5 RISKS to getting a College Education

You read that first word right?RISKS?as in something to lose! Historically risk is not a word normally associated with a college education, but this isn?t history?it?s the big, bad now and the rules have changed. Not only is the cost of a college education much higher than it?s ever been (and rising relentlessly), but the ways people are paying for it are farther out there on the danger scale. And the jobs that once reliably awaited students upon graduation don?t seem to be there in either number or compensation. To paraphrase a well worn clich?, this ain?t your father?s college education.

The college game is changing. A number of factors have developed that have turned the one time ticket to the good life into a high risk proposition. I?ve identified five and you could probably cite a few others.

Risk #1: Financial Cost

5 RISKS to getting a College EducationNo matter what it is we?re pursuing and how noble the cause, in a world of limited resources, we always need to consider the cost/benefit ratio. That ratio is way out of balance in many college norm careers. Back in the 1980s when I was in college it was possible to obtain a college degree for about the amount of a starting salary in a typical degree field. In that environment, going to college was a risk free proposition.

Today, larger amounts of money are being paid for college while the job prospects in many degree fields are weakening. It?s now possible, even typical, for a college education to cost several times the starting salary in a typical degree program. There is a real risk that the full value of the price paid for a college education may never be recovered.

Risk #2: Debt Hangover

It?s bad enough that college has such a high price tag today, but the problem of cost is magnified by the fact that debt is increasingly being used to pay for it. That debt carries well into the working years, and even though it may have preferential rates of interest, it?s still a drag on the graduate?s financial future.

Kelli Space wrote a post over at Budgets Are Sexy titled I Went to College and All I Got Was This $200,000 Bill?that was the amount of the student loan debt she had accumulated while earning her degree. That sounds like an incredible amount of debt and perhaps it is at the upper end of the range. But with college costs rising steadily and incomes and savings levels stuck in neutral, the debt numbers are getting higher all the time.

Whether it?s $200,000, $100,000 or ?just? $50,000, we?re talking about a staggering amount of unsecured debt! Liabilities of this magnitude can be life altering?it sends the graduate into an increasingly uncertain job market with one, large strike against them.

Risk #3: Time Invested

The four years it takes to get a college degree is long enough that the job prospects in a chosen field of study can change significantly in that space of time. And many students are spending more than four years to get an undergraduate degree alone.

The pace of change in the world seems to be quickening, and that includes the growth, maturation and decline phases in many companies and entire industries. There?s now a real risk that a student can spend years preparing for a career field he?ll never work in.

Risk #4: Lack of Entrepreneurial Training

With jobs in many fields degrading or disappearing the career path for graduates is increasingly pointed in the direction of some form of self employment. Sadly, college coursework preparing students for the entrepreneurial path is close to non-existent at the undergraduate level.

College curriculum is geared heavily in favor of the organizational universe of the corporate world, various levels of government and even non-profits, but not life running a small business. Part of the reason for this is that organizational training is readily teachable. Entrepreneurial training, by contrast, is so decentralized and diverse that it doesn?t lend itself to the type of comprehensive curricula that make up the vast majority of college programs.

There?s a real risk of preparing for declining organizational careers in a world where self-employment is fast becoming the new normal. College programs may eventually adjust to this change but there?s little evidence that any sort of shift is even on the horizon, let alone a work in progress.

There may be certain degree programs that can help you become self-employed, such as marketing, business management or information technology. Any of those degrees might set you up to handle the big picture challenges that self-employment requires, but perhaps not the specifics.

Risk #5: Opportunity Cost

This risk starts with the question, ?what else could I be doing to build a career that I might not be doing while attending college?? The job market is becoming increasingly selective?you won?t necessarily have a career by virtue of having a degree.

Many college norm career fields are now in oversupply, while jobs in the skilled trades and technical fields go begging. Such careers, as well as self-employment, often take an entirely different path than college norm jobs. Technical school training, apprenticeships and the good, old ?school of hard knocks? are often the best (or only) way to enter these fields.

In many fields the four years that someone might spend in college would be sufficient to gain the training, experience and credentials that would enable earning a living wage with greater career security and job mobility than many college norm careers afford. In addition, many trades and technical fields are now paying salaries comparable to or even greater than college norm careers.

