Over the years, college has evolved from a choice made by some to an expectation for nearly everyone. At high school graduations, schools will even read off information about the colleges that students are planning to attend. Going to college has become the societal norm, to the point where it is almost strange, unwise, and often even unacceptable to decide against higher education.
There is an obvious reason for this trend. Many people believe that opting out of going to college will make it more difficult for a person to find employment, advance their career, and make money throughout their lifetime. A college degree, in comparison, opens up the job market, unlocks paths to advancement, and leads to higher salaries.
None of these beliefs are expressly incorrect. Many employers will make a four-year degree a prerequisite for most positions. These positions require specific skills and education that are usually not covered in high school. Employers are willing to pay extra for those skills, meaning that salaries are—on average—higher for college-educated professionals than they are for people who merely hold high school diplomas.
Figuring Cost into the Equation
However, while college graduates usually do have more options for employment, advancement, and competitive wages, those facts don’t automatically mean that college is a worthwhile investment. On the contrary, to determine whether college is a wise economic choice, one needs to consider the cost of going to college.
If you or a family member is going through the college application process, then you have probably already spared a thought or two as to the expense. It’s difficult to fully ignore the cost of college today when the average tuition rate is so high. According to the College Board, the average annual cost of tuition is $32,410 on the high end (for private four-year colleges) and $3,440 on the low end (for two-year community college programs. Average costs for public colleges can land in the more reasonable range ($9,410) or skew toward the expensive end of the spectrum ($23,890) depending on in-state or out-of-state status.
You could simply pick the number that applies to you and multiple it by four to arrive at a final tuition estimate (though you would have to figure in a transfer to a four-year institution if you start at a two-year community college). However, such simple calculations ignore the fact that tuition expenses tend to increase from year to year. Over the past decade, the average year-to-year increase in tuition fees has been about 5%. Using that figure, you would expect to pay around $40,500 for a four-year degree at an in-state public institution, around $103,000 for a degree from an out-of-state public university, and around $139,700 for a four-year degree from a private college or university.
Tuition and fees aren’t even the full extent of what constitutes the real “cost of college.” On the contrary, you also should factor in the cost of books, room, board, and transportation. These figures are harder to estimate, as every student will be quite a bit different in how much they spend in each of these categories. In most college towns, for instance, a student can save money by moving off campus, rather than living in on-campus dormitories. A student who moves off-campus in their sophomore year, then, is probably going to save money compared to a student who lives on campus for four years. Another student might save money by living at home and commuting to college, but that person would also see a notable increase in transportation costs.
Still, we can try to ballpark these figures. The College Board estimates that, for the 2016-2017 school year, room and board costs landed at $10,440 for public institutions and $11,890 for private institutions. The College Board also averaged out the cost of books and supplies (including computer expenses), estimating that private college students spent about $1,230 per year, while public college students spent roughly $1,250 annually. Finally, the College Board provided bulk estimates for transportation and other “personal expenses”—such as clothing and entertainment. The average costs there landed at $2,720 for students at private schools and $3,270 for students at public universities.
Because the average student’s expenses in these categories are probably going to vary quite a bit from one year to the next—based on living arrangements, courses taken, and several other factors—let’s just figure them into the cost of college without worrying about year-to-year increases. If we do that, then the four-year cost of a public in-state university jumps to about $100,350, the cost of a public out-of-state school increases to $162,800, and the cost of a private institution jumps to a whopping $203,050.
Other Factors to Consider
The fact that even an in-state university jumps above $100,000 for four years with room, board, books, materials, transportation, and other personal expenses considered shows just how expensive college has become. However, even the numbers provided above won’t necessarily tell the whole story—unless, perhaps, you have a college fund that can cover the full expense.
The biggest of the other factors that you need to consider are student loans. The average graduate of the Class of 2016 was carrying over $37,000 in student loan debt at the time of graduation. If you anticipate that you must take out student loans to cover the cost of college tuition, then you must consider the aftermath of college as part of your “Cost of College” calculations.
How much you will pay on your student loans depends on several factors, making it difficult to formulate a ballpark estimate for how student loan payments affect the overall cost of college. After all, some students—usually with help from their parents or assistance through scholarships—can escape college with no debt. Others have to take out loans for the entirety of their four-year tuition bill. Whether or not you have a job and a source of income throughout college can also impact how much debt you have when you graduate.
