My 50th birthday coincided with another significant event, a need to buy a car. I had always purchased conservative vehicles, but I had a secret desire for something grander. I wanted a doctor’s car, and in my mind, that meant a Mercedes.
I accepted the fact that this was strictly an emotional purchase, and that it symbolized that I had arrived as a professional. The Mercedes that I purchased was dark metallic green with a tan leather interior. I thought it was beautiful, in an understated German way.
I felt like every driver was watching me as I drove it off the lot, and my chest swelled with pride to own such a luxurious vehicle. That euphoria faded with the realization that my Mercedes was intrinsically no different than the Ford that I previously owned.
After my car’s warranty expired, I was gobstruck with the enormous expense of maintaining my Mercedes. When I would bring the car in for a simple repair the cost would escalate as the dealership’s customer service writer would always find something else that needed repair. I would bring the car in for an oil change and leave paying a $1000 bill.
After a few years, I had enough of my luxury experience and traded in my low mileage doctor’s car for a simple Honda. The Honda delivered, while the Mercedes only promised. The experience was an excellent life-lesson.
The news has been abuzz with a new celebrity scandal, this one involving parents cheating the system so that their underperforming kids can get into selective colleges. The scandal consists of a man named William Singer, and his sham non-profit organization. Individuals of power and means paid Mr. Singer enormous amounts of money for him to work his magic with their unscholarly offspring. His deception went above and beyond ghostwriting personal essays. He created false identities, photoshopped prospective student heads on stock photos of athletes, had test proctors change answers, and bribed various university officials with cold hard cash. He claims that he has helped over 700 students cheat their way into college.
It would be naive to think that he is an island unto himself. Common sense dictates that this case is just the tip of a much more massive iceberg, its specifics made more interesting because celebrities, such as Felicity Huffman, and Lori Loughlin are involved.
I have a daughter who is a freshman at a large Midwestern university. When my wife asked her what she thought about the above scandal she seemed insouciant noting, “How is that any different from donating money for a building which then gets your kid accepted into that school.” She was, of course, correct. People with clout have always had a higher chance of getting their children accepted into a selective college, as opposed to those who lack influence. In fact, a legacy applicant has a three-fold better chance of getting admitted into a selective college than an applicant who doesn’t have such lineage.
I recently read an NYT’s article on the heels of the above story. It involved 4 excellent students and their efforts to get into highly selective colleges. One of the case studies currently is a student at the high school where my kids have attended. This girl achieved a near perfect SAT score and had a GPA of 4.8 out of a possible 4.0. She was active in clubs and organizations. She was involved in leadership positions. Yet, she was rejected by her first choice, Harvard. I can’t imagine that there was anything else that she could have done to have been considered. When you look at her impressive credentials and compare them to lesser students who were accepted, it makes you wonder about the real value of such an education.
There are over 5300 colleges and universities in our country, yet many students feel that they have to attend only a selective few. In a world where college tuition and fees are extraordinarily expensive, these colleges go above and beyond and hit new heights as far as costs are concerned.
Does attending these schools significantly impact the future of a college student? This is a complicated question, but the bottom line is generally, “no.”
At this point, you are probably recalling the frequently quoted study that noted that students who attended the most selective colleges have been shown to have significantly more earning potential than those who attended the least selective colleges. This statistic may be accurate, but the cause and effect association is not as direct as you may think. Other important factors need to be added in. For instance, the caliber of a student at a highly selective college is likely higher, as is their socioeconomic position, and their family connections. In fact, if you take a look at the wage gap between students from highly selective colleges vs. less selective colleges the earning difference disappears with students with similar SAT scores.
Other statistics worth noting is that the majority of CEOs from the top 100 Fortune 500 companies did not attend an Ivy League school. When Wall Street recruiters were asked where they found the best candidates, it wasn’t from Ivy League schools; instead, they listed the University of Illinois, Arizona State, and Purdue.
Most universities are bursting with highly academic faculty; there is no shortage of PhDs in the college world. An undergraduate experience includes a wide diversity of classes, usually presented at an introductory level. Is there a significant difference between English 101 at a local college vs. a highly selective school?