How can we respond to the college education risk

Where ever there?s risk, we should be practicing risk mitigation; what can be done to do that in connection with a college education?

  1. Don?t use college as a default when you don?t know what career to enter?the risks are too high to just ?get a degree in something?. Some life experience might help more than spending time in college.
  2. Set a limit?on how much money you?re prepared to borrow to pay for your education?lenders and colleges aren?t putting any limits on how much a student can borrow so it?s up to the student and the student?s family. You can for example, set the upper limit on student loans to no more than the expected salary for the first year in the new career. Any metric is better than sky?s-the-limit.
  3. Look for less expensive college options, such as spending the first two years at a community college or commuting to school rather than living away where room and board can more than double the cost of your education.
  4. Consider the alternatives to a college education. Would you be better suited?as a plumber? If you think you?d like to be self-employed do you think college will help you get there? Or is there some other path the might be more effective?

What do you think about the cost of a college education relative to the employment opportunities that are available in today?s economy? How much money should a student be prepared to pay for a degree? Are there any other paths a would-be student might pursue that won?t leave him/her buried in debt after graduation?

( Photo from Flickr by spakattacks )

16 Responses to 5 RISKS to getting a College Education

  1. Even while earning a college degree allows you to accumulate debt up to your neck, it does not offer you a guarantee that you will have your career developed on that profession you have trained for. Maybe it will be more pragmatic to focus on what you have a passion for early in life, be it technical or blue collar job, then build your training on this field. The purpose of getting a degree is to gain income, so why spend a fortune and spend your lifetime paying it?

  2. Hi Amy–Another thought I had–but there wasn’t room to include it in an already long post–is that grads carrying massive loans may be forced to take a job outside their field of study, just so they can service the student loans until they get a job in their field. While that may be a completely necessary move in a tight job market, the potential develops that the grad may get stuck in the interim/unrelated jobs for a long time, like a year or more. As time passes, the value of the degree can decline. That’s a double whammy, and could have been the 6th risk in the post.

  3. Kevin, Great post! You hit the nail on the head with these reasons as to why the college decision shouldn’t be a no-brainer.

    I think the same things apply to MBA’s as well. I work with a lot of business folks who thought they had to get an MBA and many wished they hadn’t afterwards. Personally, I got the “entrepreneur’s education” and learned so much more in start-up companies than I would have going back to school. Of course that’s not to say that an MBA isn’t a good choice for some people….just not me!

  4. Thanks Geoff–This is just my thought on MBA’s, but if a bachelors isn’t good enough to get or keep a job today, why should we believe that a masters will be able to do the job in five years? It’s like moving to higher ground in a massive flood, you can keep moving higher but sooner or later the water will over take you. There are risks with an MBA too. One obvoiusly is the cost, but another is the potential for being overqualified.

    It might be tempting to believe that an MBA would strengthen your candidacy in a tight job market, but it could do the exact opposite. An MBA is for higher positions, as in management. What if an employer has no management jobs, but they do have a staff position that needs to be filled? As an MBA you could lose the job to someone with “only” a bachelors.

    This isn’t conventional thinking of course, but I see degrees as being something of an arms race we’re doomed to lose. And with the cost to get a degree being so high, the risks can no longer be ignored.

  5. Great post! I think college educations are great, but — just as with the housing bubble — people are allowing themselves to be herded like sheep into high ticket educations with high ticket loans to match.

    I especially like your suggestions for less expensive college options. Our daughter is living at school, when she could be commuting, but we are clear on the fact that the costs associated with that are for the “experience” of college and not the actual education. Big difference.

  6. Hi Julie–it’s good to hear from someone who’s on “the front lines” of the topic! Please don’t take offense at this, but I cringe at the thought that young people are paying big money for the college experience, even though I know that’s pretty common. The problem I have with it is that there are experiences you can have that will cost a few hundred or even a few thousand dollars, but the living away at college experience will cost tens of thousands! That’s REAL money.

    Many, many students are paying for that experience with borrowed money which is to say that either they will not be in a position to afford other experiences in adult life, or they’ll do what they learned in college, which is to borrow to pay for what you can’t afford.

