College education is certainly not worth “whatever the cost,” and studies show that many degrees are not worth their current cost. This argument was laid out nicely in a recent Wall Street Journal SmartMoney special, “The Case Against the College Degree.” The article used census and tax data, as well as average tuition costs and student loan data, to show that most people are better off saving early instead of earning more. In other words, if a person works a menial job their entire life but starts saving 5 percent of their income at age 18, they will have three times more retirement money than a college graduate with a good job who started saving 5 percent in their early 30s — which is how long it takes to finish one or two degrees and pay off student loans.
Of course people on both sides of the argument can point to extremes to prove why a person should get a college education or not. But the SmartMoney article is troubling because it analyzes average wages for degree and non-degree holders, historical rates of returns on savings and average debt load for students graduating from college. The collection of this information overtly shows that scores of students are paying too much for their degrees.
In 2011, the U.S. is experiencing the rapid inflation of yet another bubble. A symptom of this became evident last week when Virginia Tech’s Board of Visitors unanimously approved another increase in the cost of tuition. Starting next year, tuition and fees will cost students over $10,000 a year. A mere 10 years ago, this number was $3,600.
In light of this information, current and prospective students should examine the tuition costs at Tech and other universities. Moreover, they should figure out how much debt they will have upon graduation, what the average pay and future job outlook is for their field and whether it is worth it for them to attend college.
Unfortunately, for the foreseeable future, universities will continue to raise tuition, and students will unquestioningly dive deeper into debt to pay for it. Those who point out this humongous bubble will continue to be dismissed, ignored or scoffed at. This is expected because the education bubble bears the hallmarks of every bubble before it — it is overvalued and intensely believed, and Americans believe whatever the cost, a college education is a necessary ticket to future prosperity.
The truth is, there is no Santa Claus, dot-com stocks are not invincible, home prices will not experience double-digit gains every year and most college degrees are not worth decades of debt.
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A version of this article appeared in the Apr 26 issue of the Collegiate Times.
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A huge reason there is a bubble in education is because the feds "help" us go to college. Watch this 10 minute video by top economist Peter Schiff, where he lays out how federal loans drive up the cost of education: http://www.youtube.com/schiffreport#p/search/2/AIcfMMVcYZg
Then from 6min to 8.5 min, in this video he explains how the feds have not only driven up the cost of a 4-year degree, but how they also made it less valuable. This 2.5 minute section is a must watch: http://www.youtube.com/schiffreport#p/search/4/kl4OKXhlMQY
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But yes college is probably not worth it for most of us.
Forbes: Is College Worth It? http://www.forbes.com/forbes/2006/0327/039.html
ABC: Some-Debt-Laden Graduates Wonder Why They Bothered With College. http://abcnews.go.com/Business/Economy/story?id=6654468&page=1
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Federal student aid has limited impact on sticker prices of postsecondary education. Even with the nominal increases in maximum Pell Grant in recent years, the maximum Pell Grant is still much less than the cost of educating a single student. In addition, only undergrads are eligible to receive Pell Grants.
Federal student loan borrowing limits are also tight. Unfortunately, though, due to the creating of the Grad PLUS loan type in 2006 -- a loan product with no maximum borrowing limit other than cost of attendance -- law schools, graduate business schools, graduate architecture schools and other masters programs have been free to increase their sticker prices to whatever they want. (Domestic medical, chiropractic, dental and podiatric school programs already had access to super-high borrowing limits.) In addition, schools in Mexico and the Caribbean which cater to American students jacked up their sticker prices as a result of Grad PLUS.
As a result of the negative impact on state finances of the Bush/Daschle tax cuts of 2001, many states accelerated their process of reducing support of state higher ed and forcing students to borrow more.
For the vast majority of postsecondary students who are not in law school, business school or architecture schools, there is no inflationary impact from the existence of federal student aid.
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People often jump back and forth between the cost to the student, the cost to the college, the cost to the taxpayer and the sticker price -- four very different concepts -- when they are losing their argument.