We are currently dealing with an artificially created frenzy where admittance to an ultra-expensive highly selective school becomes the ultimate prize for both the student and their proud family. However, I have to think that an education at such an institution may feel similarly to my Mercedes experience. The initial euphoria can quickly give way to frustration once you realize that you are paying 4-5 times the cost for something that is not 4-5 times better.
As parents, we need to help our kids see the reality of their life decisions. College shouldn’t be an experience, like a holiday vacation, it should be an education for the future. Part of being an adult is making wise decisions, including the value and benefit of a school.
For the ultra-rich spending hundreds of thousands of dollars is insignificant, but such a debt can be life-altering for a typical 21 year old who has graduated only to find that this overwhelming burden is preventing them from realizing their personal American Dream. Adult life does not start in college, it happens afterward. That is the time when our offspring need to be free to explore options.
It is my hope that the above scandal helps potential students and parents alike examine their higher education goals, and to explore all rational options. There is a big difference between true value and hype.
For my 50th birthday, I gifted myself with a real doctor’s car, a Mercedes. When I pulled out of the dealer’s lot, I felt like I was the king of the world. After a month of driving my new car, I realized that it was just another box on wheels.
The house lights dimmed and my eyes focused on the panel of experts sitting at a long table. The host introduced each member, starting with the representative from our local community college, and ending with a counselor from the University of Chicago. She represented all of the “highly selective colleges.” It appeared that the panel members were positioned in a classic good, better, and best order.
You may be wondering what a highly selective college is. A selective college is one that accepts less than half of its applicants, and a highly selective college is a college that accepts less than one-third of its applicants. I attempted to determine who coined the selective and highly selective terms, but I was unsuccessful. However, these names have the ring of a good advertising campaign slogan.
A school can become a selective or highly selective simply by refusing more applicants. The Washington Post in an October 2017 article listed some of the ways that colleges become selective and highly selective. One way is to buy the list of names of individuals who have taken the ACT and SAT college admission tests, and to then market your school directly to those students, even when your college has no intention of ever accepting them. This not only reduces the percentage of individuals accepted, but it also provides revenues to the college via application fees. A second technique is to use multiple applications cycles, like early decision.
As an example, Vanderbilt University filled 54% of its freshman positions via early decision rounds. In other words, only 46% of first-year slots were available for the majority of the applicants, thereby reducing the percentage of students accepted. It is unlikely that applicants accepted by early decision will be offered merit scholarships, as they have agreed to a binding commitment to attend. The college has them and doesn’t have to worry about the student getting a better offer elsewhere. This makes it more likely that a higher percentage of these students will come from affluent families who can afford to pay full tuition.
You may hear statistics that promote the benefits of attending a highly selective school. In a 2010 article, the New York Times cited a study from the RAND corporation that showed strong evidence that graduates from highly selective colleges did very well. The study looked at participants who had graduated ten years prior and found that individuals who attended highly selective colleges made 40% more income than individuals who graduated from the least selective colleges. On face value, it would seem that highly selective colleges possess some “secret sauce” for success. However, isolated statistics rarely tell the full story. Students from highly selective colleges are often very motivated and enter college as excellent scholars. In addition, they can be more affluent and thereby have greater social and business connections. Graduates for the least selective colleges can be at the opposite end of the success spectrum.
A 2017 Atlantic article revealed that when students with similar SAT scores were compared there wasn’t a significant difference in overall earning between highly selective and less selective colleges. Factors that have a more direct impact on someone’s earning potential include the type of degree (engineering vs. social work) and the individual’s drive, talent, social skills, and motivation.
You may also have heard that 30 of the top 100 CEOs from fortune 500 companies come from Ivy League schools. This sounds impressive, but note that 70 of the top 100 CEOs did not. And let’s not even talk about university dropouts like Microsoft founder Bill Gates, and Facebook founder Mark Zuckerberg.
Do graduates from highly selective colleges have higher job satisfaction? A Journal of Labor Research article states the opposite. Highly selective college graduates were less satisfied with their job than individuals from less selective schools.
