A few years ago, I was having lunch with some friends when a great question came up: Is college worth the cost anymore?
We’re all college-educated, including myself (I have a bachelor’s degree in Biomedical Engineering). One of the trends that kept coming up in our conversation was how we all were raised to believe that getting a degree was the only path to a higher-paying job.
As far back as I can remember, I thought this was a pretty simple trade-off: Spend roughly $15,000 or so per year going to college, and you’d eventually make all that money back after a few years of working at your first “real” job.
However, I’m not so sure young adults today feel the same way. Prospective students are taking out students loans and racking up debt at an alarming rate, and many of them are starting to question the benefits. In fact, in a survey conducted by Go Banking Rates, 42% of those polled said they felt their college degree wasn’t worth the student debt it had created.
Just like any other business decision, there has to be a return on investment (ROI) to make it worthwhile. That’s why in this post, I’d like to go over the facts and see if college still makes sense financially anymore.
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How Much Does College Actually Cost?
As it turns out, those days of college costing $15,000 or so per year are long gone! While doing the research for this article, I’ve come to learn that college costs a lot more than it used to.
Here are the most recent average costs according to Value Penguin:
- Public in-state college: $25,290 per year ($9,970 tuition / $10,800 room and board / $4,520 misc.)
- Private college: $50,900 per year ($34,740 tuition / $12,210 room and board / $3,950 misc.)
This means that for a typical 4-year degree, students (and their parents) can expect to pay well over $100,000 if they go to a public university. That number doubles to $200,000 if they decide to go private.
How Fast is the Price of College Increasing?
Aside from healthcare, the cost of higher education has become one of the most rapidly increasing expenses in our society. When you look at trends over the past 50 years, this is very easy to see.
For a typical four-year public university:
- Between 1968-1969, college tuition cost just $329 per year.
- In 2019, tuition cost $9,970. That’s an annual compound growth rate of 7.1% year over year.
- If we adjust the cost of college from 50 years ago for inflation, it’s $2,323. That means tuition has increased by 329% in real inflation-adjusted numbers.
Unfortunately for a four-year private university, the stats aren’t much better:
- Between 1968-1969, college tuition cost just $1,487 per year.
- In 2019, tuition cost $34,740. That’s an annual compound growth rate of 6.5% year over year.
- If we adjust the cost of college from 50 years ago for inflation, it’s $10,499. That means tuition has increased by 231% in real inflation-adjusted numbers.
Plus, we can’t forget about the rising costs of all of the extra expenses that come along with college like room and board, books, fees, etc. Pile that on top of those tuition increases, and it just makes the whole situation that much worse.
Wages Have Barely Increased
Logically, you might think that if college costs have increased by 329% over the past 50 years, then so have wages too, right?
Unfortunately, this is not at all the case.
- The current median average household income is $68,703.
- Since 1967, this has only been an inflation-adjusted increase of 45.1%.
That means that the gap between college tuition prices and wages is significantly wider today than it was 50 years ago.
It’s important to recognize this as a paradigm shift. If your parents went to college and saw it as a worthwhile investment, the financials might have been totally different than they are now in today’s environment.
With prices increasing and rapidly above the rate of inflation, it seems at some point the cost of college will become too much for the average person to bear. You can see this happening already when you consider how much debt the average student is forced to take on just to get their degree.
How Much Debt Do Students Have?
College used to be something that the average middle-class American could reasonably afford. But as tuition prices have diverged well beyond the typical household income level, this has left many prospective students with no choice but to take on some form of debt.
According to data from The Institute for College Access & Success, 62% of students graduating with a bachelor’s degree will likely have debt. The average balance of that debt will be $28,950.
How Much Do Students Pay Per Month?
A different study by the website Credible reported that the average student pays $393 per month towards their student loans. However, remember that this payment amount is highly dependent upon several unique variables. Factors such as the loan amount, interest rate, payment term, and if your payments are income-adjusted will make a big difference in what you owe.
How Long Does It Take to Pay Off Your Student Loans?
Most loan holders take approximately 16 to 19 years to pay back their federal student loans in full. Even though the typical repayment schedule for most federal loans is 10 years, there are many instances where the term can be extended by as many as 30 years (depending on the amount owed).
Keep in mind that if you take out private loans or eventually refinance, then it could foreseeably take decades for you to pay off the balance. However, you’d also incur tens of thousands of dollars of unwanted interest in the process.
How Much Money Will I Make After Graduation?
By now it’s clear that debt is going to be unavoidable for the majority of students. But that might be alright if there’s a possibility that you’ll earn a higher wage that could offset your loans. So is that true?
… Potentially, yes. According to data reported by North Eastern University, job seekers with a college degree can expect to make significantly more than those with a high-school degree. Here are the stats.