Post-college considerations will affect how much interest you pay on your student loans as well. What is the median entry-level income for the industry or job that you hope to obtain after graduation? Where are you hoping to live and what are the average living costs there? Is it easy to find a job in this particular field, or do you anticipate that you will spend a few months applying and interviewing once you finish school? All these factors will determine how quickly you can pay off your loan, how long it takes you to pay off your debt, and how much interest you end up paying along the way. Of course, the type and interest rate of your loan will factor in, as well.
Deciding Whether a Four-Year College Investment Is Right for You
You may feel alarmed or scared above the dollar amounts discussed above, but that’s actually a good thing. Too often, students will decide to go to college and take on a lot of debt—perhaps because all their friends are doing it, because they feel pressured to do so by their parents, or because they feel like they have no workable alternatives. These students and their families take on a “whatever it takes” mentality, reasoning that the value of a college degree and the professional doors it opens will be worth any investment.
There are several fatal flaws with this “whatever it takes” mentality. First, college is perhaps the only type of investment where anyone would actually think this way. If you were to invest in stock, real estate, or other assets, you would do an extensive amount of homework to predict your ROI (or return on investment). With college, too many students and too many families choose not to consider ROI.
The government doesn’t help on this front, either. Were you to seek a loan from a bank for investment purposes; you would have to prove to your lender that you had a good chance of being able to make back your money and pay off the loan plus interest. The government gives student loans to anyone who asks for them, which means that there is no step in the process where a real hard cost-benefit analysis is required.
The good news is that if you are looking at the numbers discussed in this article and feeling uneasy, you are already closer to considering ROI than most students ever get. Your next step is to try performing an actual cost-benefit analysis on your prospects.
The Cost-Benefit Analysis
Your first step should be to ask yourself what you want to do with your life. When you picture your career, what do you see? Your answer should lead you to your potential college major. If you don’t have an answer or are unsure of what you want to do for a living, then consider waiting a year or two to revisit the college consideration.
Many students go to college without knowing what they want to do and without a major to claim. While taking college courses is one way to figure out what you want to do with your life, it is arguably the costliest method to make that discovery. When you go in as “undecided,” you risk wasting money and time on courses that will never contribute toward a career-focused degree. Spend enough time waffling around trying to figure out your major, and you will add extra years onto your college bill—leaving you with a bigger investment (and more debt) to overcome. You’d be better off taking a few classes at your local community college, researching potential career paths online, and getting a job to save money.
If you do have a specific interest that you think you’d like to aim for as a potential career path, get online and do your homework. Research your interest and find associated jobs and majors. Try to figure out how competitive the field is and how much money you might be able to make right out of college. Compare those numbers to the college cost estimates from earlier in this article and from your own college debt estimates based on your family’s financial situation. In that comparison, would you be in a good position to pay off your loans quickly and start actually building wealth? Or would you be more likely to struggle financially and pay off your loans slowly?
Another consideration worth adding to the equation is graduate school. Is your preferred field of study one that would require additional schooling, training, or certification after four years in college? While some post-graduate programs can yield excellent job prospects, high salaries, and a lot of respect (medical school, for instance), they can also add hundreds of thousands of dollars to your personal education bill. You will need to ask yourself whether you want to invest the time and money that will be necessary to go through those extra steps.
Finally, consider the value of your time. Four years of classes and studying doesn’t just cost a lot of money; it also costs a lot of time. Take another look at the skills and interests that you have. Do you have a skill that you could potentially build a career around right now—without college? For instance, if you are computer savvy, you might be able to amass computer programming skills and find a good job in the tech industry with no college degree. Alternatively, you could stay at the job you worked in at high school (especially if there is room for advancement) or consider trade school options if your skills and interests tilt in that direction.
No matter your decision, the important thing to remember is that college, while a popular path, is not the only path. A college degree is no guarantee of success. Recent graduates face an unemployment rate of 5.6 percent and an underemployment rate of 12.6%. If you can start making money and building a career today—without going through four years of college, facing down $100,000 or $200,000 worth of expenses, and dealing with student loan debt—that option is certainly one worth considering.
Click here to read more about assessing the value of a college degree.