The subgroups that did seem to show a positive financial benefit from attending a highly selective college included individuals whose parents did not have a college degree, as well as blacks and Hispanics. The article speculated that these students benefited from the networking and connections that they made at their universities.
Highly selective colleges are typically more costly than other schools. Harvard’s 2015 average annual cost for a student was $64,400.00, compared to $24.673.00 at the University of Wisconsin, Madison. Both schools offer excellent educations, but a year at Harvard is almost three times as expensive. Many universities offer some financial need aid, but highly selective colleges typically do not provide academic merit scholarships.
The pressure to get into a highly selective school can be enormous and can be both internally and externally generated. I have known students who felt that they would be a failure if they didn’t get into the highly selective school of their choice. Parents sometimes use their child’s college acceptance as a personal point of pride, as well as a license to brag. High schools loudly celebrate when one of their students is accepted into a highly selective school. Parents talk about giving their kids the “college experience” as if going to an institution of higher learning was akin to a ride at Disney World. All of these factors contribute to the myth that a degree from such an institution is magical, which it is not. In my work life, i have talked to parents plagued with guilt because they didn’t have the resources to send their child to the school of his/her choice. It should be noted that the student’s choice often had little to do with academic reasons and more to do with setting, and social life.
A 2018 Forbes article headlined that the price of college is increasing almost eight times faster than wages. A 2012 report from the Huffington Post cited that the cost of a college degree has increased 1120% over the last thirty years. These numbers apply to all colleges, but highly selective institutions (as stated above) are the tuition leaders. There are many factors for these outrageous increases. However, a significant factor has been the increase in “easy money.” Students can take out almost unlimited secured and unsecured student loans, as can their parents (Parent Plus loans). This surplus of cash has allowed colleges and universities to raise their tuition and fees to unprecedented levels.
College loans have become big business, and lending benefits both schools and loan institutions. Sallie Mae was under the control of the government, but in the 1990s a private lender bought the Sallie Mae name for five million dollars. The new private Sallie Mae has been reported for unethical practices, but many parents associate the name with secured government loans and assume that their child will be treated reasonably and fairly.
Student loan debt is currently at a staggering 1.5 TRILLION dollars and rising. There are countless stories of student and parents who signed for loans, later noting that they had no idea what they were doing at the time. Students get not only subsidized loans but also unsubsidized ones. If the borrower can’t pay back the loan due to hardship, it may temporarily go into forbearance. This may sound like a good idea to the student, but it isn’t.
If a loan is in forbearance, it continues to accrue interest. That interest can then be added to the principal of the of the loan in a process called capitalization. There are cases where a loan has almost doubled from its original value. Imagine that you borrowed $60,000.00 and later discovered that you now owe $100,000.00. For lenders, the more money you are in debt, the more money they make. The government guarantees many student loans, so if you don’t pay them back, they will get that money from the US treasury. There is little incentive for companies to work with borrowers.
Forbes in a 2018 article noted that student loans are now the 2nd highest consumer debt, behind mortgages. The average debt per student is a staggering $37,172.00, but this only tells part of the story. Over two million students owe over $100,000.00, four hundred and fifteen thousand students owe over $200,000.00, and there are currently one hundred students who owe over $1,000.00000 in student loans.
It is easy to blame students for the loan crisis, after all, they signed on the bottom line. However, the massive scope of the problem suggests that the blame also needs to be placed on lenders and colleges, as they did not inform students and their parents adequately. Many students approach college decisions emotionally. They sign for loans with the perceived idea that they will make good money after graduation, and that they will have no problem paying the loan back. Yes, students need to be responsible, but so does both the lender and the college.
Many college students study majors that do not provide a path to a high paying job. Also, many students who start college never obtain a degree. Both student and Parent Plus loans cannot be eliminated by bankruptcy. This law was enacted in the 1970s with the industry citing a 20% student loan default rate at that time. However, only a tiny fraction of that default rate was due to students filing bankruptcy. A student loan debt is yours for life and it will impact everything from your credit score to your ability to get hired.
When a person stops paying a loan, it continues to grow with little chance of forgiveness. Search, “Dave Ramsey, student loans” on YouTube, and you will find the story of a teacher who owes $160,000.00, and dentist who owes over $1,000.000.00 in student loans. Couples that marry enter that union with their combined student loan debt, sometimes making it impossible for them to live independently.
