Recently, The Birmingham News ran a column that brought into question whether borrowing to pay for college made financial sense. The writer pointed out that the average student loan amount upon graduation topped $25,000. I presume the alternative to borrowing to pay for college was to not go to college and therefore avoid the debt. For 2012, it’s estimated that over three million kids will graduate from high school. Of these graduates, approximately 30% will choose not to attend college. To this group we can add another million high school kids who have dropped out.
How is the future of college graduates likely to differ from those who choose not to go to college? Virtually all the research shows that lifetime income expands with education. It’s estimated that, on average, the college graduate’s lifetime earnings will outpace non-graduates by more than $1 million while getting a doctoral degree will add yet another million of lifetime earnings. At the other end of the spectrum, an estimated 24% of high school dropouts will earn incomes below the poverty line versus 3.6% for college graduates. High school drop-outs hit the unemployment line at 14% while high school graduates fair better at 10%. But compare these rates to the college graduate unemployment rate of only 4.5%.
Why is the college degree so important to achieving higher levels of financial success? Certainly many entry level jobs require a college degree, but the true answer goes much deeper. For many high school graduates, college is the first time they have been on their own; fully in charge of their lives, their schedules, their decisions. For most, it’s both a learning and growing experience. In effect, they are exercising their ‘thinking’ muscle. Obviously, college students further their learning based on courses taken but they also learn how to interact with a much wider group of peers. All of these skills transfer into a more mature, well-rounded person by the time graduation arrives.
Need more proof that it pays to have a college degree? Much media attention has been focused on the Occupy Wall Street protester’s anger at the disparity of income of the so-called ninety-nine percent versus the one percent of America’s highest income earners. When you place the one-percent under a microscope you find four very interesting traits:
- They are overwhelmingly college graduates. Many also hold post graduate degrees.
- They are highly focused on their careers; and approach work with a workaholic fervor.
- Most are small business entrepreneurs who have started businesses and they are the primary driving force for creating jobs in America.
- They raise their children in a two-parent home.
It turns out that the members of this elusive 1% club didn’t just show up one day, they worked their way to the top! Instead of vilifying the 1%, maybe we should seek to emulate them.
My friend, Wray Pearce, CPA, summed it up well, “I believe most of the ills in society are really just symptoms and the underlying problem is the breakdown in family and resulting decline in core values: honesty, integrity, education, commitment, hard work, independence- all things that made this country the best in the world.”
The bottom line is this: If you want the best chance of achieving financial success, stay in school! If you know someone who’s dropped out of high school, encourage them to return. If you know a high school graduate who’s considering not going to college, encourage them to go to college. If you know a college graduate who’s facing a dire job market, encourage them to seek an advanced degree. If you can help them out financially, please do so. The gift of education is perhaps the best gift of all.