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The Average Cost of College: Evaluating Education As An Investment

Going to college is more expensive than ever before. According to Mother Jones, the average cost of college is now ~12 times more expensive than it was 35 years ago. This increase isn’t solely due to inflation and the actual cost to educate students has not gone up much. Today’s high college costs are largely the result of increased enrollment, reduced funding and the creation of thousands of new administrative positions.

35 years ago roughly 12.5 million students were enrolled in 2-4 year undergraduate programs. Today there are over 20 million of these students. Additionally, from 1993-2009 administrative positions increased by 60% (admin pay has been rising for decades). During the same period academic faculty positions (and pay) have remained virtually unchanged, despite the fact that there are now far fewer full-time faculty positions (about 50% of post-secondary faculty are now part-time employees).

Breaking Down the Data:

  • It is now much more expensive to attend college.
  • There are now far more students earning degrees, thus reducing the inherent value of each degree in the workforce.
  • Tuition money is being funneled primarily to administrators  (maintenance and supervisory functions), the highest paid college employees.
  • Less tuition money goes to academic faculty or the cost of education itself.
  • College degrees are considered mandatory in order to compete in a global economy.

Can you think of any other so-called mandatory investments with such an unpredictable rate of return?

The potential benefits of attending college:

  • The experiences, new friends, being challenged by new ideas.
  • Education and some workforce training.
  • Networking to significantly increase employment opportunities.
  • You are likely to make more money with a degree than without one.

Are these benefits so important that we must seek them out at any immediate cost? Apparently not- see the graph below reflecting a rare decline in enrollment from 2010-2014.  Many college-age students simply cannot attend at these prices. The more determined students are largely opting for affordable alternatives such as online coursework, technical and trade schools, attending foreign universities or starting a business.

You NEED a college degree, right?

Yeah, its mandatory remember? Unless you are an entrepreneur, tradesman, salesman or you work your way up in another field where that’s still possible (restaurant management, tax preparation, military etc.). So, although the right degree is highly-attractive or mandatory for certain careers, degrees are not necessary to make a good living. In fact, as Forbes pointed out, highly compensated, skilled tradesmen are rapidly aging and they are not being replaced in the workforce.

In order to determine if going to college is a good value, students must consider whether the quantifiable benefits are greater than the total cost of the investment. This should include an analysis of career-paths and salaries, loan repayment terms and research into career satisfaction factors. What 18-20 year old’s don’t do all that before choosing their university coursework?

Nonetheless, it’s an excellent idea for qualified students to focus on degrees that provide a good return on their investment (STEM, medical, finance etc). Interestingly however, countries who focus solely on these high value degrees (I’m looking at you India and China) typically suffer from a disproportionate number of applicants competing for the same positions

Money saving tips for college applicants:

  • Evaluate the average cost of college, as well as loan repayment terms, against your prospective salary.
  • Explore all scholarship options early and often.
  • Explore financial aid options thoroughly.
  • Research Opportunities Abroad. High quality foreign universities are often much more affordable than their U.S. counterparts.
  • If available, loan forgiveness programs are extremely valuable.
  • Think hard about the path you want your life to take and how this degree will aid you in realizing your goals.

Signs of Change As the Average Cost of College Has Become Untenable

Though college enrollment numbers have increased nearly every year from 1970 – 2010, the trend appears to be changing as the average cost of college has increased.

Fall College Enrollment 2005-2014 -USA

YearTotal4-Year Only2-Year Only
2005
17,487,47510,999,4206,488,055
200617,758,87011,240,3306,518,540
200718,248,128 11,630,1986,617,930
200819,102,81412,131,4366,971,378
200920,313,59412,791,0127,522,582
201021,019,43813,335,8417,683,597
201121,010,59013,499,4407,511,150
201220,644,47813,476,6387,167,840
201320,375,78913,407,0506,968,739
201420,207,36913,492,8846,714,485

Data Source

Take a look at the data from 2010 – 2014. It shows that the number of enrolled students is actually declining now (only one previous period, 83-84, reflects a decline). Could this be a sign that the college degrees are becoming over-valued?

If this trend of increasing costs and decreased enrollment continues the result could be disastrous. But, more hopefully, the market will adjust with this drop in demand. And as online colleges and affordable alternatives become more prevalent, the average cost of college will fall to keep pace.

2 thoughts on “The Average Cost of College: Evaluating Education As An Investment

  1. When I was in my final two years of high school I thought in order to make money I would HAVE to go to college. I wish I would have known then what I do now. Many of my friends and I struggle to make enough money to pay off our college debt even though we are in specialized fields. My cousin who just graduated from welding school has already paid off his schooling and is making as much money as I do and I have a masters degree and 6 years in the work force. Definitely something to think about!

  2. Anathema, sacrilege, balderdash! How can you go against the party line like that?

    And yet, spot on. I also wonder how many people have felt a sense of shame or disappointment that they were not “cut out” for college or they made the practical decision not to go into huge debt for a questionable return. I also wonder what to make of the fact that more women go to college than men? Is it possible they don’t consider the alternatives as available or attractive enough?

    Also, I want to know more about the creation of so many administrative jobs, Is this out of line with needs? At the same time colleges have increased costs, they have reduced expenses by cutting back on tenured staff and many get so much money from donors and corporate sponsors. I would love to have the lowdown on this boondoggle.

    One reason why college is not a good option, even to test out, is because of the withdrawal of public financial support. The public should support education in line with our commonly agreed upon value of meritocracy. High costs obviously present a massive barrier to entry.

    Finally, Germany has a great system of college and vocational education which is why they are so incredibly successful in manufacturing. We used to be too. What happened?

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