Is College for Everyone? Part II: The Pros and Cons of Attending a 4-Year College

Welcome to Part II of our series that asks the question of whether or not college is necessary. In Part I, we took a look at the history of higher education in America. What started as a place for a small, elite group of students began turning into an American rite of passage in the early 1900s. Enrollment boomed, endowments skyrocketed, and the idea of college became imbued with a romantic haze that has endured until the present day.

This last decade, however, has started to show that four years of college immediately after high school may not be the best option for every student out there. Today, we’re going to look at the pros and cons a young man should consider before deciding to enroll in a four-year university.

[amazon asin=1479269387&template=*lrc ad (left)]While some of these pros and cons apply equally to both four-year and two-year schools, in general, they are specific to four-year schools. For example, while tuition costs are skyrocketing at four-year institutions (especially private ones), community college remains pretty affordable at an average of just over $2,000/year. And while it’s possible to form close relationships at a community college (even if those friendships aren’t quite as wacky as depicted on the eponymous television show), it’s harder to do because students don’t live on campus.

The reason we’ll be concentrating on the pros and cons of enrolling in a four-year school, particularly right after graduating high school, is because of the weight those particular institutions carry in the minds of Americans. The cultural pressure to go on to college after high school almost completely centers on enrolling in a four-year college. While plenty of students attend community and technical colleges, the majority of 18-year-olds that have graduated high school will attend four-year schools. In total, you see about twice the number of four-year students (~11 million) than two-year (~6.5 million).[amazon asin=1603582347&template=*lrc ad (right)]

There is still a certain stigma attached to two-year schools – that they’re only for those who don’t get in or can’t afford “normal” college. Without a doubt the cultural perception is that two-year schools are a step down from four-year institutions. It’s an unfortunate side effect of the blanket prestige given to four-year schools.

But is that level of prestige truly deserved? Should attending a four-year college be the aim of every high school senior in the country? In this post we will examine the positives and negatives of attending a four-year institution with the goal of receiving your bachelor’s degree.

[amazon asin=0399159967&template=*lrc ad (left)]The Cons of Attending a Four-Year College

Tuition Costs Are Skyrocketing

Given the fact that we are still experiencing the aftershocks of the 2008 recession, it’s inevitable that many of these cons are related to money. I’ll try to address a few specific concerns within the broader category of college economics.

The first is that the cost of tuition is growing at a rate far higher than the general inflation of the economy. What this means is that more and more students (and their families) aren’t actually able to afford college, but enroll anyway, because it’s still just what you do.

Since 1990, just 24 years ago, the price of a four-year institution has soared 300%. That’s an eye-popping number to be sure, but you can say that about a lot of products. You have to factor in general inflation numbers in[amazon asin=0986011908&template=*lrc ad (right)] order to figure out the real significance. When we do that, we see that in those 24 years, tuition has risen at a rate that is 2.5-4 times that of the national inflation, depending on who you ask. Theoretically, when disproportional inflation occurs, that product becomes a luxury good. That has not been the case with college, however, as enrollments only continue to go up. (Minor caveat: enrollments dropped among all college types slightly in 2013 — by 2.3% from the year prior — but the majority of that number was in fewer adult learners enrolling at either for-profit schools or public community colleges.)

Ultimately this means that families are spending money they don’t have for a luxury product they can no longer reasonably afford. At an average cost of around $20,000/year for college, families are looking at an expense that is 38% of their entire household income. That’s a rate at which most families would be denied a mortgage.

Unfortunately, there’s no real end in sight. In 2011 alone, the cost of public schools rose 5.4 percent and private schools rose an astounding 8.3 percent, both of which significantly outpaced the 3 [amazon asin=1591845610&template=*lrc ad (left)]percent inflation for the economy. Wages simply aren’t keeping up with college costs, and Americans have not yet been able to cut back on this particular expense.

A Degree Isn’t Yielding the ROI That It Used To

Tuition may be going up, but a college degree is still thought to be a good investment. But it could be argued that while the cost of college has been rising, its actual value – on many different fronts – has been declining.

The popular statistic thrown around in regards to the long-term, monetary value of a college degree is that graduates earn, on average, $1 million more over the course of their lifetime than non-degree holders. To a high schooler, or even a parent of a student, that’s a number that cannot be ignored.

Unfortunately, it’s a little bit misleading, and also simply not as accurate post-recession. That $1 million number is quite top-heavy. If you make it into a top university and graduate with honors, your earnings are likely to be [amazon asin=1593576587&template=*lrc ad (right)]much higher than if you scrape by at Podunk U. Those at the very top are well above that $1 million figure, and skew the results for the rest of us. A recent study by found that there are only 72 schools (out of 2,700 4-year schools in America) at which earning a degree can get you a $1 million return on investment over high school grads. The median is closer to $500,000 according to that report, which while still being a lofty number, is half of what prospective college goers are often promised.

