The Shifting Cost Benefit of a College Education: Is a Four Year Degree Still Worth the Investment?

The Rapidly Rising Cost of a College Degree

Since the early 1980s, college tuition rates have risen much faster than the rate of overall inflation. Even after adjusting for increased financial aid, the average cost of a college education has more than quadrupled since 1982.  Tuition, room and board for 2010 at the private liberal arts university where I earned my degree has actually increased to almost ten times what it cost when I graduated in 1982.

The steep increase in tuition costs is driven by many factors including increased demand, due in large part to massive amounts of federal and state money poured into higher.  Abundant government aid, aimed at helping students meet the cost of college, has actually driven up the cost. Basic economic theory suggests that the increase in demand for higher education brought about by the system of grants and loans will continue to increase the price of higher education.

The Shifting Cost Benefit of a College Education

An article in SmartMoney, written by associate editor Jack Hough, states that "[t]he four-year college degree has come to cost too much and prove too little" and that a four year college degree has become "a bad deal for the average student, family, employer and taxpayer."

But don't college graduates earn significantly more money than people who didn't earn college degrees? Yes, typically so. For people 25 and older, the median after-tax income for those with a Bachelor's degree is $39,000; for those with only a high school diploma, the median is $24,900 (based on 2005 data from the College Board).
However, it's also important to recognize that while college graduates do tend to earn more than non-grads, many enter the work force saddled with significant debt. When monthly loan repayment amounts are subtracted from gross earnings, four-year college graduates actually tend to be at an income disadvantage to high school graduates.  In fact, according to the College Board, it takes a remarkable 14 years of work before the typical B.A. recipient reaches net-pay parity with a high-school-only.  This is not only because of debt repayments, but because college grads forgo potential full-time income while earning a degree.

Parents and soon to be high school graduates need to prayerfully consider if earning a four-year degree really is the best route.  Because the maturity and motivation of the student is a major factor, along with the financial situation of each family, the decision about post-high-school education is a personal one. Just don't assume, as many parents and students have done in the past, that earning a bachelor’s degree is the "best" option and that the other options are “second best”.

Alternatives to a Four Year College Education

Prayerfully consider the following list of ideas, asking the Lord to give you His wisdom:

Wait and work. There is no rule that says a high-school graduate must immediately enroll in college. Perhaps your son or daughter would be better served by taking a year or two to work and save. During that time, he or she can be growing in maturity and seeking the Lord about the next step.

Take tests for college credit.  Some colleges allow credit for Advanced Placement or College Level Examination Program tests.  Not all schools accept credit for all tests, however.

Transfer from a community college. A popular option for reducing the cost of a four-year degree is to go to a community college for the first two years, then transfer to a four-year school. However,  it is very important to  check ahead of time about which courses will transfer. If the student lives at home with parents during these two years, room and board expenses can also be saved.

Explore online learning.

Consider the military.