### College Math 101

#### by Walter Burns

Math questions don’t come much easier – what’s a bigger number: \$120,000 or \$1,000,000?

It’s not exactly an SAT level problem, but as the job market has been brutal on recent college graduates coupled with student debt continuing to pile up, it’s hard to blame young students for having trouble with that question.

\$120,000 represents the approximate cost of a college education, including classes, room and board, in the US from a private institution - public universities can and usually do cost considerably less. Meanwhile, \$1,000,000 represents the amount of extra income a college grad can expect in comparison to those without degrees.

Ask any investor and they’ll tell you that the chance to turn \$120,000 into \$1,000,000, even in the course of an adult’s professional career, is a tremendous return. There are few things more lucrative and secure than the monetary return from a college degree.

Of course, not all college degrees are created equal. While the general numbers point to a clear advantage for attending college even while accruing a mountain of debt, the subtleties create a murkier picture that is taking its toll on recent graduates and prospective students.

Let’s start out with the schools. The conventional wisdom seems to state that public institutions tend to be a better deal, while private institutions are more expensive. That may be true, but it does not mean that public universities are graduating students with less debt.

State budget cuts have taken a serious toll on the financial aid packages at public universities, forcing students to take on a greater share of their tuition in the form of loans. Meanwhile, private universities that technically are more expensive are graduating students with less debt, thanks to large endowments and the relatively affluent families of admitted students.

It’s also not just where but what you study. Newsweek and the Daily Beast recently put out a list of the most useless majors with all the usual suspects, like fine arts, philosophy, and journalism making the list. Recent graduates are learning the hard way, according to a Rutgers University study, which detailed that more than one-third of those surveyed said they would have studied something different in college, in addition to a variety of other regrets (financial and otherwise).

There are high paying jobs out there. Our colleges just aren’t graduating students to work them. Computer science majors have constantly been in demand since the 1980s, but there’s a greater need than ever for educated IT professionals.

Talking about student debt in a broad term insinuates a certain amount of uniformity with the college experience, the origin of debt, and why it has become such a problem. All colleges and degrees are not created equal and, in fact, the choice of where to go to school and what to study in college probably has the largest financial impact of any decision in a person’s life.

US president Barack Obama and former Massachusetts governor and Republican presidential candidate Mitt Romney have both addressed the issue of student debt. Even more shocking, they seemed to be reasonably close to agreement on the issue. Both support keeping student loan interest rates at existing levels instead of allowing them to rise.

While that may be some respite to those with outstanding student loan debt (true relief will only come either through debt forgiveness or decent jobs once the economy fully recovers), it does little to stem the tide of students who continue to pile up an ever-increasing wave of debt.

Obama has addressed one particularly bad area: for profit colleges. These institutions – examples include the University of Phoenix and ITT Technical Institute – have some of the worst job placement rates and debt default rates. Those efforts are facing pretty serious opposition.

There’s another dynamic at work that throws the equation off a bit – college dropouts who took out loans. Almost 30 percent of college students with loans drop out of college, saddling them with all the downside and none of the upside of higher education. Clearly this is the worst of both worlds, and with a still dismal job market for people without college degrees, that money will probably not be recovered any time soon.

And of course, there is the fact that student loans have an incredibly high default rate.

It’s a scary problem, but realization that student debt is not one big scary specter helps make it solvable. Student debt arises from a series of choices. It’s the choice to go to an expensive institution, even state schools can be extremely pricey, especially when applying from out of state. It’s the choice of a major that may or may not be in demand. It’s the choice to drop out.

This problem is not going to be solved quickly, as it has taken years to get here and will take years to fix. The economy should slowly get better (barring any disasters from Europe or a lack of action from the government, both reasonable possibilities), which should mean good things for the employment and income of graduates. But it needs to be recognized that the US job market is not the same one of decades past – and our education system in general needs to recognize that to begin providing young students with the realization that the vast majority of their jobs will include working on a computer.

Universities, high schools, admissions officers, guidance counselors, and parents need to impress on students from a young age that college is not the only key to a financially secure and successful life – the choices along the way matter as much if not more.

The key will be realizing that college, while in general a tremendous investment, is riddled with decisions that can doom a student to seemingly insurmountable piles of debt. Every student knows \$1,000,000 is greater than \$120,000, but too many of them see an even bigger number – \$1,000,000,000,000 – roughly the combined amount of outstanding student debt in the US today.

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Walter Burns is our weekly news correspondent. No, this not actually Cary Grant. He's dead. Contact the man behind Walter Burns at walter.burns [at] theinclusive.net