We have a generation of graduates who are often underemployed and hopelessly in debt. They can’t buy a new car or purchase a home. They wonder if they can ever afford to have children. These are the young adults who did the right thing, they delayed their lives and got an education. Now they feel betrayed. Their financial insecurity impacts all of us and has a negative impact on the US economy.
Colleges are run as big businesses and employ those same marketing techniques as fortune 500 companies. It is essential to approach higher education as a consumer, rather than a student. It is crucial to squarely examine the cost to benefit ratio when making any college decision.
It is ridiculous to think that everyone should go to college; there are other paths to being successful in life. I know of many individuals who are skilled tradesmen. These people do very well financially. As bonuses, their earnings started after high school, and they have zero school loan debt.
When a college degree was less expensive, it made sense for some individuals to obtain less marketable degrees. Students were encouraged to pursue their passion and to broaden their horizons. However, college is becoming a trade school; a place where you gain a marketable skill. It makes no sense to saddle yourself with $100K of student loan debt for a profession where you will only be making $30K a year. Passion for an area of study can run cold when you can’t afford to put food on the table.
College is supposed to prepare you for life. However, massive debt cripples you. To circumvent the debt problem students and their parents need to be creative and think outside the box. Applying to a college because you liked the look of the campus, its sports complex, or its location makes little sense in today’s market.
Consider a community college for your first two years. English 101 and Math 101 are pretty much the same wherever you go. You may get more personalized attention at your local school.
Explore any scholarship options. Merit scholarships can be given by outstanding schools who want to attract the best and brightest to their institution. If you are a top student, it is nice to be the big fish in a little pond.
Strongly consider the cost-benefit ratio of your chosen major.
If you choose a low paying major, think carefully why you are doing this, and have a clear idea on how you plan to make a living that includes paying off your student loan debt.
For-profit online schools often have high tuition and a low graduation rate.
Your community college may offer the same certificate program that a private school provides at significant savings.
Realize that many interesting sounding careers have few job openings. You may want to become a music recording engineer, but good luck in finding a job in that field. Check job availability before you start a degree or certificate program.
Choose the best school THAT YOU CAN AFFORD, rather than the best school that accepts you.
Consider attending a commuter school to save thousands on room and board fees.
It is likely that you will need to take out a loan. Stick with government subsidized loans, and set a limit to the total amount that you will borrow throughout your degree. Don’t use loans for everyday expenses.
Use online calculators to understand what your monthly payments will be.
Understand loan terms, such as forbearance, un-subsidized/subsidized loans, and capitalization, and know how these terms impact your loan.
Schools and loan companies are looking out for their interest, not yours. Accept this fact and approach any offers accordingly.
Consider a certificate program instead of a baccalaureate degree, if appropriate. Community colleges offer many such programs.
Consider a trade. A practical skill combined with ambition and a little business sense can make for an excellent life.
I currently have two daughters in college. The oldest of the two attended IMSA, which is considered the top math and science high school in Illinois. Also, she was a National Merit Scholar. This latter fact granted her free college tuition at some colleges and universities. When we met with her guidance counselor, we were surprised when the counselor informed us that the majority of the school’s National Merit winners did not take advantage of free tuition, opting to set their sites on selective universities. I am thankful that my daughter bucked this trend and she is now completing her degree in Chemistry and Russian at an excellent state school.
My other college student was accepted at Vanderbilt and Washington University, both selective schools. She is also an accomplished student, but neither school offered her any merit-based money. However, many other colleges and universities did offer her money based on her academic performance. She is currently attending a wonderful Midwest university, majoring in Public Health. I am so grateful that they will not have the burden of tremendous debt that many students face. My graduating daughter is strongly considering applying to the Peace Corps. She would not have this option if she were facing the repayment of massive student loan debt.
Dear readers, it is essential for all of us to explore our dreams. However, the wise person makes this discovery sensibly and thoughtfully. Happy school hunting, and please share this post as I believe that the information it contains can help many parents and students who are facing the challenge of college.