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When Is College The Wrong Investment?

Author: Jacob Taylor

College tuition gets more expensive every year. This is to be expected since there is always some inflation that needs to be accounted for. However, college tuition rises between 5% and 7% each year; significantly faster than the Consumer Price Index. As college costs continue to rise, many people are finding that going to college is becoming an increasingly worse investment. So how do you know when college is the wrong investment for you?

Determining Your Return on Investment

For every investment that you make, you should determine your return on investment. In fact, every time you spend money you already do this to some extent. For example: if you buy a $5 cheeseburger, your return on investment is that you expect at least $5 worth of satisfaction from that cheeseburger. When it doesn't live up to your standards, you might complain to the manager. College costs should be no different.

Fortunately, there is a site out there that calculates the best value colleges. Every year PayScale lists the top colleges, how much they cost, and the 20 year return on investment. Using statistics based on the current cost of tuition and the likelihood of receiving a loan, and by interviewing alumni to see how much they are making, PayScale determines which colleges offer the biggest bang for your buck.

This is a great starting point if you are trying to determine if college is the right investment for you. But there is one major point that you need to address. Most of the colleges toward the top of the list are heavily weighted toward computer sciences and engineering; two degrees that pay a lot and are in high demand. If you got your degree in basket weaving from the #1 rated college, you will likely find that you are NOT getting a good return on your investment. The wrong degree from a prestigious college will land you in the same boat as the wrong degree from a state school: no job and a lot of debt.

Choosing the Right Degree

Just a few decades ago you would be able to get a good job with a high school diploma and no college. That quickly shifted to the understanding that you could get a good job with any college degree even if it wasn't something specialized. In today's world you either need a specialized degree, or you need to be very talented in your field; often both are required.

Now there are two schools of thought when it comes to getting a degree. You can study something that you are passionate about, or you can study something that is high in demand. For instance, while you may find Anthropology and Sociology fascinating, degrees in these subjects are, unfortunately, not very marketable. On the other hand, if you study engineering or computer sciences, you'll likely land a well-paying job right out of college.

For those who are paying for the bulk of their schooling on their own (that is without scholarships and grants offsetting the cost), following your passion may have to be something that you do on the side. Instead, you should focus on a degree that is more in demand. Keep in mind that if you don't even like the subject matter, you need to find a compromise, otherwise your working life will be miserable for the next 30 or 40 years.

Foregoing the Degree

Even those who would like to enter a field that is in demand balk at the cost of education. With the average student owing more than $30,000 upon graduation, some are skipping the degree all together. This is just fine as long as you can develop a skill or find a high paying job that doesn't require a degree.

The one thing you need to know if you skip the degree: many employers will overlook you for the simple fact that you don't have a degree. If you do get an interview, you will have to wow the employers with your knowledge, skills, abilities, and results. If you are just a marginal employee, you can expect the employer to favor the marginal employee with the education over you.

The Bottom Line

If you are in college, or have already graduated, do you feel your investment was worthwhile? It is possible to study a subject you like and obtain a job in your field. But many are not that fortunate and still struggle with debt from student loans. So while the investment in the first example was worthwhile, that's not the case for everyone.

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