The average salary of someone with a Bachelor’s Degree:
- Median Annual Earnings: $64,896
- Median Weekly Earnings: $1,248
- Average Unemployment Rate: 2.2%
The average salary of someone with a high school diploma:
- Median Annual Earnings: $38,792
- Median Weekly Earnings: $746
- Average Unemployment Rate: 3.7%
Not too bad! This means someone with a college degree can expect to make 67% more than someone without one.
Greater Lifetime Earnings
Starting salary is one thing. But when you look at the total earning potential over the life of a worker, the benefits of having a degree become even greater.
According to data from the Brookings Institution, the lifetime earnings of someone with a bachelor’s degree graduate are more than twice as high as for someone with only a high school diploma or GED. This is because degreed professionals typically get:
- Higher raises
- Greater bonuses or profit-sharing
- More promotions
- Better opportunities for advancement
Clearly, from a financial perspective, there is still some merit to pursuing a 4-year degree.
Does This Mean I Have No Choice But to Go to College?
No, not at all. You don’t necessarily have to go to college to make a lot of money or become successful.
Keep in perspective that all of these conclusions are being drawn using averages. Yes, the majority of people pursuing a degree may have better chances of landing a great job after graduation and earning more money over the life of their careers.
However, someone going to college to become a lawyer will have significantly different employment and earnings potential than someone else who goes to earn a liberal arts degree. There will definitely be some case-by-case situations that could be considered.
I’ve known dozens of individuals who earn a great living and don’t have a college degree. You can find countless stories online of real estate agents, salespeople, business owners, and even bloggers who have found ways to hustle their talents and earn over 6-figures per year.
If college isn’t on your radar, then here are some alternative worthwhile career paths you could consider instead.
Jobs That Only Require a Certificate
Certifications take significantly less time and typically cost less to earn than a 4-year college degree. Most can be completed in a few months.
- Web Developer: $77,200 per year
- Construction and Building Inspector: $62,860 per year
- Architectural and Civil Drafter: $57,960 per year
- Industrial Engineering Technician: $57,320 per year
- Pipefitter and Plumber: $56,330 per year
Jobs You Can Get by Attending Trade School
Some jobs require more extensive training than what would be required for certification. However, they still cost significantly less than a 4-year degree and are much more focused on the knowledge and skills needed for that specific occupation.
- Radiation Therapist: $85,560 per year
- Elevator Installer and Repairer: $84,990 per year
- Dental Hygienist: $76,220 per year
- Diagnostic Medical Sonographer: $68,750 per year
- Respiratory Therapist: $61,330 per year
- Electrician: $56,180 per year
- Plumber: $55,160 per year
- IT Technician: $54,760 per year
Conclusion – Is College Worth the Money?
As you might guess, the real answer to this question is that it depends on who’s asking. Just like starting a new business requires so many factors to determine if it will be profitable or not, the same is true for going to college.
For instance, a software engineer making over $87,000 per year would most likely be able to pay off that $28,950 average student loan in a reasonable amount of time if they kept their cost of living relatively modest. However, a different person choosing a lower-paying career path and twice as much student loan debt might find that getting a degree makes no sense at all.
This is why when it comes to your career selection, I’d recommend doing something pretty radical: Don’t choose it based solely on money. Pick something you’re passionate about becoming and pursue it. Money always seems to find its way to those people who love their jobs and add value to the lives of others.
If your path does involve going to college, you’re not doomed to take out tens of thousands of dollars in student loans. You have plenty of other options that can help make it more affordable:
- Fill out the FAFSA (Free Application for Federal Student Aid) and see if you qualify for any federal assistance or grants.
- Apply for scholarships from national and local organizations.
- Live at home and commute to school to save on room and board. Or consider taking online classes.
- Choose to go to a more affordable school (such as a community college for the first few years)
Note: If you want more details on college funding, I recommend reading $670,000 in Scholarships – Crystal Harell’s Amazing Journey.
If you find you need student loans for financial assistance, be sure to have a plan on the backend for paying them off. These might be strategies like:
- Paying extra towards the principal
- Refinancing them when interest rates drop
- Using the Debt Snowball method to accelerate your payments
Remember: Your job is what you’ll do with one-third of your adult life. If that means having to go to college so that you can enter the right career, then try to do so in the most economical way possible. But if a certification or trade school will accomplish the same goal, then consider those to be valid options too.
Key Next Actions:
- For your desired career path, determine the potential routes to get there (college, certification, trade school).
- Estimate the educational cost.
- Determine the average pay for the career you want.
- Create a budget using the average pay for your career and, if applicable, include a payment plan based on how much you believe you will need to repay for any student loans.
- Remember, “If you fail to plan, you plan to fail.” – Benjamin Franklin
LEARN all that you can, BELIEVE in yourself, and take actions that allow you to GROW!