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The Cost-Benefit of a Traditional Education

The age-old advice regarding the importance of education is still relevant. When your grandfather says you must go to college and receive an education then certainly it must be true. Yet, what your grandfather would have paid had he gone to college or what he paid if he did go is not exactly what you'll pay when you go.

In preparation for attending a traditional college or university there are a few things that can accomplished and they don't have anything to do with the SATs or developing good study habits. They do relate to mathematics and accounting perhaps but they aren't focused on academic pursuits. First, you better get a credit card with a sizable credit limit, apply for federal student loans, and ask your parents if you can rent your old bedroom back from them when you graduate because you won't be wallowing in the riches that a bachelor's degree would have gotten you 50 years ago when your grandfather helped build the school, relatively speaking.

While the importance of higher education has received greater attention from both the public and private sector over the years, greater cost barriers to receiving a higher education have been erected. In 1986/1987 the average cost of college tuition, fees, plus room and board at public higher education institutions in America was $2,989 at two year institutions and $4,138 at four year institutions. Private higher education institutions reported that for the same period these costs were $6,384 and $10,039 respectively. These costs were expensive for the times perhaps but not exorbitantly so.

Fast forward to the 2004/2005 school year and suddenly the average annual expense at public higher education institutions is $6,334 and $11,441 respectively. This represents an increase of well over 100% in less than 10 years and if this trend continues the cost of the traditional higher education will truly engender the division of society by economically defined social classes. Furthermore, private higher educational institutions have experienced even greater increases. In just under ten years these institutions increased almost 300% with the two year institution reaching $19,899 per year and the four year institution reaching $26,489 per year for tuition. This means that with the average 4 year degree now taking 5 years or longer, students can expect to have invested at least $90k into their undergraduate education. This begs the question-is it worth it?

Well, the answer is yes if you meet the following criteria:

1) you went to Harvard or Yale (in which case you probably invested even more in your degree),

2) you landed a $90k a year job straight out of college, and

3) your parents are independently wealthy.

There is also the possibility that you got a perfect score on the SAT or the ACT and you had colleges and universities banging down your door with academic scholarships. However, if you're like the majority of us and your eyes glazed over in trig class and weekends were spent socializing rather than memorizing Greek and Latin roots, you will need to take out student loans, apply for scholarships and grants, borrow money from friends and family, work part-time, and max out credit cards in an attempt to finish your education.

Since the average annual salary in 2005, according to the U.S. Census Bureau, was $46k with much of this being comprised by mid-career professionals and those with years in the workforce, that $90k annual salary is highly unlikely. Those with a bachelor's degree, who are expecting to reach the median income of $43,143 reported by Census Bureau to be the average salary for this educational level, it becomes apparent that the cost-benefit of a traditional education is not what it used to be. Once living expenses are factored in along with taxes, it may take 10 years or longer to fully pay for just a bachelor's degree even with partial scholarships and grants.

Outside of hoping to found the next tech startup what is a person supposed to do? Currently, because of the explosive increase in costs associated with higher education there are a host of alternatives that have made the prospect of obtaining a higher education less an exercise in financial poverty and more of an exercise in actually learning. Online educational formats have allowed many students to functionally maintain careers or jobs while pursuing their education which allows them to better fund the costs associated with it. Online educational institutions are better able to control costs and typically pass these savings onto the students in one form or another. Of course we all wish we had scored a perfect 2400 on the new SAT but, in lieu of that, online education might be the best alternative to the spiraling costs of traditional higher education pursuits.












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