As our family navigates a college selection choice for our youngest daughter, a natural question pops up: Is it worth going into debt for a college degree?
Like millions of American families, we’re averse to the idea of saddling our daughter -- or ourselves -- with debt. I’m within five years of retirement age, and we hate the idea of loans.
Years ago, we considered the idea of “return on investment” for specific degrees and colleges for our oldest daughter. Certain degrees like systems engineering, actuarial mathematics and computer science have great returns, according to PayScale, a company that tracks post-graduate salaries.
If you have a child who has the aptitude and desire to study largely technical subjects -- and will be happy in those careers -- your search is so much easier.
But what if, like most children, yours doesn’t have that precise inner direction? As a parent, you’ll then have to chart a course that’s more financially oriented than you might like.
One marker for choosing a degree is the colleges themselves. Some universities are known for the excellence of their programs, hence their graduates will have less problem finding well-paying work when they graduate. But the differences between great universities and the rest of the college universe are vast. You have to look carefully at each program.
According to a recent study by Joseph Altonji of Yale and Seth Zimmerman of the University of Chicago, college spending on programs can have a large disparity.
The most expensive program in the study was engineering, which costs colleges roughly $62,000 per student annually for specialized facilities such as labs. A business major, in contrast, cost about half as much.
Although engineering degrees tend to be the highest paying, your net return is what you paid for the degree relative to your eventual salary. By that measure, computer science still yields one of the highest returns, while philosophy and art are near the bottom.
“The importance of costs as a determinant of relative returns is even more striking on a per-dollar basis,” the researchers found.
They also pose an interesting policy question to those troubled by the high cost of college: If you’re going to get a smaller return on the degree of your choice, shouldn’t you get a tuition discount on the less-desirable degrees?
While that hasn’t happened, you still have to make what you believe is a wise college choice. Does this mean it’s not worth getting a philosophy or history degree? After all, the mission of college is designed to expand your ability to think, understand and adapt to the world.
Yet the college argument these days always comes back to whether it’s still a good investment. If you can’t support yourself with a college degree -- and will be paying off debt for decades -- the personal financial formula can’t be ignored. It’s a quality-of-life issue. You could be happy as a barista with a humanities degree, but your standard of living may be disappointing.
None of this is a surprise to anyone following the job market. Until computers can harness artificial intelligence to program themselves and perform engineering, STEM professions will continue to pay well.
Yet don’t take any of this research too narrowly. If any degree can give you the mental dexterity to do a variety of jobs in a changing work environment, that will be worth it. Value is relative and often hard to measure down the road.
Knowing foreign languages, business practices, communication and interpersonal skills will always be useful. The most successful graduates will be able to adapt broadly and specialize when the time comes. They can be easily trained and cross boundaries.
The only decision that my wife and I reached after this current college discussion is that if our daughter wasn’t heading directly into a four-year STEM degree program -- and we were facing a large potential debt -- two years at a community or commuter college would be recommended.
The same introductory courses at a two-year school are offered at a fraction of the cost of a four-year college, with no room and board charges. We’d save her at least $40,000 and be able to cover her last two years through our 529 college savings fund.
Whatever route you take, do your homework. Put many numbers and options on the table. The more choices you have -- and time to think about it -- the better decision you’ll make.