Regardless of whether federal student aid is offered, colleges still have to pay their faculty and staff, heat their buildings, pay their electric bills, and so on.
For profit colleges generally price their product at approximately the maximum-available federal grant and loan amount. Many non-profit colleges list a sticker price many times above the available federal student aid and offer "tuition discounts" to the majority of students who cannot pay the sticker price. Funds are internally redistributed from the students who can afford to pay the full sticker price. Yet even these schools tend to argue that even students paying the sticker price do not cover the full cost of educating themselves. In particular, at state schools, the full sticker price of in-school tuition, fees, room and board is still often subsidized somewhat. Wealthy students attending state schools are subsidized by the state taxpayer in general.
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I watched the Schiff videos and found others of him on YouTube. That guy makes a lot of sense thanks for the links.
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As a current student, I've been wondering about this over the past few years now as tuition goes up every year. Sadly most people are left without a choice until employers change their standards.
As it stands, you almost need a minimum of a 4 year degree if you hope to get a job paying a comfortable livable salary of $50,000 or more a year.
No degree = no job
unless you have connections or start your own business which most students don't have the resources to do.
So what are students to do?
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You can start by recognizing that $50K is not a "comfortable livable living salary." You don't need $50K straight out of college. If you can get it, great, but you can live comfortably on much less than that.
What to do? Students should stick to schools offering the best bang for your buck. Tech is not off-the-wall expensive yet for in-state students. In-state (IS) tuition today is still a bit less than out-of-state (OOS) tuition was ~12 years ago when I started as a freshman (OOS) at Tech. At the time, OOS tuition at VT was about the same as the IS tuition I had available. I did not come from a family that was very well off at all, and I was able to swing it - my loans are nearly paid off. Tech is still way behind the tuition curve.
If you want to do something about rising tuition, get involved. Ask the university to stop building unnecessary things like on-campus hibachi restaurants and suite-style dorms. Take a walk around campus and look at the construction. Research money is paying for a lot of it, but students are paying for a lot, too.
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I read the articles he referenced. If this article is correct, then "college is a must" is a complete myth. http://www.smartmoney.com/personal-finance/college-planning/the-case-against-the-college-degree/
According to that article you don't need college to prosper. I kind of agree. Think about it. I have friends who are in construction, auto mechanic, plumbing, electrical, or started a small business. None of them went to school, and many of them are making $20-$30 an hour. If I land a job that pays $50,000-$80,000 a year, you know how long it will take me to catch up to their savings? At least twenty years out. Half of them already own a home and have paid down a nice chunk of their mortgage too.
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The SmartMoney article the author references argues that it's almost better to take a $15k/year job right out of high school, and invest what you would have spent on college and student loans. Even though your salary probably isn't ever going to get above the mid-$30k's, the compound interest in your savings and the additional 4 years you spent working makes up for the lower salary.
The article assumes you finance around half of a $34k education and start off your career making $23k, which seems much lower than a starting salary for an engineering graduate.
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Yes, but he is using AVERAGE wages for those who went to college and those who did not. Engineers will no doubt start more than 23k, but political science, history, art, music, sociology, and a bunch of other useless degrees will not.
In my opinion the only good degrees are those that add productive capacity to our society. This eliminates most social sciences.
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And yet Mike, you might enjoy art (movies?) and music, and it's easy to recognize that social workers are already overworked even if they are underpaid, and remember that saying about those who don't know their history are doomed to repeat it. So perhaps calling many social science fields "useless" might be a bit of a stretch...
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@Karen....most of the musicians I know do it on their own dime - they didn't need a college degree. Sociologists, more or less, create their own jobs (as Mark Twain once said about lawyers): If they're overworked, it's partially due to their own efforts, and, as an avid student of history, I'd paraphrase Good Will Hunting by observing I could have gotten a comparable education with $1.50 in late fees at the public library.
