The College Bubble
It doesn't take a college degree to know that college costs are outrageous and getting worse every year (if you're interested in paying less for college, attend one of our workshops or give me a call for a free analysis).
College Costs continue to rise more than 5% per year and have for the better part of the last few decades. Today, the average public 4-year-education costs over $20,000 per year (in California) and close to $40,000 per year for private education.
But college has always been expensive, right? Is college worth the cost of admission?
Maybe, but in the past few months I've seen a lot more articles and commentary about this subject than ever. Is this because with kids of my own headed to college in the next few years I've become extra-sensitive to it? That's possible. Maybe I'm just more aware because my financial planning practice has such a focus on college funding solutions
It sure seems like the tone has changed recently on the subject, however.
College Debt
One reason for this shift may be college debt. Today, the average college student graduates with $23,000 in education-based debt and nearly $40,000 in overall debt. That is an incredible burden to put on a young person (especially since much of that debt is on credit cards with astronomical interest rates).
With the current anemic recovery from the Great Recession of 2008 keeping unemployment high - especially among the younger age demographics - that college debt burden is doubly damaging.
Is This a Bubble?
The National Inflation Association just released an article suggesting that College Costs would be the next "bubble" to burst. This is an interesting article and it does contain a lot of statistics to support their claim.
Are college costs are a bubble? There are a number of similarities between this market and other bubbles that have burst in history - primarily that the "value-price relationship" has completely broken down and that the cost increases are being subsidized by vastly increasing leverage (debt).
Will this be the next bubble to burst? I doubt it for a number of reasons. (1) There are plenty of other markets and asset classes that are more out-of-whack than educational costs. (2) The system is far more entrenched in our history than most (Harvard is older than our country - hundreds of colleges have been around for 200+ years) and (3) There are many systemic barriers to entry for competition.
The Debate Continues
In February there was an article in the Business Insider with James Altrucher saying people shouldn't go to college - that it is a bad investment and a waste of time for most students. Then today there is a video article on Yahoo's Daily Ticker talking about College Debt.
While Altrucher has always been a little "out there" in my opinion, this second article raises some serious questions and seems to have a lot of support within the comment section.
Poll Question
Is college really worth it anymore?
The statistics all say that a person graduating from college will earn about $1 million dollars extra in their lifetime than someone who only finishes high school. Then again, folks like Bill Gates and many others are proof positive that you don't have to be a college grad to be very successful in life.
What do you think?
We set up a poll question on our Facebook Page. If you are on Facebook, you can answer the poll or you can comment below - and I am really interested in your thoughts on the subject so please take a moment to share.
John
Solutions
Now more than ever is the time to get help from a professional expert in navigating the college funding process. Are you saving enough to avoid lacing your son or daughter with all this debt? Does it mean trashing your retirement to do so? Where are the best deals in education?
We can help you find the answers to all of these questions plus help you qualify for more grants and scholarships (free money) and (most important) make sure your student is headed off to the right school to study the right major for all the right reasons.
If you have a student in high school (or know of someone who does), they should start by attending our free workshop on College Funding Solutions. We teach the basics of the process, how need-based aid is calculated and share some of the most common and expensive mistakes well-meaning people make when sending their kids off to college.