There are a few things to keep in mind while those numbers bounce around in your head:
- They may be too low. The top end of college prices are north of $40,000 per year.
- They may be too high. There are many great deals at state colleges and smaller private colleges. Like it or not, only some 2,000 or so undergraduates are admitted to Harvard University each year, which makes the odds of getting in rather slim. And it is also true that not every student is suited for the most competitive, most demanding colleges; a student can get a great education at a state college or at a small private institution.
- The listed costs at private schools are the sticker prices. Some people walk into a car dealership and write out a check for the price listed on the sticker. Others do some comparison shopping among other dealers and other models and search out discounts and special programs. And some are willing or able to dig in their heels and bargain for a better deal. When it comes to college expenses, few if any schools are willing to haggle over the price of admission and room and board. However, there is usually quite a bit of latitude when it comes to the amount and type of grants, scholarships, loans, work-study jobs, and other assistance offered to parents and students. This is called the discount rate. In 2004–05 the average grant at private colleges was about $7,000; at public schools, it was about $6,200. Overall, about 76 percent of students at private colleges received some amount of financial aid (grants, scholarships, loans, and jobs); at public schools about 62 percent of those admitted received a financial package.
- It is a fact that the vast middle class—with too much money to qualify for need-based grants and not enough money so that price does not matter—is hit hardest by college prices beyond the sticker price and the discount rate. However, there are dozens of ways to reduce the cost or lessen its impact on your personal finances.
BASIC FACTS ABOUT COLLEGE COSTS
The number of schools to choose from (more than 2,400 in the United States, plus hundreds if not thousands of international schools worthy of consideration) is daunting. The price can be frightening. And the process of taking tests, filling out applications, and writing essays can be overwhelming.
Here are some very important underlying principles to understand about college:
• The federal government and the colleges determine the amount of your financial need; you do not.
• Colleges are nearly immune from the ordinary rules of economics.
They are able to set their prices at will without much regard to things like the rate of inflation, interest costs, or the ability of many families to pay the bills. They can continue to do so for as long as there are those wealthy enough to pay full freight or there is enough federal aid to pay the costs for others. Those of us in the middle have to scrimp, save, and borrow—or go elsewhere.
- There are plenty of “elsewheres.”
- Don’t give up hope. There are dozens of ways to cut costs, increase the amount of financial aid, and otherwise obtain a first-class education at a discount price.
DOES IT PAY TO GO TO COLLEGE?
Every few years some supposed expert comes along and says that four years of time and money spent on college is a waste: just look at George Washington and Abraham Lincoln as historical examples . . . and Bill Gates and Michael Dell in the modern era. If you’ve got a special skill—be it high technology or marketing know-how, or musical, acting, or sports talent—why give up four years of prime earning power?
And there are some jobs that pay quite well and are in great demand but do not require academic training; have you hired a $100-per-hour plumber recently? It is also a fact that even today many college graduates are the first in their family to receive higher education.
All of this is true, but for the vast majority of students, going to college is the key to higher earnings and better jobs. In 2005, a study by the U.S. Census Bureau reported that those with a college degree earn, on average,
nearly double the amount of those without the diploma.
According to the census, workers eighteen and older with a bachelor’s degree earned an average of $51,206 a year, while those with a high school diploma earned $27,915. Workers with an advanced degree made an average of $74,602, and those without a high school diploma averaged $18,734.
Let’s assume that the average American works for about forty-two years between high school or college graduation and retirement; in fact, the number of people working for that long is increasing, as more of us are staying in the work force out of necessity or because we are in better shape. The gap starts out relatively small, but by retirement age is quite wide; some experts say that over the course of a lifetime of work, the typical college graduate will earn as much as $1 million more than will a person with only a high school
diploma.
Other information in the Census Bureau’s Educational Attainment report showed that the American educational level in 2004 reached record highs: 85 percent of those age twenty-five or older said they had completed at least high school, and 28 percent said they had attained at least a bachelor’s degree.
Other highlights for the population twenty-five years and older in 2004:
- Minnesota, Montana, Wyoming, and Nebraska had the highest proportions of residents with at least a high school diploma, all at or near 91 percent.
- The District of Columbia’s population had the highest proportion with a bachelor’s degree or higher at 45.7 percent, followed by Massachusetts (36.7 percent), Colorado (35.5 percent), New Hampshire (35.4 percent), and Maryland (35.2 percent).
- The high school graduation rates for women was slightly ahead of that for men, 85.4 percent and 84.8 percent respectively. However, men had a higher proportion with a bachelor’s degree or higher (29.4 percent compared to 26.1 percent).
- Non-Hispanic whites had the highest proportion with a high school diploma or higher (90.0 percent), followed by Asians (86.8 percent), African-Americans (80.6 percent), and Hispanics (58.4 percent).
- Americans of Asian descent had the highest proportion with a bachelor’s degree or higher (49.4 percent), followed by non- Hispanic whites (30.6 percent), African-Americans (17.6 percent), and Hispanics (12.1 percent).
Other data in the survey showed that black and Asian women with bachelor’s degrees earn slightly more than similarly educated white women, and white men with four-year degrees make more than anyone else. Analysts said that there could be several reasons for the income difference, including the fact that employers in some fields may be offering special financial incentives to attract a more diverse work force; it might also be related to the field of study chosen by the graduates.
Data for the survey was collected in the Annual Social and Economic Supplement to the Current Population Survey (CPS); as with any survey, the results are subject to sampling variability and other sources of error.
So if your high school student offers to skip college if you’ll buy him a Porsche 911 Carrera coupe in seal gray with a cherry red interior, a 444-hp 3.6-liter engine, six-speed transmission, and a dashboard-mounted stopwatch for about $100,000 . . . suggest he hit the books and prepare for four years that should set him up to buy his own toys.
Read More: College Cost 101
