A few decades ago, it was possible for a college student to pay for college by working part-time while studying full-time—this is no longer possible. In 2017, the average tuition and academic fees at both public and private universities rose between 2.9% and 3.6%, while inflation remained at 2%. The cost of a college education is hyperinflated and shows few signs of dropping anytime time soon.
The rising cost of college education has resulted in students having to take out loans to pay for school. In March 2017, the Institute for Higher Education Policy found 20% of colleges are unaffordable for lower and middle-class families without taking out student loans. With the exceeding rise in the cost of higher education, student loan debt continues to climb past $1.4 trillion.
Reviewing the rising cost of education
National Defense Education Act introduced federal student loans in 1958. Through the 1970s, college was reasonably affordable, and students pursuing Bachelor’s degrees graduated with little to no debt as late as the early 1990s. The rapid growth of student loan debt began in the mid-2000s correlating with the rising cost of education.
Education and the Cost of Living in 1974 vs. 2015
This table shows the household income of the average American household and the average cost of living.
Source: NY Times
|What it was in 1974||If 1974 translated into today||What it was in 2015 (The date of the article)|
|Average household income (per year)||$13,000||$62,000||$64,000|
|Average price of a new home||$36,000||$174,000||$290,000|
|Average price of a new car||$4,400||$21,300||$33,560|
|Average tuition at a private 4-year university (per year)||$2,000||$10,300||31,000|
|Average tuition at a private 4-year university (per year)||$510||$2,500||9,000|
When translating the earnings and cost of living in 1974 into 2015’s dollars, the average median household income is slightly higher than it would have been in 1974. The slight increase in income doesn’t account for the higher cost of living with the average price of a car and home facing two-thirds from 1974. The cost of education meets the most dramatic increase with private and public universities being three and four times more expensive, respectively.
The ROI on a college degree
Attending college is not only an investment of money, but time, stress, and work. The ROI on a college degree is simply broken down as: the amount of income to be made versus the amount paid and owed in student debt.
The transition from high school to college is difficult, but a well-informed plan is essential for the lifelong investment of higher education. Payscale is a vital tool for determining the ROI of a college degree. The website helps students obtain real-time information on market compensation based on surveys from 40 million employees. Payscale reflects the value of academic costs, financial aid, and the salary levels of college graduates based on:
- Academic expenses such as tuition and fees
- 30-year net ROI: the amount of money earned over 30 years
- Percentage of students receiving financial aid (student loans, grants, and scholarships)
- The average amount of aid students receive
Pursuing a higher education is risky invest, which begs the question: is it worth it?
Is it worth to pursue a higher education?
The reality is most students cannot accord to pursue higher education without taking out student loans. The amount of student loan debt surpasses credit card debt in America and is second only to mortgage loans. The amount of debt associated with college is enough to make students question the value of higher education (although some schools statistically guarantee big paychecks for grads).
Rising costs and debt aside, the value of college in today’s economy still inspires hope. According to the Bureau of Labor Statistics, the median annual wage for Bachelor’s degree graduates is 72,830 as opposed to 36,100 for individuals with only a high school diploma. The doubled median career salary is due to the skills introduced and acquired through higher education.
Over the past three decades, the wages of skilled workers have increased in comparison to “unskilled workers.” Economists agree the leading cause of income inequality between skilled and unskilled workers is technology. Higher education remains the primary institution offsetting the trend and teaching unskilled individuals technological skills.
Finding a solution to excessive educational expenses
The cost of higher education increases every year and attempts to reduce it only bring about more questions than answers. Senator Bernie Sanders advocates free tuition at public colleges and universities for American students similar to Finland, Germany, and Sweden. Opponents of Sanders argue free tuition is a radical idea as “free college” shifts the cost of education from the student to the taxpayer.
Without a solution in sight, the best future college students can do is apply for scholarships, flexibly adapt to technological advancements, and pursue a degree that will teach them sought-after skills.
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