Is college worth it? A letter from Dean Walter Pearson

Feb 4th, 2013 | By | Category: FEATURED ARTICLES

I have a friend who is considering a return to college.  He stopped out of Big State U several years ago and has worked in unsatisfying jobs since.  He is wondering if the time, effort, and money he would have to invest to complete his degree is worth it.  Will it really make a difference?  Will he just accumulate more debt and be stuck in the same place?  Is completing the bachelor’s degree worth it?

The answer is, “Yes, of course it is!”

Even during this very trying Great Recession, those with more education fared much better than those with high school and below.  Education has mattered enormously during this recent period in avoiding unemployment and garnering higher wages.  Those with only a high school education have continued to lose jobs throughout the entire recent period, and wages have slid lower.  An associate’s degree improves things.  A bachelor’s degree improves wages and employment even more.  A graduate degree adds to your chances of positive employment and wage outcomes.  The bottom line is, more education matters.

But wait, what about those recent graduates living at home?

We all know some who have completed degrees that are not flourishing and some who stopped their formal education at high school that are doing well.  Despite these individual counter-examples, the economic data make it clear that holding a bachelor’s degree is an enormous advantage.  During the more recent period of slow recovery, job growth has largely gone to those with a bachelor’s degree or higher.  Georgetown’s Center for Education and Workforce report titled “Weathering the Storm” stated:

“More than half of the employment increases have gone to workers with a bachelor’s degree or better, the rest of the gains to those with some college education or an associate’s degree.  Even in the recovery, workers with only a high school diploma or less have continued to lose jobs.”

While the size of the job market for college graduates has increased more slowly than in the past, the odds still strongly favor those with a bachelor’s degree or higher.  The broader direction of the economy points toward this becoming a stronger, not weaker trend.  This chart from their report “Weathering the Storm” illustrates the point:

chartBut, what about wages?  I don’t want to have $25,000 in debt to make only $30,000 a year.

A new report from the State Higher Education Executive Officers pointed out that skepticism about the value of a college degree in the wage area is just off base:

“…the evidence clearly demonstrates the value of a college education.  According to our analysis of U.S. Census data, those who obtain a bachelor’s degree have a median income of $50,360 compared to a median of $29,423 for people with only a high school diploma.  An associate’s degree leads to a median income of $38,607, more than $9,000 higher than a high school diploma.  Those with a graduate degree have a median income of $68,064, 35.2 percent more than those with a bachelor’s degree.”

Let’s work with that wage differential.  How long does it take to pay off the cost the degree, and what’s the lifetime advantage? Whether we consider the bachelor’s advantage over the associate’s degree ($11,000 a year) or the high school degree ($21,000 a year), it takes only a few short years to pay the direct costs.  The lifetime advantage will be better than $400,000, according to the Census Bureau.

OK, does it matter what major I choose?

In some ways, no.  Completion of the degree is what matters.  However, not all degrees are created equal.  For one thing, the degree does need to come from a reputable source to be helpful in a job search.  We also know that, in general, the more quantitative or technical the degree, the better the lifetime outcomes will be.  For instance, there is great demand right now for health-related degrees, and graduates from those programs are getting good starting wages.  However, over their careers graduates in engineering, science, and business will get the greatest bang for the buck.  In IT, those who create information will do better than those who use information.  These insights come from another recent study from the Georgetown Center for Education and Workforce.  All that said, completion of a degree matters.  For those with experience, the major may be less important than simply finishing the degree.

I’ve seen those commercials from a for-profit college — is that a good option?

It does matter where you get your degree.  In one study from the National Bureau of Economic Research, graduates from for-profits saw very little impact on earnings after degree completion, even after controlling for other characteristics that might affect wages.  The study found “large, statistically significant benefits from obtaining certificates/degrees from public and not-for-profit but not from for-profit institutions.” Another study indicated that hiring managers preferred graduates from traditional programs over those from identifiably online universities.  When hiring managers were presented with sets of candidates that were matched with the only variation being the source of the degree, “96 percent chose the hypothetical applicant with the traditional degree.” The U.S. Senate Committee on Education recently published a large study on the major problems they found with the large for-profit colleges.  There are plenty of adult-focused colleges that are non-profit or public that provide credible degree completion programs with accelerated and online options.

Is it really that simple? Does completing my degree get me the job I want?

The key is having both – - the needed experience and the credential (the degree).  In my career, I serve adult degree completion students, and roughly half of them are completing their degrees in order to secure their career or to move up where they currently work.  They typically do not need added experience, just the degree.  Another 40 percent are seeking a degree in order to gain entry into a field new to them.  While they are working on their degrees, we help them gain experience in the target profession so that they make the most of the degree when they finish.