    And the issue is magnified by the fact that the college costs and debt numbers are getting higher. If we were having this conversation 10 years ago, the numbers we’d be talking about would be substantially lower and might make more sense. The desires associated with college are so ingrained in the population that they continue to flourish even as the cost has gotten prohibitive. I sense that a lot of kids don’t know what they’re getting into. The sky is no longer the limit even with a degree–not any more.

  7. Yes, I can very well see your point Kevin. I totally agree with you. Another burden for the graduate, worse, the cycle indeed goes on and sucks him through…

  8. Hi Amy–Yes, that’s the even darker side of student loans, that they can set up the graduate for a life of perpetual debt. The grad borrows money to pay living expenses while his or her income is dedicated to servicing the student loans. That’s a process of shifting debt from one pile to another. Worse, the grad is becoming conditioned to the mistaken notion that debt is some sort of savior. It’ll be downhill from there.

  9. Hey Kevin,
    A great post!!! College education is considered as essential by many, but it surely carries a myriad risks, which the post has highlighted effectively. The financial debt which the education creates, at times becomes difficult to overcome. Thanks for highlighting this aspect. Indeed, a thought provoking post!!!

  10. Thanks Aayna–A college education is good to have–I have one myself–but I got mine at a time when the cost/benefit ratio was much more obvious. Today, the cost is so high that it creates risk to the student and to his/her family. We really need to think about different options now.

  11. Time invested could surpass the standard four years. Work your way through school, and you could slide easily into the six- or seven-year mark.

  12. I agree, there is no reason to obtain a tremendous amount of debt going to school. I wish I hadn’t done it. Although, all my debt is strictly paying for school. While I was in school, I worked and saved enough to make myself comfortable and built my resume for later.

  13. Hi Nate – Congratulate yourself on the parts that you did do right – working to pay living expenses and building a resume are two huge parts of the college experience (or they should be). There’s so much pressure to get a degree that rational judgment is often the first casualty. So be thankful for what you did do right, and share your experience with others so they don’t make the kinds of mistakes that so many are these days.

  14. Hello Kevin. I was given this article to read for my Economics class, so I can’t say I quite have all the research to agree or disagree with you as I am merely a High School student. I intend to go to college to get a doctorates degree in the area of my interest. I believe the pursuit of knowledge is worth the possible oncoming dept I may encounter- though I can see how some may not share the same ideology as me. I do agree that one should be careful in how they go about gaining their college degree- I plan to get through college through scholarships, grants, my own pocket money, and as little student loan as I can manage. I’ve done my research on the estimated amount of time I would need to pay off the possible dept I may encounter- the maximum amount of time exceeding more than just a few years after I graduate with a Doctorate’s degree. I still believe it to be worth it. Even if I do end up changing my mind on what I want my major to be (as unlikely as that seems to me at the moment), I still view the time and money spent learning not to be a waste. I would like to know what sources you used to develop your argument. I was also wondering if anyone was doing anything to fix the technical mistake that caused all those misplaced question marks- as I’m sure that wasn’t your fault but merely an error that occurred while entering your article onto this website. Your responses to comments are proof enough that the errors in punctuation are not your doing. Thanks for taking the time to read my little rant!

  15. Hi SG – Yes, sorry about the ?s all over the place. It’s a technical problem we haven’t yet been able to solve. It hit the older content, so it looks like it could have been a hack.

    But as to your question, “I would like to know what sources you used to develop your argument”, the evidence is all around. But when I was in the mortgage business I saw the credit reports with the multiple student loan debts making it hard for young people to buy houses. There’s also plenty of evidence in statistics on the web. I didn’t include statistics in this post because it was more of an opinion/strategy for dealing with a known problem.

    I think the fact you’re still in high school may be the reason you’re not completely aware what’s happening with graduates, or that you doubt the risks. The school system isn’t teaching or advising on the seriousness of the debt college students are taking on. They make the assumption it will always work out in the end.

    I’ve seen enough real life stories of where it didn’t. Life often teaches you what you don’t learn in school, and my hope is to warn as many young people and their parents as possible of the real risks that are now involved in going to college. It’s not the slam dunk decision it was 20-30 years ago, and all the risks I’ve outlined are real. I suspect the coronavirus may only magnify those risks.

    Can I ask why you didn’t indicate the doctoral degree you plan to pursue?

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