Money Match-Up: Is College Worth It or Not?

Here's the latest post in the Rockstar Finance Money Match-Up series where two money bloggers argue opposite sides of an issue. Today's issue features an interesting debate on college -- is it worth going or not? We'll begin with Kate from On Our Way World who says that going to college is certainly worth it...

Why College is Worth It

There’s been a lot of discussion lately about whether or not a college degree is really the best way to go these days. The lack of qualified people to fill skilled trades, the costs of higher education, and higher unemployment rates for college graduates compared to years past have combined to the point where some people are making the case for routes other than college as an equal or better route to reach financial security. While there are definitely benefits to pursuing other routes, particularly if your passion lies in autobody repair, welding, or a profession more commonly taught in a trade school, the simple fact remains that the college degree is still the absolute best option when charting your course to financial freedom. One major fallacy in the argument against college is the perception that a college degree is inextricably linked to high student loan debt. This is simply not the case. I would argue that our focus should be on going to college smarter, rather than nixing the idea of college altogether. The benefits of a college education are obvious. 1. Those over the age of 25 with a bachelor’s degree who are working full time earned $24,600 (67%) higher per year than those with a high school degree. 2. In 2015, the unemployment rate for 25- to 34-year-olds with at least a bachelor’s degree was 2.6%, while it was 8.1% for high school graduates in this age range. 3. Of full time workers aged 35-44 who earn $100,000 or more per year, 2% did not have a high school diploma, 5% were high school graduates, 25% had a bachelor’s degree as their highest degree, and 38% had an advanced/graduate degree. 4. Increased education leads to higher job satisfaction: 55% of college graduates reported being “very satisfied” with their jobs vs. 40% of non-graduates (it’s even higher for those with a master’s degree, at 69%). There are also several less obvious benefits to college education – research has shown that college grads tend to live longer, be healthier, and have happier marriages. There’s also a link between college education and entrepreneurship (aka the side hustles we all love so much here in the FI community!) - 92% of U.S. tech company founders hold bachelor’s degrees, and 47% have attained advanced degrees. The bachelor’s degree opens up the way to achieve more advanced degrees over the course of your career as well. Many times, employers will pay for advanced degrees, or professional organizations will offer scholarships. With each higher degree, there is typically a fairly significant pay increase. Even if the salary is not significantly higher with the advanced degree, there are often other benefits. For example, in my profession a nurse educator may not make a lot more than an experienced staff nurse, but the educator has the benefit of a flexible schedule, a ten-month work year, and/or the option for distance work. It’s obvious from the statistics above that a college degree paves the path for financial success and independence, career growth, and stability in employment. The question, then, is not should you go to college, but how can you best afford college? There are many options to ease the cost of a college education. These include dual enrollment, CLEP tests, and beginning at a community college, to name just a few. I started my higher education career at a community college. I paid roughly $5K in total tuition for a 2-year associate's degree in nursing, immediately entering into a $40K per year career field. My bachelor’s could be completed almost entirely online, while I was working fulltime. I was active duty military at the time, so I was able to take advantage of tuition reimbursement for my bachelor’s degree. We had separated from the military by the time I pursued grad school, and the GI Bill paid for all of my master’s degree and all but the final semester of my doctoral degree. My total out of pocket costs for my doctorate were about $8000 + books. My career is my passion and has been incredibly fulfilling for me – but it has also been very lucrative. In addition to a solid six figure salary, I have an immense amount of freedom to create my own schedule, travel as often as I’d like, and spend more time with family than most other full-time workers do. None of this would be possible without a college degree. There are certainly exceptions to this rule, as there are to anything. If your passion is in a hands-on craft that’s taught in a trade school, it’s completely reasonable to pursue that. If you have a knack for coding you may be able to get a job as a software developer without a degree. However, it’s important to recognize that in most circumstances, a college degree is the best way to secure your financial future and reach financial independence faster. ------------------------------------------------------------------ Arguing that college is not worth it is Jim from Wallet Hacks. Here are his thoughts...

Why College is Not Worth It

When I graduated college in 2013, I owned $35,000 in low-interest subsidized federal student loans. I was very lucky. I had a post-graduate degree and an undergraduate degree from one of the best computer science universities in the nation, Carnegie Mellon University. I also had a nice $60,000 a year job with a federal defense contractor and a bright future. It even came with a $2,000 signing bonus! So far, my gamble with college had paid off. Today, a student attending CMU will pay twice what I did - $70,000+ a year. And he or she will probably leave with a student loan debt burden that dwarfs mine. College is always seen as the path towards prosperity. If you get a college degree, the world will take care of you. That may have been the case decades ago but I think things have changed. The nature of education in America has changed. The nature of work in America has changed. It's time for our thinking about college to change as well. I don't think college is for everyone and here's why.

