College Degrees: Are They Destroying America?
Did you know?
The average amount of student loan debt increases by 6 percent each year. The average student now graduates with $29,400 of debt.
The average rate of inflation? Less than 3 percent.
The Myth of the College Degree
Students today labor under the belief that they need to have a college degree for two reasons: wealth and morality. Students are told that they won't be able to find a job without a degree, and that a degree will garner them a greater starting salary. Degrees have also become a question of morality; there is the unspoken sentiment that someone who has a degree is better than someone who does not. Uneducated people are not only assumed to be anti-intellectual, but actually worse people. But is any of this true?
The Hypothesis of the Degree
In this article, we will be exploring some of the major beliefs of the college degree system and the situation that gave birth to it. Throughout this article, we will answer the following questions:
- Does a college degree guarantee you a job?
- Does a college degree make you more money over your lifetime?
- Why is the college degree system broken?
- Are there any answers to this problem?
Does a College Degree Guarantee You a Job?
The fallacy that of a college degree is that it compares a 22 year old individual with a 4 year degree against an 18 year old individual out of high school. What many new graduates are finding is that this isn't usually the case. More likely, it's a 24 year old individual with a 4 year degree (4 year degrees are now averaging between five to six years) against a 24 year old individual who now has 6 years of professional experience.
The most interesting part in all this is in how the facts are represented. CBS News reports that hiring standards are rising only to find that 44 percent of all jobs are now requiring a college degree. 44 percent? That means that most jobs still don't require a college degree.
However, that's not the most damning statistic. The most damning statistic is that 57 percent of those unemployed have a degree. Despite making up the minority of the population, those that have a college degree are actually unemployed more often. Why? Because they need to pursue higher paying jobs to pay for their student loans.
College degrees increase your likelihood of unemployment. The majority of jobs still do not require a college degree.
How educated are you?
Does a college degree make you more money over your lifetime?
For the purposes of these scenarios, we'll consider that a private college degree averages about $129,700 in tuition and that a public college degree averages about $38,300 for an in-state resident. These numbers are provided by Saving for College, a college-oriented site.
That's just the upfront cost. Now you need to remember that the average amount of student loan debt is $29,400 and that student loans are usually for 10 year terms at 6.8 percent. This makes the total amount of the loan itself about $41,015 with $11,315 in interest. We add that interest in, and we have a total cost of $141,015 for private college and $49,615 for in-state public college.
Now, let's look a little closer.
With average student loan debt of $29,400, $109,300 of all private college costs are coming out of pocket. The target retirement age is 67 years of age. If you invested $109,300 in your retirement account at the age of 18 rather than going to college, you would have $2,647,949.05 by the time you're 67.
But that isn't all. By going to private college, you would have also had to pay off an additional $41,015 in loans and interest by the time you were 28. If you instead invested $41,015 when you were 28, you'd have $423,311.06 more by the time you were 67, for a total of $3,071,260.11.
The results for public college are not as severe, but are calculated the same way. Without going to college, you would have $8,900 to invest at 18 and $41,015 to invest at 28. Without going to public college you would end up with $590,433.33 by the time you were 67.
The average high school graduate makes $1.371 million in earnings throughout their life, while the average college graduate makes $2.422 million in earnings. These are only earnings, so they don't consider debts or savings.
Now let's get down to the brass tacks.
First of all, these calculations are about what each individual will have by retirement, rather than what they strictly earn.
Sarah decides that she's going to save money rather than go to a private school. She makes $1.371,000 throughout her life and has $3,071,260.11 by saving her tuition. At retirement, Sarah has $4,442,260.11.
Beth decides that she would rather go to private school. She makes $2,422,000 million in earnings. At retirement, Beth has $2.422,000. Beth will have $2,020,260.11 less than Sarah.
Now, let's look at Joe. Joe is a high school graduate who has decided not to go to public school. He will make $1,371,000 throughout his life and $590,433.33 by saving his tuition. At retirement, Joe has $1,961,433.33.
Now, let's look at Jim. Jim decides to go to public school. He will make $2,422,000 over the course of his life. Jim will have $460,566.67 more than Joe.
Over the course of a lifetime, a private college education will cost an individual over $2 million. However, a public college education will make an individual $460,566.67 more.
College Degree Skeptics
But wait, what does that all mean?
What we've discovered so far is that private college is never good for you, and that public college may be better for you to the tune of half a million dollars. While half a million dollars is a lot, it's by far not the $1 million number touted by college promoters.
What is not taken into account throughout these numbers is that an individual who chooses to go to a public university and get a degree is showing a drive to succeed. In other words, it may not be the college degree itself that's helping them. It might simply be the fact that they want to make more money.
Think about it: if all of society tells you that the way to make more money is a college degree, and you are an ambitious person, you will get a college degree. Does this mean something about the college degree, or something about you? Studies are showing that other preparatory methods can be just as effective if not more than college.
Following you to your grave.
Student loan debt is one of only a handful of debts that is nondischargeable through bankruptcy.
Why is the college degree system broken?
Beyond sheer earning power, there is something darker at play in the college system. College costs are skyrocketing artificially because the government directly profits off of the cost of tuition. The government makes over $41.3 billion in student loan profit every year.
The secret of the college degree system is that it shifts debt from the nation to the individual. Graduates today cannot afford to purchase homes and are struggling paycheck-to-paycheck. The wealth--which is truly an abstract number due to the arbitrarily rising tuition costs--is simply being shifted from the individual to the government.
Government advocates defend this by pointing out that the government lends at a relatively low interest rate--between 4 percent to 6 percent. However, the government can do this because student loans represent a significantly lessened rate of default. A student loan cannot be discharged by bankruptcy and student loans can actually be deducted from social security checks should the need arise.
As mentioned above, college tuition prices are increasing at a greater rate than inflation.
But that isn't the only problem.
College isn't just about numbers. College is also about people. We discovered that college graduates are actually less likely to get employed. While an in-state public college student will make more over the term of their life, it's actually not that much more. Moreover, the in-state public college student will need to delay their purchase of a home and will need to live in a state of indentured servitude for 10 years of their life.
College is a for-profit industry that makes the government money. The debt involved in student loans takes a toll on students that goes beyond finances.
Countries With Free Education
- Sri Lanka
- United Arab Emirates
Are there any answers to this problem?
There must be, because America is actually one of the few countries that even has this problem.
America has one of the least affordable higher education systems in the world. Many countries have completely free post secondary education. Some Australian systems even pay their students for higher degree programs in much the way that scholarships are sparingly awarded throughout the American educational system.
European universities are based on public funding, with the understanding that education is for the public good. This bolsters their economy and leads to a more equal distribution of wealth overall.
One of the core problems of the American university system is that Americans believe this system is normal. Free and inexpensive education is available in most other countries, and this is why Americans are losing their competitive edge on a global scale.
Do you think that the educational system in America is broken?
- Free education - Wikipedia, the free encyclopedia
- 42% of Millennials blame colleges for rising student debt
As student loan debt mounts, students and policymakers alike are trying to figure out who is to blame for the country's $1 trillion problem. According to a study on Millennials released this week by the
- How Student Loans Became a $120 Billion Government Bonanza - Money Morning
The federal government will make more money from student loans this year -- $48.6 billion – than oil giant ExxonMobil will earn in profits.
- Project on Student Debt: Home
Raising awareness about rising student debt and developing practical solutions to increase college access for all students.