Is College Worth Today's High Prices?

Let me start out by explaining that, emotionally, this question might have wildly different answers. What we are discussing in this publication is more about ROI, or return on investment. It is also an answer that very well may have a variety of answers, depending on how you were taught to do the calculation.

Here are a few examples.

Last week, I was sitting at the counter in one of my favorite diners having breakfast, when a gentleman said, “I paid cash for my oldest granddaughter’s college education.” I asked what she was now doing with her education. He told me she is a physical therapist in the Chicago area. She is making about $65,000 a year. When I asked how much he paid for her education, he proudly said, “One hundred eighty-six thousand dollars for her 6-year degree.”

The next example was a former employee of ours, who said a few years ago that her daughter went to a local college for 5 years, and the cost was over $124,000 in total. The daughter had obtained a teaching degree and a certificate to teach in Pennsylvania. She didn’t find work locally and ultimately moved south. She now earns about $36,500 a year.

In each of these cases, one needs to look at how the costs were financed. What if all or a large part of the college costs were in the form of a Parent PLUS loan? What if the student borrowed all or most of the money? The answers would be anywhere from a great deal higher, to, the student would not earn enough to pay back the loan without significant help and might have to interrupt her 4-year education for a 5-6 year time period to complete her degree.

Most parents don’t understand that students cannot, in today’s high-price world, borrow enough on their own to finance their education without some form of co-signer. We have also learned that a large number of parents don’t understand that once they obtain a Parent PLUS loan for their student, the loan cannot be transferred to the student. Articles have been written about how a student can refinance their student loans after they finish college. This is more difficult than it appears, because the student doesn’t have an established loan repayment history or even a reasonable FICO score.

Don’t go down the path of, “We’re going to borrow the money or my student can pay for their own college education; after all, I paid for my own college education,” without consulting a professional with experience in all aspects of this intensely complex endeavor.

Mike Giffin, President