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In a Recession, is College Worth It?


August 31, 2009

Alyssa Griffin, 19, of Columbus, Ohio, would like to obtain a bachelor’s degree in interactive media from Capital University, a private school in Bexley, Ohio. But to save money, she plans to spend her freshman and sophomore years at Columbus State Community College and live at home.

This strategy means Griffin will miss out on a traditional four-year college experience, but it will significantly reduce the cost of her college education — by more than $40,000. Tuition at Capital runs more than $27,000 a year, vs. about $6,000 at Columbus State.

“I have no issues with starting at Columbus State and then going on to Capital,” Griffin says.

Community colleges have long provided a way for adults to learn new job skills, often by attending part time. But these days, they’re seeing a big increase in students such as Griffin, says Will Kopp, vice president for institutional advancement at Columbus State.

The median age of new students at Columbus State is 19, he says. By attending their first two years at a community college, Kopp says, “they’re paying maybe a third of the tuition at state universities; maybe a tenth what they’d pay at a private school.”

*Students who attend traditional four-year colleges are paying more attention to costs. More than two-thirds of students who applied for college this spring said the economic downturn affected their choice of colleges, according to a survey by the Princeton Review.

The survey also found “a great concern around financial aid,” with 85% stating that they wouldn’t be able to pay for college without it, says Robert Franek, vice president, publishing, for the Princeton Review.

Similarly, 70% of high schools reported an increase in the number of students who abandoned their “dream schools” in favor of more affordable options during the 2008-09 academic year, according to the National Association for College Admission Counseling.

More than 65% reported an increase in the number of students planning to apply to a state instead of a private school.

Nearly one-third of private colleges expect freshman enrollment to decline in the 2009-10 academic year, according to a survey by the National Association of Independent Colleges and Universities (NAICU).

Overall undergraduate enrollment in private colleges is expected to increase by 0.2%, the association said. In the past 10 years, enrollment at both public and private schools has increased by an average of 1% to 2% a year.

Private colleges are well aware of the financial difficulties facing many families and have increased student aid by an average of 9%, says Tony Pals, spokesman for the NAICU.

“Nearly nine out of 10 students at private colleges pay less than the list price,” Pals says. “You also need to consider that students at private colleges are twice as likely to graduate in four years than their peers at public institutions.”

So is college a viable long-term investment?

Few would argue that college is a bad investment, but the economic downturn could diminish the value of that investment.

Those who graduate during a recession tend to start at smaller and lower-paying companies or firms, forcing them to change jobs more frequently than those who graduate during better times, according to a 2006 study by the National Bureau of Economic Research.

The study found that college students who graduate during a recession suffer an average 9% reduction in annual earnings initially, and that the discrepancies don’t disappear until about 10 years after graduation.

Even before the recession, the value of a college investment was inflated, says Marc Scheer, author of No Sucker Left Behind: Avoiding the Great College Rip-Off.

Oft-quoted reports that college graduates earn $1 million more over their lifetimes than workers with high school diplomas help encourage students to take out unmanageable levels of debt, Scheer says.

“No debt amount seems steep compared to a $1 million payoff,” he says.

The College Board, a non-profit association of more than 5,400 colleges and universities, estimates the lifetime “earnings premium” for a college graduate is $450,000 in today’s dollars, or $570,000 for workers with graduate degrees.

“That’s a much more accurate” estimate than the $1 million figure, says Sandy Baum, senior policy analyst for the College Board.

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But Baum argues that a college education is more valuable during a recession, not less.

In a downturn, she says, “Most of the stories that say maybe it (college degree) isn’t worth it any more find some unemployed college graduate,” she says. “But unemployment among college graduates is still half that of high school graduates. A college education payoff is at least as high as it was before the recession. You’re so much less likely to struggle if you have an education.”

Laurence Kotlikoff, an economist at Boston University and developer of ESPlanner financial software, says his analysis of median earnings shows that college graduates nearly always fare better than those with just a high school diploma. But the amount students borrow can significantly reduce that advantage, he says.

Brenda Jaeggi, 26, of Galveston, graduated last May from Texas A&M University with a degree in maritime studies and more than $39,000 in student loans. About $22,000 of her loans are private loans, which are costlier and carry less flexible repayment terms than federal student loans.

Now, Jaeggi is struggling to make her $400 monthly payments. She’s considering moving to a less-expensive apartment, although that likely will mean living in a neighborhood that isn’t as safe as the one she’s in now.

“I don’t have any regrets about going to Texas A&M,” Jaeggi says. “I’m proud to be part of that school and that culture. I very much regret how easy it was to get a student loan. Now, I’m stuck in this really bad pickle.”