11/24 Consumerism Commentary: A Personal Finance Blog Since 2003

Please add updates@feedmyinbox.com to your address book to make sure you receive these messages in the future.

Consumerism Commentary: A Personal Finance Blog Since 2003

Is a College Degree Worth the Investment?
November 23, 2009 at 11:00 am

Over the next couple of weeks, six finalists will be auditioning for the opening of “staff writer” at Consumerism Commentary. Each will be providing two guest articles to share with readers. After the six writers have shared their guest articles, readers will have an opportunity to provide feedback before we select the staff writer.

This article is presented by Debbie Dragon, a full time freelance writer and co-owner of ReliableWriters.

Last year, in spite of the recession, the difference in the median earnings between high school graduates and college graduates rose to record highs according to The New York Times’ David Leonardt. He reported on the average earnings of graduates, based on information from the Census Bureau which state the following average annual salaries for people of varying education levels:

High School Graduates: $27,000
Some College (no degree): $33,000
Bachelor’s Degree: $47,000

What isn’t clear from Leonardt’s argument that college is the best investment a person can make, is how much debt the average student graduates with in order to complete their education. As a 29 year old college graduate still paying student loans for a Bachelor’s Degree obtained in 2002, I think the amount of student loan debt a student must carry to complete their education is an integral part for determining whether the education was worth the investment or not.

The College Board reports the average cost of tuition in 2009-2010 as:

Public 2-year colleges: $2,544
Public 4-year colleges: $7,020
Private 4-year colleges; $26,273

These numbers represent tuition only, and do not include room and board, books and other miscellaneous fees which anyone who has gone to college or paid to put their child through college knows can add up to considerable amounts each semester. It’s true that many students receive grants (money that doesn’t have to be paid back) which helps reduce the amount they pay out of pocket or through loans — but according to The Project on Student Debt, graduating seniors who receive educational grants actually end up with higher student loan debt than students who do not receive grants. Graduating college seniors receiving Pell Grants had an average debt of $24,800 in 2008. Other than academic or merit-based grants and scholarships, students receiving grants usually have lower family incomes than students who are not eligible for grants –- so it makes sense that they would go on to borrow more money to cover the miscellaneous fees, room and board and books in addition to tuition costs.

Average student debt upon graduating, according to the Project on Student Debt in 2008:

Public Universities: $20,200 in debt
Private Non-Profit Universities: $27,650 in debt
Private For-Profit Universities: $33,050 in debt

So while there is no question that statistics show us that most college graduates earn a higher annual salary than non-graduates, there are still other factors to consider to declare whether the cost of education was a good investment.

Adrian Cartwood, a blogger at 7million7years.com, questioned about the extra 4 years a high school graduate has in the workforce while the college students are still in school. Don’t they average a 4 year head start earning money? He shows that if the high school graduate saved 15% of his or her earnings every year and earned the average 8% return, he or she would end up with $468,168 after 26 years of working and saving (based on the U.S. Census Bureau’s 2007 American Community Survey of estimated salaries for high school graduates and a 4% income increase annually). He determined the college grad, even after getting a 4-year later start on saving and starting out with $20,000 in debt, would end up with $794,000 at the end of 26 years. In Adrian’s example, we see that college is worth $326,000.

All of these statistics and examples have made good points, but I think the answer to whether or not a college education was worth the investment depends on each individual and really can’t be summarized by “averages.” If a student goes through college and graduates unable to get a job in his or her field of study –- chances are they’re going to earn wages that are closer to the high school graduates’ salary. That income is not likely enough for the new graduate to pay back student loan debt, pay for their living expenses, and begin saving for retirement upon graduation. There are even college graduates who DO get positions in their field of study that don’t start out at the top of the pay scale which makes it difficult for them to keep up with living expenses and student loan repayments after graduating. Since there are never guarantees that a college graduate will land a well paying position due to their degree, I think a college education might better be classified as a high-risk investment.

This is a guest article by Debbie Dragon, one of six finalists interested in being Consumerism Commentary’s staff writer.

Photo credit: Yakinodi
Is college worth the money?, MSN Money, Morning Joe video, September 28, 2009
College Costs – Average College Tuition Cost, The College Board
Project on Student Debt

Rating: 0.0/5 (0 votes cast)

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Is a College Degree Worth the Investment?

Avoiding Black Friday Online and Offline
November 23, 2009 at 8:00 am

Many retailers — those who have survived the rough economy — have struggled this past year. Companies are looking forward to the holiday season because they know consumers are in a tough position, too. Here is how it works: the economy is recovering, but unemployment is the last piece of the economy to improve in a recovery. With an national unemployment rate of 10.2%, Americans are finding it more difficult to rationalize frivolous or expenses. We’ve seen a broad trend towards frugality during the recession and we’re not quite ready to bid farewell to the newly found focus on savings.

The credit crunch has affected consumers as well, and fewer people have access to what has normally been a boost during the holiday season, cheap credit.

Despite the lack of access to income and credit for spending, consumers want to do what they can to make the holiday season seem normal. Experts predict this holiday season will be similar to last years, though some predict slightly less spending and some predict slightly more. We would expect retailers to use the same play book as last year. Shoppers will find Black Friday doorbusters offering the best deals and unannounced deals online.

There are some caveats. Included in the fine print amongst the Black Friday advertisements and circulars is often a number of conditions. The best deals are commonly found only in limited quantities. The time you need to be at the store to receive the deal is also limited. If you need to be at two different stores at 5:00 am or earlier to line up before the doors open, you need to choose. Many of the doorbusters are only available in person, as well.

While deals are in abundance, they exist mostly as teasers in order to get the most customers in the door at the same time. These deals are often just one step away from bait-and-switch scams. Last year’s Black Friday death at Wal-Mart shows how retailers can be irresponsible and unprepared and how customers can be horrifying for the sake of saving a few dollars. I plan on avoiding the morning shopping madness this coming Friday.

Stores also tend to suspend consumer-friendly practices during the period after Thanksgiving. You will have a more difficult time getting stores to match prices if another local store has the same product advertised at a lower price. For many products, this practice is suspended. In the past few years, retailers have limited return policies. During other times of the year, if a sale item is out of stock, you can get a rain check. But for the holidays, sales are first-come, first-served.

Shopping online won’t be much better. Last year, some retailers couldn’t handle their online sales. In some cases companies couldn’t ship the products sold for weeks or months after the orders were placed, and in other cases they resorted to shipping similar products when inventory ran out.

Should companies be allowed to advertise deals that will only be available to a few customers? If one store has, for example, three televisions — not three brands or three models, three televisions — to sell at a super low price to the first three people that day who want one, is this deal truly “available?”

I plan on avoiding Black Friday as much as possible this year. I am not a fan of crowds and very few sales are worth dealing with frenzied shoppers and grumpy salespeople. I may be monitoring a few stores online but unless I see fantastic deals on a selected group of interesting items offered by a retailer I can trust, I’ll be keeping my credit card in my wallet. The holiday season may be a bit easier for me than it is for others as I am sans kids, but I hope to continue this approach even if my life changes in the future.

What’s your plan for holiday shopping this year. Will you brave the crowds on Friday or stick to browsing online?

Photo credit: jardenberg