What is College Really Worth?

About this time of year, many families of high school seniors will begin to have some very serious discussions about money, education, and the realities of what is affordable versus what is not. In many cases, this discussion will have a dramatic impact on the student’s future.

For many parents, this brings up a dilemma: perhaps you’ve saved some money, but not enough to pay for the incredible cost of tuition at some of the higher-end colleges. It seems that the saving that you’ve done is actually working against you, because you’re finding that having some assets to your name takes you out of the running for many grant options.

At the same time, your child has, well, good grades, but they’re not the valedictorian by any stretch. What’s the next alternative?

Of course, there are plenty of loan options to choose from, including home equity loans, “PLUS” loans, and loans from retirement savings plans.

Each of these options (and there are many others to choose from) has shortcomings. Home equity has a tendency toward a floating rate, which could become very expensive in the long run. PLUS loans are non-deductible and often carry floating rates, plus the repayment period begins immediately. Borrowing from a retirement plan is never a good idea – it’s hard enough to put money aside in the first place, let alone continue putting money aside and paying yourself back at that same time!

So the issue comes back to the original question: what is college really worth? Obviously a college education is worth the expense in the long run, but is an education at a prestigious institution really worth the additional cost?

There are really two answers to that question. First of all, most of the “prestigious” schools operate on a false pretense when it comes to the cost of attendance. It is extremely rare that a student would pay the “sticker price” to attend. There are so many endowments and scholarships available at these schools, most students don’t come anywhere near paying the whole amount.

The second answer is a resounding “No!” – meaning, the quality of the education and the cachet that goes along with it are likely not worth the additional cost, even if you were to be required to pay it. When making comparisons between various different schools you need to keep in mind that the name of the institution makes far less difference in terms of career success for your student than does the simple fact that the student has taken part in and passed this milestone in their life.

So if the question comes down to cost – and let’s face it, you know it will – focus more on making sure that your student can get an education at a quality school, rather than believing that the prestigious name institution is going to make a big difference in the long run. The education is the important part; we just need to remember that.