What does a college degree mean?

Completion of a college degree may help satisfy a requirement for hiring or promotion, and it does so because it signifies a number of qualities the candidate is likely to possess.  A degree from a quality institution signifies the capacity to reason from facts, the capability to engage in thoughtful and clear writing, empathy for others, the ability to work cooperatively within diverse settings, an understanding of our place in a rapidly changing global context, and analytic and quantitative reasoning.  These are qualities employers are looking for – - and qualities our society needs.  Employers are paying more for college graduates, even when a degree is not a formal requirement of the job.  In the Weathering the Storm study from Georgetown, those holding the bachelor’s degree typically receive 37 percent more in salary in low-education jobs than those with a high school education.  Employers are paying a premium even when a degree is not required.  The degree matters.

Is there any way I can reduce the cost of completing my degree?

Explore the least expensive options first.

My university is transfer-friendly and has a robust program to allow you to earn credit for the learning you’ve already gained through your work, travel, and the stuff you are passionate about, such as hobbies and causes.  These options (transfer, PLA, CLEP, and evaluated training) can save you thousands and several semesters.  Explore all of these options with your college or university to help you reduce the cost and time to degree:

  • Maximize transfer credits.  Since the goal is to finish a bachelor’s degree, start by exploring community college transfer credits with the college where you want finish.  How many credits can I bring in? Which courses will help me the most? Most bachelor’s degree programs will allow about half of your credits to come from a regionally accredited two-year school, usually the local community college.
  • Check out prior learning assessment.  This is a well-established system for receiving credit for the learning you have gained from work and other experiences.
  • Try CLEP tests.  These nationally recognized exams from the College Board enable you to receive credit for a required course.  With a bit of study and a modest expense, CLEP tests can save time and money.
  • See if your training programs from the military or work might carry a credit recommendation from the American Council on Education.

Get your boss to pay for it.

Try to find a job where the employer provides tuition support.  Many employers provide up to $5,250 a year in tuition support.

Go for all of the grant funds — too few apply!

Complete the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov,  and do it early each year.  This helps you qualify for a Pell Grant (up to $5,550 per year) and may qualify you for additional state grant funds.  My home state of Illinois has a grant program that provides about $157 per credit.  Any time you can find gift aid (that does not need to be re-paid) grab it.

I’m worried about repaying loans since my salary may be low when starting out.

The most important guideline is to borrow the minimum amount.  Don’t borrow for living costs or things you don’t absolutely need:  A new car or the latest gadget can wait.  Scrimp and save.  Remember that you are investing in your future, not living for the moment.  Unlike other forms of debt that can be erased in bankruptcy, you cannot walk away from student loan debt.

Check this exciting new student loan option: Re-payments in proportion to income.

Under a new federal student loan program, you can pay in proportion to your income.  Loan payments can be capped at 15 percent of discretionary income, which results in payments that are generally much lower than under the current system.  To give an example, let’s say you are making $30,000 a year after graduation and your loans total $17,000.  Since you are single, the government calculates that you would have a discretionary income of $13,225.  Your payments would be 15 percent of that, or $165 per month.  The payments would be lower if you had family obligations.  There is a subsidy for interest accumulation over the first three years, and the loan goes away after 25 years, even if not fully repaid.  This is a great deal, and I am very happy President Obama made it happen.

You may not have to pay all of it back: Public service loan forgiveness.

One of the most valuable new federal programs gives you loan forgiveness after 10 years of income-based payments.  These terms will apply if you are working for any unit of the federal, state, or local government.  This also applies if you work for any non-profit that provides any of the following:

  • public health services;
  • public education or public library services;
  • school library and other school-based services;
  • public interest law services;
  • early childhood education; or
  • public service for individuals with disabilities and the elderly.

This forgiveness program is combined with the new income-based payment system (see previous section) to make this a very attractive option.

Closing thoughts

Despite all the recent skepticism, completing the bachelor’s degree pays off in finding and keeping a job and in how much you get paid.  You’ve got to be careful to choose the right college and the right major for you.  Be smart and explore with an admissions representative or academic advisor all the ways to bring down the cost.  Get grants and employer support to help you with the cost.  If you must borrow, be frugal and borrow only the minimum necessary.  Work with the financial aid office to understand the great new re-payment and forgiveness programs.  Make sure you approach the job market with the degree completed as well as with experience in your chosen profession. Millions of adult students finish their degree each year. You can do it too. The key is to get started.

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