That $1 million number may have been true 12 years ago when it was released in a report by the US Census Bureau, but with the recession, and wage inflation being lower than general inflation, to continue to throw that number around today is irresponsible.

At one time, college certainly was a reasonable investment. Tuition was low ($1,200/year in the 1970s at public schools, including room and board!) and therefore affordable, and you’d be rewarded with a well-paying job. Forty years ago, over a third of the labor force didn’t even have four years of high school education, while only 10 percent of the population had a degree. That made college graduates more of a hot commodity, and in the mid-nineties, at the height of America’s economic success, the unemployment rate for college graduates was around 2%.

That time is long gone. Tuition has become damn-near unaffordable for most, and well-paying jobs (heck, jobs period) are nowhere near the guarantee they once were after you graduate. In fact, recent grads (ages 20-24) have an unemployment rate that is now at about 7.8%. That’s higher than the national unemployment, and close to three times higher than it was about 20 years ago. This means you’re accumulating mountains of debt (which was not the case even a decade ago, when less than one-third of graduates used student loans – more on that below) that will strap your financial decisions for decades after graduating, and you may not even have a means of paying it off. Does that sound like a good investment?

Another factor that has to be considered in this topic of ROI is your lost potential income during your college years. Let’s consider even the lowest wage scenario. If you make minimum wage, with zero raises over the course of four years, you’ll have made $56,000. That’s not chump change, and it’s likely you’d make much more than that. I had jobs in high school that were well above minimum wage, and you’re almost guaranteed raises if you’re competent. Then factor in the out-of-pocket expenses as well as the debt for someone in four years of school (which is generous in itself – the average these days for graduation is closer to 5 and even 6 years). You’re looking at anywhere from $25,000 to $100,000 for the average student. Then you consider interest on those student loans, and the fact that you’ll take an average of 16-18 years paying them off (during which that high school graduate likely moved up the ranks and is now earning a decent wage), and all of a sudden the difference is not as great as it once appeared in terms of total earnings. While there is still a difference in the earnings of college grads vs high school grads (I’ll cover that below in the “Pros” section), it’s not as great as what it used to be, and it’s not as great as what is often promised by college admissions offices.

Loans and Debt are Crippling College Grads (and the Economy)

In 2010, the total amount of student debt overtook the total amount of credit card debt in America. As of 2013, there is $1.2 trillion in outstanding student loans – that’s over $3,700 for every man, woman, and child in America. As our nation recovers from the recession, we’ve actually managed to cut down our credit card and mortgage debt. The one area that’s still growing? Student debt.

The major issue, economically, is that about $1 trillion of that is backed by the federal government. This puts the American taxpayer at risk as the creditor, which means we the people carry the burden of unpaid student loans. And that burden is only increasing. Recent reports show that 10% (and the number is increasing) of student loans are in default. On government loans, this means they haven’t been paid in 9 months. Furthermore, only 4 in 10 student loan borrowers are paying back their loans at any given time.Graduates are not able to pay back their debt, and that hurts their credit tremendously, which impacts all future financial (and life) decisions, including car purchases, home purchases, even marriage.

For this reason, many economic experts are calling this student loan crisis “the next housing bubble.” In the mid-1990s, banks were giving out mortgages to anyone and everyone who applied. There wasn’t much due diligence in terms of the borrowers’ ability to pay back their loans. Eventually, that came to bite banks in the rear, and they needed a hefty (to say the least) government bailout in order to survive. The same thing is happening with student loans.Schools give out tens of thousands of dollars to students (and families) who may not have any realistic ability to pay back those loans. Eventually, as many experts are warning, this will create the same effect as what happened to our economy in 2008.

Another crippling factor of student loan debt is that it’s not eligible to be discharged by declaring bankruptcy. While not affecting a great number of people, you never know when something catastrophic could come along and you need the fresh start that bankruptcy sometimes provides for those in dire straits. If you’re not able to discharge student loans, it could hamper your ability to ever recover financially. It’s worth noting that private student debt is far more dangerous than government student debt. While both are non-dischargeable, government loans have low, fixed rates (for the most part – depending on the mood of congress), and repayment can be adjusted based on income (although doing so increases the length of the loan and the interest).

Two-thirds of all students are graduating with debt, and the average amount owed is over $26,000 (a 43% increase from just 7 years ago – right before the recession). With interest, that puts your average monthly bill at $320. When you get married that bill can double, and you’re looking at a lot of money each month that isn’t going into savings, isn’t going towards other debt (credit, car loans, mortgages), isn’t going towards helping the American economy recover.

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