Is College Worth the hefty price tag? | 08.22.08

Posted in Student Loans By Student Loan Network Staff

That is the million dollar question, and I mean that literally not figuratively these days. Education costs have soared in recent years at a rate far greater than inflation. And with the U.S. population continuing to grow more students are seeking higher education. As a result Universities reap the financial benefits. The demand is high and the supply (number of seats) is low.

I’ve been having the great college debate with my buddy Brian, 33 years old, who recently went back to school. He thought a Bachelors degree from a premier school would unlock the door to a fat salary, but so far that has not been the case. In fact, in a well-known paper by Princeton economist Alan Kruegar and researcher Stacy Berg Dale at the Andrew W. Mellon Foundation they discovered the school itself did not translate to a higher salary.

It was discovered that salaries from students accepted to a top-tier school but electing to attend a less selective/more affordable institution, were similar. Bottom line, if you’re bright you’re bright and the cream will always rise to the top. Brian, for a smart guy, made a dumb decision and now has astronomical student loan bills from his “name school.”

Still, some will argue the name school attracts the most distinguished professors, and that your education is second to none. Also, the contacts you make during your college career can play a pivotal role in where you land in your professional career. At upper echelon schools you tend to rub elbows with dignitaries, royalty, and future industry leaders. So much of life is who you know and not what you know sadly.

Implicit benefits aside the price tag is still staggering for both students and parents even with scholarships and grants. It is a vicious circle. If you don’t go to school you have little chance of landing that high paying job, and if you go to school you may face so much student loan debt you default on your loans.

Another friend of mine entering his senior year at Boston College will graduate in May with just over $100,000 in student loans (both private and federal). He’s already reserved to the fact that he’ll either be living with Mom and Dad for the next several years or won’t be able to buy a house until he’s 40.

With a bachelor’s degree serving as this generations High School diploma it has certainly put students and parents in a precarious position. When my Dad reminisces of yesteryear he speaks of simpler times when everyone had a shot at the American dream. Today the American dream has turned into an unattainable nightmare for so many. Something needs to change.


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2 Responses to “Is College Worth the hefty price tag?”

  1. Terry says on October 6, 2008 at 1:38 pm:

    While I agree with Chris’s point about counselling high schoolers about the pitfalls of taking out ed loans, this does not address the issue. It has been too easy to get these loans; the loan orgs (banks, etc.) would give full tuition and housing loans to first or second year students. Both of my daughters went to expensive schools and took out huge loans to do so. Neither are in fields where pay is high enough to cover the loan payments; apparently, this was not a consideration for the entities that made the loans. The percentage of income loan payment option seems to be most fair for these loans but does not address the fact that these kids will never have a “normal” life. If they are lucky, they will arrange some sort of payment plan and pay for 25 years and have the balance forgiven. Still, they will be near 50 years old by that time and many in that situation will have credit issues due to the inability to pay these loans. A portion of the bailout should go to assist these people so that they can become productive in the US economy and not forever operating on the fringe.

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  2. Chris says on August 22, 2008 at 3:37 pm:

    Great post! I think part of the problem is that smart students feel that they are “above” certain schools. They are not always concerned with paying back loans when they begin school, because it is 4 years away. High School guidance counselors should be sure to explain the points you bring up in your post to their students, and hopefully this trend will reverse.

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