Thursday, October 27, 2011

The College Education Trap

Since the mid nineties, the U.S. economy has seen quite a few bubbles and subsequent collapses.  First, there was the Internet stock market bubble and collapse.  Then, there was the housing bubble and collapse.  That resulted in a lifestyle and wage bubble collapse.  Now, it appears that college education is another bubble that is collapsing.  As a result, a college education has become a financial trap for an increasing number of graduates.

As a child, I was told that a college education was the path to a better future.  When I graduated from college in 1980, I was able to get a job even though the economy was in recession.    Since my degree was in engineering, I know that my college education helped me get a higher paying job.  In addition, my student loans were about 40% of my salary since tuition costs were much lower.  

A college education seemed like such a good idea that the Federal Government got involved to make attending college more affordable through expanding the student loan program.  The idea was to enable everybody to attend college and get that higher paying job.

Unfortunately, graduates are finding out that a college degree no longer guarantees a job, much less a higher paying job.  In addition, the cost of a college education has significantly increased due to demand created by student loan availability.   For example, in 1979 a friend of mine paid $1500 to attend a state university.  That same school costs $15000 to attend now, a ten fold increase.   In extreme cases, student loans can be as high as 2-3 times a graduates starting salary making debt a significant burden.   For reference, student loan debt just exceeded credit card debt at $1 trillion and is growing at $100 billion per year.

The solution is make college part of a wealth building plan.  For me, the purpose of college is to obtain skills and knowledge to get a higher paying job, at a reasonable financial cost.  If a chosen field of study cannot meet these criteria, then perhaps other alternatives should be considered.
For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or education advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

No comments: