Fewer Individuals See College as a 'Good Investment'
A growing body of research suggests that, in spite of rising tuition, the social and economic benefits of higher education outweigh the costs. Sociologists have found that students from low-income backgrounds have the most to gain from obtaining a college degree, even though they struggle the most with the up-front cost. The international Organization for Economic Co-operation and Development (OECD) has also shown that widespread acquisition of the cognitive skills linked to advanced education has a significant positive effect on nations' economies.
Still, the fact remains: College is expensive. Between tuition, fees, books, housing and lost potential work hours, the cost of higher education can be extremely daunting. And as the economy continues to struggle, more and more people have come to believe that it's not worth the expense.
Country Financial recently released the results from their annual Financial Survey. The company hired independent research firm Rasmussen Reports to perform a telephone survey of over 3,000 Americans, asking them about college and their finances. This year, the number of respondents who agreed that 'college is a good investment' dropped dramatically to 64%, down 16 points from 2009 and 17 points from 2008. The company points to the fact that tuition keeps rising while most family incomes are falling, making it difficult to justify the ever-steeper expense.
As Country points out, this sentiment is problematic because it takes a short-sighted view of cost-benefit. Although the costs of college may seem overwhelming now, a college degree can lead to much higher earning potential down the road. Recent data from the U.S. Census Bureau shows that, in 2008, the average salary for someone with a bachelor's degree was over $27,000 higher than the average salary for someone who only held a high school diploma. The average salary for an individual with a graduate degree was almost $25,000 higher than that.
These figures suggest that people who avoid college due to short term costs may find themselves suffering financially down the road. And with our economy dependent on increasing our rate of educational attainment, any trend away from education could come at a high national cost.
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One-Third of Respondents Borrowed Money for College
The perceived devaluation of higher ed coincides with a shift in personal savings priorities. This year, slightly more people (43%) reported that saving for retirement is more important than saving for their child's education (41%), a reversal of last year's numbers. And many more people are experiencing uncertainty in their financial planning - the number of people who reported that they 'weren't sure' which was more important jumped from 13% in 2009 to 17% this year.
Nevertheless, a majority of respondents (65%) still feel that college costs are a parent's responsibility. Eighteen percent felt that parents should cover all costs, and 13% thought that parents shouldn't pay for any costs. Echoing earlier studies, Country found that young Americans aged 18-29 were most likely to say that kids should cover the full cost of their own education.
The survey also looked at trends in college borrowing. Country found that 31% of Americans borrowed money to cover the cost of their education. Of those who borrowed, about 64% have finished paying off their loans.
When asked if having education loans had impacted other major life decisions, such as getting married or buying a home, responses ranged across the board. Just under 20% reported experiencing 'a lot' of an impact, and 28% reported 'somewhat.' About a third of the respondents who had taken out loans experienced 'not much' impact, and only 18% reported feeling no impact at all.
Although the survey doesn't explore why loans have such a dramatically different effect on different people, it's possible to speculate. A college degree may correlate to a higher potential salary, but a recent study by the Institute for Higher Education Policy (IHEP) shows that nearly 60% of young adults currently living at or near the poverty line have a bachelor's. Individuals who come from low-income backgrounds may find it harder to overcome the burden of loan payments while they're still struggling to put their degrees to work, especially in this economy. It's therefore no surprise that many people feel hesitant to make other expensive life decisions while still paying back loans.