Parental Guide: Maxing the Value of a College Education

Warren Buffet has a saying, “Price is what you pay, value is what you get!  As high school graduates and their parents deliberate over where/whether to attend college next year, this axiom should be at the forefront of their minds.  While it is widely known that the costs of college skyrocketed over the past twenty years, it is not widely known that growth in wages and salaries lagged.  The result of this dynamic is thousands of students across the country burdened with endless amounts of student loan debt.  A recent article on reported that student loan debt is over $1.6 trillion and is the most significant portion of U.S. non-housing debt.  The takeaway is that while a college education is still valuable, it may not be as valuable as it once was.  Today, it pays to be more thoughtful about how to earn graduate and postgraduate degrees.  Below are some ways parents can help guide children through this process and maximize the value of their education.

Focus Decision on Career Path

Expensive colleges, both public and private, should be avoided unless your child has 1) A clear idea of their career goals and 2) Compelling evidence showing how these universities will set them apart and help accelerate the achievement of those goals.  While it’s understandable that many high school graduates are unsure about what career path to take, the cost of “figuring it out” once you get to college is too high and no longer makes sense.  By having a clear idea of what they want to do, students can get more out of their time in college, and possibly save money by finishing sooner than the typical four-year timeframe.

Encourage a Delay

If your child is unsure of their career path and what to study, let them know it is ok to delay the decision.  There is no law mandating the attendance college directly out of high school.  In fact, delaying your child could potentially be much better off.  So, before parents voice their displeasure, and why their child should not delay the decision to attend college, let me explain!  The advantages to your child delaying may be that they 1) Gain knowledge and experience about potential career paths, which focuses future educational pursuits (See “Focus on Career Path” Above) 2) Work and save money to reduce/eliminate the need for burdensome loans and 3) Earn financial aid/ scholarships through their employment.  (The military, and the GI Bill, is one option that comes to mind, but there are many others!)  The point here is that attending college directly out of high school is not for everyone and trying to force it could be a costly mistake!

Understand Return on Investment 

Once your child has a clear idea of their educational path and costs, they must then assess the potential return on their educational investment.  If student loans will play a significant role in financing education, then this step is critical!  Parents should help children 1) Research job opportunities available as a result of their future skill set 2) Have a general idea of what those job opportunities pay on average and 3) Develop a financial plan to pay down student debt over a reasonable time (10-15 years) after college, and at the same time maintain a moderate lifestyle.

Again, while education remains an important aspect of financial success, we must understand that the game has changed!  Remember, “Price is what you pay, Value is what you get!”  Doing one’s homework and thinking outside the box is critical to maximizing educational value in this new environment.

Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.

Fox 6 Talking Points:

  • Focus Decision on Career Path
  • Encourage a Delay
  • Understand Return on Investment

Marshall Clay CFP, JD, is a Partner and Senior Advisor at The Welch Group, LLC, which specializes in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.  More information about The Welch Group and important Disclosures can be found on our website. Investing in securities involves the risk of loss. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance level(s). Consult your financial advisor before acting on comments in this article.