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@Karen....most of the musicians I know do it on their own dime - they didn't need a college degree. Sociologists, more or less, create their own jobs (as Mark Twain once said about lawyers): If they're overworked, it's partially due to their own efforts, and, as an avid student of history, I'd paraphrase Good Will Hunting by observing I could have gotten a comparable education with $1.50 in late fees at the public library.
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If you're making $15k per year you don't have any money to save unless you live in Bangalore or perhaps in a shack in Appalachia.
If you live in any metropolitan area you better make twice that and be able to live at home to save any money.
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@bankderdanny
while I agree with you that 15k is hard to for one person to live on no matter where you are in america, its relatively easy when you pool youre money. That being said: I make 20k/year and would live pay check to pay check in blacksburg living on my own, living with one other person allows me to cut most of my expenses other than food in half and actually have money to do something other than pay bills. If I lived with three people it would be even easier. I recognize tho this is not always a desirable situation for everybody, however, if that's what you make per year and you want to still be young and do stuff, I'd recommend trying it out.
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I'm not going to argue that there isn't any truth to this, but there's a flaw in the logic here:
In other words, if a person works a menial job their entire life but starts saving 5 percent of their income at age 18, they will have three times more retirement money than a college graduate with a good job who started saving 5 percent in their early 30s — which is how long it takes to finish one or two degrees and pay off student loans.
Someone with a "good job" will likely (hopefully!) be able to save more than 5 percent. I save far more than 5 percent. Just something to consider.
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Hey Karen. As somebody who has studied and read economics for a decade (as a hobby, not as a major), I can tell you that most economists and investors will agree with the statement that "it's better to save less early instead of more later."
If you look at the historical rates of return for investments in our country, and then see how compound interest works, you would be VERY surprised how much a person stashing only $3,000 a year would accumulate over the course of a decade and a half. So the decade to decade and a half that you don't save is actually a huge loss.
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Here is a crude example, and you should play with this calculator and do your own math. http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Pretend 2 18-year-old men have $0. The first does not go to college and saves $3k a year for 30 years. After 30 years he will have $367,000. Now the 2nd person (you) saves $6,000 a year for 20 years (because you took ten off to go to school), at the end of the 30 years you would only have $296,000.
Now this is assuming the historic average of 8% return on investment. This also assumes that nobody has money saved for college. If the guy who skipped college had money saved already then his amount after 30 years would be HUGE.
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and how, precisely, does someone making 8 dollars an hour save three thousand dollars a year?
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These spiraling costs in many cases have very little to do with actually educating students. Take a look at the increase in administration, and add-ons. Heck, take a look at the most recent alumni magazine. VT has the best campus food in the nation...gourmet, in fact. That steak and lobster while in Blacksburg means a lot more bologna and ramen once you leave.
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Is a college degree worth it? If by "worth" you mean making the most of your money and retiring with more money, then no, college is not worth it.
But if you want the "experience" of college and are willing to throw away tens of thousands of dollars for it, then more power to you. There are worse things than college to waste money one, such as drugs, booze, whores, gambling and sports.
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Oddly, "drugs, booze, whores, gambling and sports" seems to be a large percentage of what "experiencing college" is all about.
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ROFL touché !!!!!
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Easy there BSE '97. I'd have to disagree with those things being "a large percentage." Yes, there are those who make those things their college experience, but I doubt they were a big part of yours. I know they were not a big part of mine (CEE) and I graduated ~5 years after you. Most engineers aren't doing those things, and engineers make up a good portion of Tech's student body.
I do agree with your earlier post, though. The need for access to a quality steak and lobster on campus is laughable. Just like the need to live in a "suite," rather than a dorm, or the need to drive your car to an expensive campus parking deck every day when there is a top-notch transit system in town and most off campus students live within a mile of campus (can't wait for the responses on this). Those things do not make Tech a "cutting edge institution." All they do is drive up tuition and fees.
