Friday Rant: College Investment — Higher Education or A Rite of Passage

The future value of an investment in terms of both time and money has certainly become far more difficult to project than when I paid $280 for a hand held TI financial calculator back in b-school in the 1980's. And many Spend Matters readers likely have high school juniors and seniors who are deeply immersed in the college process, while many others are writing significant checks for their kid's college tuition and expenses. These readers are also extremely savvy when it comes to getting what they pay for and while they may be loath to admit it, many are in a chronic quandary over their total ROI in higher education.

Eric Felten in today's WSJ writes that "Andrew Carnegie didn't think much of college." Felten quotes the industrial giant from The Empire of Business over 100 years ago saying "The almost total absence of the graduates from high positions in the business world seems to justify the conclusion that college education, as it exists, is fatal to success in that domain." And while today "Steve Jobs, Bill Gates and Mark Zuckerberg ...didn't collect sheepskins...most corporate executives these days have college degrees, if not MBAs."

To wit, a September New York Times column on a recent College Board report claimed that "Workers with a college degree earned much more and were much less likely to be unemployed than those with only a high school diploma... [and] the median earnings of full-time workers with bachelor's degrees were $55,700 in 2008 -- $21,900 more than those of workers who finished only high school." Good news from a salary perspective. And on the monetary ROI issue, "The report found that after about 11 years of work, college graduates' higher earnings compensated for four years out of the labor force and for student loans, at 6.8 percent interest, to cover the average tuition and fees at a public four-year university."

But other than the likelihood of higher future income, how much of the aggregate cost of college -- tuition, expenses and foregone wages -- is an investment in education and how much is a country club style rite of passage? Mr. Felten writes in today's column that "as the reward for the collegiate credential has been going up, what goes into getting that degree has been going down. So find sociologists Richard Arum and Josipa Roksa in their book "Academically Adrift" (University of Chicago Press)... The book's most damning and unambiguous finding [according to Felten] was reported by the students themselves -- that in college they get away with a bare minimum of academic work." Authors Roksa and Arum, who are on faculty at the University of Virginia and New York University respectively, claim that "Institutions of higher learning are 'focused more on social than academic experiences,' they write. 'Students spend very little time studying, and professors rarely demand much from them in terms of reading and writing.' More than a third of students do less than five hours of studying a week -- and these shirkers end up, on average, earning B's."

I'll spare you my diatribe on how the earnings stats are skewed for non-college grads as a result of the U.S. public education system failure, but what is vital in the college process is to not stop parenting on an adjunct academic level. As we all hopefully know, hard work isn't so "hard" when accompanied by passion for subject matter. Encouraging your legal adults to pursue academics that support their passions -- not yours -- will make them demanding customers and greatly improve your return on college investment.

- William Busch

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