College Is Expensive, but Not Getting Degree Costs More
June 20, 2014
For many of you, summer means a break from college — either you or your child has the summer off. But thoughts of paying for college probably never cease. For families with a member in college or younger children someday destined to attend college, the rising cost of a college education can keep you awake at night.
According to the College Board, the average cost of tuition, room and board at a public four-year university has risen 37 percent to $18,400 during the 2013-14 school year. Private universities have seen costs rise 24 percent over the same period. More and more, students and parents alike are turning to loans to cover these costs. More than 70 percent of all college seniors graduated with student loans in 2012, up from 68 percent in 2008, according to the Institute for College Access and Success. According to FICO, consumers with an open student loan on file had an average student loan debt of $17,233. In 2012, this figure had grown by 58 percent to $27,253. Student loan debt is the second-largest source of debt, after mortgages, for people under age 35.
Our nation’s total outstanding student loan balance is now more than $1 trillion, and a whopping 11.5 percent of this massive amount is 90-plus days delinquent or in default. That is the highest delinquency rate among all forms of debt, including credit cards, mortgages and auto loans.
Clearly, the cost of an education is rapidly outpacing inflation and forcing more people to assume more debt to pay for their education.
Fewer students are working
Despite the skyrocketing cost of a college education, fewer students are working their way through college. Citing a report from the U.S. Labor Department, The Wall Street Journal reports that just 44 percent of college students between the ages of 16 and 24 had a part-time or full-time job last year. This is down significantly from the peak in 2000, when 56 percent of students were employed. Part of this trend is explained by today’s tough job market. With our country’s unemployment rate at 6.3 percent, young people are having an even harder time getting into the workforce because employers can give jobs to older, more experienced people who are desperate for work. There is certainly no lack of sad stories of recent college graduates living at home and working part-time jobs while they search for work suited to their degrees.
Things might be tougher than normal for today’s college graduates, but rest assured things are even tougher for those with no college education. Rising costs and high unemployment among recent graduates are no reasons to doubt the value of a college education. The U.S. Bureau of Labor Statistics projects faster growth for jobs that require at least post-secondary education by 2022. Workers with a post-secondary education or more earned a median income of $57,770 in 2012, compared with $27,670 for those in jobs requiring only a high school diploma.
If you are losing sleep over the rising cost of a college education, talk to your financial adviser about how you can save now for those expenses. If you should have been saving for years but never got around to it, you can start today. It is never too late to begin saving!
Phoebe Venable, chartered financial analyst, is President and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.
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