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Yes, but those are also what some of the best HS students want. If VT wants the best students it must provide those things or risk losing talent to other schools who are more aggressive about providing them
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I am curious about this conversation. I never visited Tech before applying. I am not into the sports stuff, never looked at pictures of campus, or looked into the food. I just wanted to go to school somewhere that wasn't Harvard, Yale or Princeton expensive.
Do most students really care about all that nonsense? Serious question. Those things never entered my mind.
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I don't totally agree that a college degree isn't worth the investment. That said, I definitely don't believe that a degree from a top tier college/university is worth the 6-figure tuition premium it commands.
As a grad of a 'second tier' state school I might be biased. But I have also held VP positions at two of the country's largest commercial banks supervising a staff of as many as 12 people. And this is also without an MBA.
Will I ever make a $500K salary or receive a 7-figure bonus, no, probably not. But I make over $100k and graduated in the late 80's without student loans.
I have interviewed and hired grads from big name state schools like Michigan and Illinois, and top tier privates like Northwestern, Yale, and Princeton and I haven't found them to be any smarter or more capable than grads from Illinois State or Northern Illinois.
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Employers are the engines driving the college tuition increase train. As long as a bachelor's degree (of any type, from any tier university) is seen as a de facto work permit, the madness will continue. This is especially true for jobs which provide health insurance. Not everyone is willing (or able) to start their own business and live without medical insurance for several years, at minimum. One illness or accident and you are bankrupted.
Parents who pay outrageous tuitions, who cosign outrageous loans, know this. Institute national health care and you will see the college bubble pop.
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Please. When the government did not pay for healthcare, school was dirt cheap and so were medical costs. It's economics 101: the more money flows into a good or service, the more it cost. Because government funds and government policy direct funds into healthcare and education, the cost is skyrocketing.
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It's not "Economics 101." You cannot just go point your finger at the government and say it's their fault.
I'm a licensed Professional Engineer. In order for me to get that license, the APELSCIDLA board mandates that I graduate from an ABET accredited university (there are a few exceptions to this). Licensing was not something that was mandated by the government, it was self-imposed by practicing engineers. If I want to be a licensed engineer, I have to get a degree. And licensing is not limited to engineering.
You speak of a time before professional licensure existed in many industries, oftentimes requiring a degree. And, on a side note on the healthcare side (which has nothing to do with this conversation) you completely neglect to mention that very few people sued their doctors back in the 50's, and that the standard of care is light years ahead of what it was a few decades ago. All of these things cost money.
But RIIIIGHT. It's all the government's fault education costs so much.
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Maybe I'm in the minority when I say that I didn't just get a college education to make money. Sure I want to be able to support myself, but there are other very worthwhile incentives involved in a college education.
I was able to travel, mature, learn to relate to others, learn to live with others, explore ideas and ways of thought I wasn't able to in high school and probably wouldn't have in the 'menial job' that would make me more money in the long run or whatever.
I didn't go to college and then into my profession to make a boatload of money - I did it because I found it personally fulfilling. It made me happy and I feel like I'm contributing something to society. THAT'S what I hope people get out of a college education - not just a someday paycheck.
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As a faculty member here at VT (for 30 years), I truly believe 20% of our students don't need to be here. They are not yet ready for college studies, or more importantly their skillset would best used in learning a technical trade.
A 4-year college degree is not for everyone. And if we at the university look down on those pursuing such skills, shame on us.
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A+++++ I agree with Daniel. Tons of people in school do not deserve to be here. What do I mean by that? Look around. Most of my fellow classmates sit around on Facebook, Sims Farms, or World of Warcraft. They do not care about learning or what the teacher is saying. All they want is a grade to pass and a degree. Why? Because they think that is just what they are supposed to do. The people who are not supposed to be here and making it so the faculty have to dumb down the classes for the rest of us too.
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Until American employers and even general culture/society abandons the hype about 4 year degrees, most students think it's an imperative necessary step for success. It's been built into us through High School, "it's so important to go to college to get a good job blah blah blah"
Even looking through a lot of job openings on the internet, 90% say at the top of their demands "4-year degree"
I wonder who first came up/started the notion that a 4-year degree is a must with employers. Back in the 60's it wasn't nearly as hyped up. A 4-year degree today is basically a high school diploma, it's a must have.
