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The Relative Cost of College

| July 05, 2015
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What is a college degree worth to you or your child? Asked another way; is the cost of college worth more or less than the expected income potential over your career?

This is another topic that begs for a meaningful family conversation early in a child’s life, and between parents and their financial advisor.

Are you still working in a career that is related to your college degree? We all seek a living that maximizes our skills and knowledge, while meeting our needs. Some of us want to live 10 minutes from work, while others put greater value on a safer, family-oriented neighborhood for our kids. Some want higher income potential, while others want to avoid the airport at all costs. These are the tradeoffs we all make.

With the average costs of college rising faster than the Consumer Price Index, it’s a worrisome picture. The figures listed below are from collegeboard.com. Shockingly, the average rate of in-state tuition and fees for public four-year institutions has increased more than 3% annually since 1974-75. Until last year, that is, when it only increased 2.9%!

The first year at UGA will run you $21,058, which includes tuition, room and board. GA Tech is $21,828. Out-of-state schools? Swallow hard and keep reading. For the University of Alabama it costs $33,816, spend even more at Auburn $40,624, less at FSU $32,702, or try on some orange at Clemson for just $39,932. Private schools? If you want your child to attend Emory try coming up with $59,444 per year.

The average tuition (excluding room and board) for a Georgia four-year public school is now $8,094. This is more than double what it was 10 years ago from $3,411, a 137% increase. The average tuition and fees for a Georgia four-year private school is now $29,578; an increase of 60% over 10 years ago.

On the other hand, how does this payoff? The average starting salary, according to the National Association of Colleges and Employers, for new college graduates earning bachelor’s degrees is $45,473, an increase of 1.2% from 2013 to 2014.

The point here is a serious one – many college graduates are coming out of school with too much debt – not just school loans, but also consumer credit card debt. Parents need to be having meaningful conversations with their children to determine the appropriate choice of school based on financial ability, career options, realistic future income potential, location, scholarship opportunities, all blended with personal choice.

Here are two scenarios we heard about recently that emphasize these points.

First, many people assume that professional degrees mean automatic success in life. Doctors or lawyers are great examples of this. This may be true for some degrees, but certainly not for all. They finish undergrad and graduate school (and possibly more years after that) with a mountain of debt. Finding a job comes next. Fortunately, the medical field continues offer good employment opportunities, but there is no right-of-passage just because a young adult graduates with a law degree and passes the bar. Ultimately they must go out and find their role, their niche and purpose. God forbid it’s your child that realizes, after all those years and all that debt, that they have no interest writing briefs and/or finds litigation to be “uncomfortable.”

Our second example highlights a recent graduate who is a natural leader, very smart, and could probably attend any university, but he chose to go to an in-state school. Why? To lower the cost of his undergraduate degree, while also taking the time to figure out what he wants to do for a living. We call this VERY smart.

Why spend huge dollars for private or out-of-state school, even if it’s a parental Alma matter, when he doesn’t even know what career he wants yet? While in his first year of college he earned some scholarship money, is a part of the honors program, has a job, and is having some fun. Heck – it’s college after all! This young man will finish college with low levels of debt and have a much clearer picture of what he wants to do for a living. Next step – some work experience to be followed by graduate school. With good undergrad grades, he’ll be able to hand pick the top schools for his decided specialty. He’ll hunker-down on his studies, seek a stipend, and write his thesis. Hopefully he finishes with little to no debt, and he’s on his way professionally.

Our advice is to start early, save into a 529 plan, and by the time your child is 10-years-old parents should have a conversation about what is ideal versus what is a realistic financial situation for you. By the time your child is 14-years-old include them in the conversation as well. The future is bright, but school loans can cast a long shadow. Be wise about your choices and help your children, and yourself, to a happier more meaningful life.

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