Forex Articles

Some financial questions feel like non-starters: Should I pay the rent or instead put the money on Molly's Foal to win the 3rd race at Belmont? Despite the obvious pitfalls, there will be people who go with the second choice. Other questions offer more nuance in their balance of rational calculation and emotional desire: Should I buy a third glass of wine at dinner? There the answer can get wrapped up in questions beyond the merely financial – effects on health, job and relationships, not to mention driving fitness and involvement with the legal system. Most often for this latter question, even the positive answer turns out okay.

The question of Does it pay to go to college? was once considered among the second type, whose yes answer was smooth entry to the middle and upper-middle classes with solid economic benefit. Lately, though, some commentators have begun to treat the college question as a variation on the race track decision, warning that choosing college is too often an ill-considered bet that's a gateway to a lifetime of crushing debt and poverty. Which is it?

With the average annual cost of a college education (tuition, room and board) topping $23,000 at a public college and $46,000 at a private school, putting a brace of children through college can appear financially daunting. Even a single child's tuition can represent a substantial chunk of a family's annual income (and in more extreme cases, a multiple of the income).

This massive financial decision is driven in large part by a member of the household who isn't yet considered competent and trustworthy to vote or purchase alcohol and is bedazzled by glossy college catalogs and perky tour guides. Add the anxieties of those parents who worry that without college their scion will be – in the words of Saturday Night Live's Chris Farley – living in a van down by the river, and the decision leaves the realm of logic and enters that of fear and fantasy.

The classic worst-case scenarios – the minimum-wage barista with a doctorate in, let's say, Dalmation Lit and $250,000 in loans – are dire, yet the reality is far different. According to the Brookings Institute, 75% of student loan borrowers owe under $28,000 in student loans, while the median debt is under $15,000, and the average monthly payment is $242, wih 50% of households paying less than $160. Some commentators have pointed out that the monthly cost of paying off student loan debt is about equal to the monthly cost of an auto loan. Cars typically have a life expectancy of 8 to 10 years, so after a decade, most people won't still have their car, but they will always have their college education.

Focusing on the extreme cases to steer the decisions of the majority can be somewhat akin to discussing the value of fine wine by focusing on the fate of the indigent alcoholic. Let's return to the facts: Most college graduates estimate that they make about $20,000 per year more in income than they would if they had stopped at high school graduation, which is the same amount that high school graduates feel they lose annually by not going on with their education. That is very near what the Federal Reserve estimates as the value of a college education over a 40-year work life – more than $800,000 in earnings, not a bad return on the investment.

That isn't to say that students and their families shouldn't keep their eyes open as they navigate the college decisions. Starting long before those application forms get filled out, students should be soul-searching and exploring their career options. Is college the best route to the future for this person?

Many skilled trades – plumber, electrician, etc. – are in high demand and considered resistant to technological elimination or foreign competition, forces that have hurt trades like auto assembly line worker. Also, many public service jobs and the military will pay good salaries with a high school diploma. On the other hand, long-haul truck drivers may be an endangered species if plans for robot-driven vehicles pan out. Clearly, not going to college is no longer the same as not continuing your education. It may just be making a conscious choice of one form of training over another. (You may also be interested in Careers To Avoid: Lowest Paying Professional Jobs.)

Keeping the overall college bill down can definitely aid in the long run. In fact, crafting a frugal, thoughtful financial plan for college can be an important component of the ritual of growing up, allowing the adolescent to begin to take on responsibility for financial decisions. First order of business is deciding whether that name-brand, basketball-crazed out-of-state university with the velvet-lined dorm rooms is absolutely necessary. What are the options in-state, at the public university? Many of these show up regularly on lists of the top-rated colleges.

Can one try one's hand at the community college, hone the academic skills and then trade up later for a shorter stint at the costlier school? Recently, ranking systems have started appearing that calculate the value add of one school over another. The results can be astonishing, with many smaller regional schools punching way above their weight in career benefit. (Also, check out Pay for College Without Selling A Kidney.)

More attention to choosing the academic subjects with the biggest career futures can also pay off. Check out online listings of college majors that have the top starting salaries. Not everyone is suited to being a petroleum engineer or an actuary (the highest valued majors in 2014), but many of the social sciences show up fairly high on the rankings. Also, the ability to be comfortable around computer technology seems to be required in every area these days, so probably best to plan to spend some time in the computer lab whatever your major.

Is the question Does it pay to go to college more like rent vs. the race track or yes/no on the extra glass of wine? If Brookings is right and you're in the 50% whose monthly college-loan payment doesn't top $160, that's a bit more than $5.25 a day, which in most ritzy restaurants is half the cost of that third glass of wine. So, go to college and for a few years after choose the cheaper cell-phone plan, select fewer options on the car, and forgo that third glass of wine. You'll end up in the 86% of college graduates who tell researchers that their college degree was a worthwhile investment.