It's not so much the student's faults as it is employers and society as a whole.
Education is important but there are so many different alternatives like 2 year degrees, and trade schools. Even programmers and computer people(like myself) shouldn't need an entire Computer Science degree and all the fluff that comes with it. Just a few classes or even an associates is fine.
But here I am suffering through a Computer Science curriculum instead of getting full time real world experience because it's required by so many employers.
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Check out "the price of admission":
http://www.cnbc.com/id/39911910/
Higher ed is certainly not needed for number of positions higher ed people are hired into. The gov't is complicit by pouring $ in this taxpayer scam.
The military is a good example...why educate someone that is going to likely be used as cannon fodder.
Is the value of an education always going to appreciate...just like houses were supposed to?
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Man, thanks for the link! I am going to delve into that site tomorrow afternoon!
I agree that you do not need all these degrees for jobs. There are TONS of jobs that pay LOTS of money that only require 2-year degrees. Also, as somebody pointed out here, many mechanics, plumbers, electricians and others get paid a lot and require ZERO school.
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This is considering the guy is making 32,000 as a high, but what if he has a family? How will he support kids on 32,000? Can you live in Northern Virginia on 32,000?
what if he loses his job? Will companies hire a person without a degree ?
In other words you are holding everything constant, that the economy will be fine, he won't lose his job, he won't have kids ect...
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Workers with college degrees don't have kids and families? They don't lose jobs in recessions?
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Two major points:
1) Only a few of the studies of college versus no college control for differences in incoming students. For an 18 year old deciding whether to attend college, he/she needs to know how similarly situated individuals are likely to do later in their careers.
People who go to college, on average, are brighter and more motivated than those who don't have the credentials to attend, so even if the college degree added nothing, we would expect them (on average) to eventually land more desirable jobs that pay more or are more fulfilling.
The few studies that control for the differences in incoming students find that much of the salary advantage for college graduates disappears. That makes intuitive sense, as there are some bright and motivated individuals who do quite well without college degrees - think of many plumbing, electrician work, or run small businesses. The article cited above actually understates its point. When you account for the difference in incoming students and erase the apparent income gap between college and no college, not going to college looks even better financially due to similar earnings + 4 more years of earnings + no debt.
2) There is an opportunity cost to attending college - what would you have been learning in those 4 years instead? Would it also have expanded your horizons, helped you help society, or given you income-enhancing training?
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You are right on Point #2. If you accomplish nothing in those 4 years of not going to college, well, then you are just wasting 4 years like a lot of people with useless degrees. However, if you save some money during those 4 years, learn a good trade, advance in a company, or do something else that is fruitful, then yes you are probably better off not going to college than the "average" person who did go to college.
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Two major points:
1) Only a few of the studies of college versus no college control for differences in incoming students. For an 18 year old deciding whether to attend college, he/she needs to know how similarly situated individuals are likely to do later in their careers.
People who go to college, on average, are brighter and more motivated than those who don't have the credentials to attend, so even if the college degree added nothing, we would expect them (on average) to eventually land more desirable jobs that pay more or are more fulfilling.
The few studies that control for the differences in incoming students find that much of the salary advantage for college graduates disappears. That makes intuitive sense, as there are some bright and motivated individuals who do quite well without college degrees - think of many plumbing, electrician work, or run small businesses. The article cited above actually understates its point. When you account for the difference in incoming students and erase the apparent income gap between college and no college, not going to college looks even better financially due to similar earnings + 4 more years of earnings + no debt.
2) There is an opportunity cost to attending college - what would you have been learning in those 4 years instead? Would it also have expanded your horizons, helped you help society, or given you income-enhancing training?
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So then, Mr. Dunn, I suppose you'll be withdrawing from Virginia Tech?
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