Tuesday, December 4, 2012

Investing in a College Education

I'm back in Oregon and clawing my way up to the top of the massive pile of things to do, but I thought I'd finally check in with the virtual world and try and breathe some life back into the blog.  Fortunately there has been some interesting reporting by The Oregonian to comment on.

I'll start today by commenting on the interesting piece by Molly Young on the escalating debt burdens of recent college grads.  Now this makes interesting reading and it certainly is a story worth writing, but it is essentially the same story as the escalating college costs that has been reported on for the last couple of decades.  Recently college costs have soared as states, faced with recessionary belt-tightening, have ratcheted back state support of colleges and universities and they, in turn, have ratcheted up tuition and fees.

What concerns me is that by focusing on the individual debt burdens of college students you are telling a cautionary tale that might dissuade people from investing in college.  This is a huge mistake. Investing in college is about the best investment you can make and pays off for the rest of your life. Yes, it has become more expensive, but it is still a great investment. From my post a while back on the same subject I repost this graph:

A good way to think about the investment is to put it in terms of other investments you might consider.  For example consider $10,000 you might consider borrowing to invest in weatherproofing you home.  If the monthly payment for this loan is $100 a month but you save $150 a month in energy costs, it would be a smart investment.  You would have an extra $50 a month.  College education is the same calculus.

Joe Cortright had the key quote from Molly Young's article which I am glad the print edition highlighted: "The only thing worse than going into debt for your college education is not going to college for your economic opportunity." Which is to say that letting the concerns about debt dissuade you is a mistake.

I can speak from experience, I still write a decent sized check every month to pay off my accumulated student loans that began when I was a freshman at Lewis & Clark. Yes, it is a drag to be sure and, yes, I think about what I could be doing with that money, but I never regret making the investment.  Both in money terms and in life satisfaction I am well in the black even when you figure in the debt and the interest.

Now a final word of caution, a college degree is only what you make of it.  It is not a guarantee of a fixed income for life. It is a key that opens doors and opportunities - but your return will depend on how seriously you take your studies while in college and how well you perform after college.  I worry that the mindset of today's student is a little too focused on the diploma and not the knowledge itself.


Allan said...

It seems like a college degree is a a tool that can be used. If you don't plan on trying to get the maximum return on your investment, then maybe the debt should concern you.

I think you could break the graph into separate lines for each type of major and you would see that colleges offer a number of negative return majors

Jack Cruz said...

To have a college degree is very important for us to have a better and nice job. I do had a great time reading it and I like it most. Education is very important. Thanks.

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