credit hours a semester (usually three courses), or 24 credit hours a year. But students usually need 30 credits a year to graduate within four years.

The realities of college life are such that sometimes they take light course loads because they have to work part-time to help pay for their education. Often it’s because class schedules conflict in a way that makes it impossible to take all the courses they need to graduate on time, or they drop courses shortly after a semester begins. Or maybe they are more interested in partying than studying. Whatever the case, the longer it takes to graduate, the more the meter runs.

College costs have risen an average of 6% a year since 1990, more than double the rate of inflation. The main reason is because college administrators have no incentive to hold down costs. Not as long as student loans are so easy to obtain.

Unlike financing a home or other major purchase, virtually anyone can qualify for a student loan. You don’t have to show proof of income, because these loans are based on an assumption that you will pay back the money from future earnings when you go to work after graduating from college. This assumes that you will find a job where you earn enough to repay the loan and cover living expenses.

However, as I pointed out in another blog, some 37% of college graduates are under-employed in jobs that don’t require a college degree, and many others are working in low-paying fields like social work where student loan payments take a large chunk of their income. That’s why so many recent college graduates go back to living with their parents rather than setting up their own households.

It adds up to an astounding big picture of the student loan debt landscape. The most recent reports indicate there are:

• $1.44 trillion in total U.S. student loan debt. (That’s not a misprint; it’s with a t.)
• 2 million Americans with student loan debt.
• Student loan delinquency rate of 11.2% (90+ days delinquent or in default).
• Average monthly student loan payment (for borrower aged 20 to 30 years): $351.

A story in the August 12, 2017, Wall Street Journal adds even more fuel to this fire. Titled “Colleges Struggle to Prevent No-Shows,” WSJ reported that at some schools up to 40% of incoming students fail to show up for classes, even after putting down a tuition deposit, which they forfeit. It happens because the students miscalculate how much more they will have to pay when factoring in books, fees, room and board, etc. So they decide to cut their losses. They pay for education they never receive.

Oh, I don’t want to forget to mention that most trade schools cost much less than college, and there are many apprenticeship programs available where you not only don’t have to pay to learn a trade, you actually earn a livable wage in a work-study program.

To be sure, if you aspire to be a doctor, lawyer, engineer or some other highly-paid professional, then you must go to college. But if that’s your ambition, you probably aren’t reading this. You’re on this site to Explore the Trades. Do it.

I’ve not exhausted my reasons why college is a lousy deal for so many people. Stay tuned.

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