College may not be the best next step

If you want to become an engineer, physicist, mathematician, or something similarly academic focused - college may be the only place for you to further your education. If you want to become a chef, a mechanic, or something less class-room centric - college isn't going to be the next best step. And if you're like most college freshman, who aren't sure what they want to do, college is an expensive place to find out. For many jobs, you can try them on before you commit to a costly formal education. If you want to become a chef, take a few years to work in a kitchen before embarking on culinary school. If you work two years in a grueling kitchen and still love it, consider leaving to go to culinary school. If you work two years and can't stand it, you've saved yourself a costly education.

College isn't required to get a high-paying job

If you do a search for the most in-demand jobs, they're often in the trades. I have a friend who makes a great six-figure salary and, for all intents and purposes, is a mechanic. He's not your everyday mechanic though. He repairs and maintains heavy equipment like the massive hulking machines you see on construction and mining sites. It's extremely specialized equipment, he is extremely knowledgeable and proficient, and going to college would've been a tremendous waste of time and money. He makes as much as he does because he's working in an in-demand field and he's good at what he does. You can earn a very good living by going to a vocational school and learning an in-demand trade. If that's the type of work you'd like to do, then going to college is only going to be an expensive (and not that much fun) vacation.

Student loan debt is a huge problem

Student loan debt is now at a staggering $1.49 trillion. TRILLION. The Pew Research Center reported that 40% of adults under 30 have student loan debt. The median amount of outstanding debt for someone with a bachelor's degree is $25,000. For all borrowers, which includes less than a bachelor's and postgraduate degrees, the median is $17,000. 7% of current borrowers have over $100,000 in student loan debt. Those who go to college may outearn their non-college graduate peers, but they also start work much later and many wear this debt around their necks while they work. This is why there's a big business in the world of student loan refinancing, where companies will pay hundreds of dollars in bonuses. What's scarier is that sometimes students take on massive debt and don't go into high paying fields. The classic case we're all likely familiar with is that of a liberal arts student who amasses a five or six figure debt but can't even find a job after graduating. It's unfortunate but it happens all the time.

College outearn non-college graduates but...

College graduates tend to outearn their non-college graduate counterparts over their careers. This amount varies based on the study but the most recent U.S. Census data puts it around a million dollars over a lifetime. We should expect this because college graduates start with a higher salary and in higher paying roles. They offer more specialized expertise and should be rewarded. This advantage compounds over time so a larger starting salary advantage tends to grow with time. But the higher earnings have a cost. College graduates start working four years later, generally putting off many life choices for four years as well, and are saddled with the amount and the stress of student loan debt. This can affect how much they contribute towards retirement and save towards buying a house. College graduates are, in part, trading years of their life for that higher salary.

Certifications are more important

What does it mean when someone has a degree in Computer Science from Carnegie Mellon University? It means they've gone through the crucible of that university's program - but it's not a concrete indication of what that graduate knows. What does it mean when someone has a Master Electrician's license in Maryland? They have to pass an exam but to qualify for the exam they must "have been engaged or employed regularly and principally in providing electrical services for all types of electrical equipment and apparatus for at least seven years under the direction and supervision of a master electrician or similarly qualified employee of a governmental unit." So they must have experience (7+ years) plus demonstrate expertise (passing the class). If you are in a field that recognizes and requires certifications, it's better to work towards those rather than a college degree that may carry more prestige but demonstrate less ability. It's the cornerstone idea in how to invest in yourself - targeted investment of time and money into skills that translate into great earnings is crucial. In 2014, there was a Gallup-Lumina Foundation poll that showed knowledge and applied skills were more important than where a candidate attended school or even their college major. If those skills are also certified, it goes a long way to proving (on paper) to a recruiter that you're qualified. Employers want people who can do good work and solve problems. College is a good choice for some but it is not a good choice for everyone. Understand yourself, what you want out of college, and know that you shouldn't feel compelled to go because it's the "next" thing in life. ------------------------------------------------------------------ So, those are the two sides of the issue. What do you think?