The Costs and Benefits of College

This is Brad Barrie, Chief Investment Officer and Portfolio Manager with Dynamic Wealth Group.  Welcome to this market and economic update. In this week’s video, we’ll shift a little away from our regular economic and market talks to discuss the benefits and costs when it comes to a college education.

This is timely because we’re in the middle of college planning season for many high school seniors. But even for those families who don’t have seniors going to college next year, the idea of paying for college can be daunting. Education costs are among the largest in our financial lifetimes, on par with retirement and buying a home.

Of course, college is not just about finances – it’s also about pursuing your passions and achieving your ambitions. At the same time, many have grown more disenchanted with college as costs rise and those dreams seem out of reach.

Over the next few minutes, we’ll explore the costs and benefits of attending college from a financial and economic perspective.

First, this chart shows the cost of a college education across different types of institutions. Keep in mind that these numbers are adjusted for inflation, so any increase in costs is above and beyond inflation.

What leaps off the page is the rising cost of private four-year colleges. All costs have risen faster than inflation, but these costs have increased dramatically over the past few decades. Public four-year colleges have also seen their costs grow, but at a slower pace.

These numbers only include tuition and fees. According to the National Center for Education Statistics, families should expect an additional $13,000 on average in room and board expenses per year.

These figures can also vary greatly across institutions. For the most expensive colleges, the total cost of attendance can be $85,000 or more per year, adding up to $340,000 or more in total.

With such a high cost of attendance, do the benefits of college still hold up today?

The general answer is yes. According to the Bureau of Labor Statistics, higher levels of education are associated with lower unemployment rates and higher earnings level, as you might expect. This pattern still holds true today despite the concerns many have around attending college.

For instance, in 2023, those with a bachelor’s degree experienced an unemployment rate of only 2.2%. Those with only a high school diploma, had a higher unemployment rate of 3.9%. Both of these rates are quite low by historical standards, but it’s clear that having more education still helps.

Of course, these figures can vary greatly depending on the individual. One way this can vary is based on what you study in college.

So, this chart shows the level of annual earnings based on college major using data from the U.S. Census Bureau. These are median annual earnings for those with a bachelor’s degree only.   The chart illustrates the longer run trajectory of career earnings, not just the starting salary.

It’s easy to see that earnings differ greatly by college major. As you might expect, degrees in the arts, education and humanities have generally lower earnings potential than in science, engineering and business.

Thus, the financial considerations of college, including the burden of student loans, depends greatly on the degree and field of study. That said, the benefit of college goes beyond the financial benefits. Studying social work or education, for instance, can allow you to make an impact on society and your community that is not captured by these numbers.  Also, success and happiness in life should not be based on financial measure.

In the end, there is still strong evidence that college can be worthwhile despite high costs and other concerns. This does depend on specific individual goals though, so it’s more important than ever to consider all of these facts carefully.

We’ve only scratched the surface on this important topic, but we hope you found these insights valuable.  Comprehensive financial planning can be crucial to helping one achieve their financial goals, including college planning. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor if so desired.  If you are a financial advisor and would like more information on our Multi-Dimensional Approach towards asset management, please visit our website DynamicWG.com, or reach out directly by emailing us at:  Info@DynamicWG.com.  Until next time, take care everyone, and make smart, logical & fact-based financial decisions.

Disclaimer:

Clearnomics and Dynamic Wealth Group, LLC are not affiliated entities.  No part of this should be taken as investment advice.  Consult your financial advisor for specific investment recommendations tailored to your specific situation. 

Dynamic Wealth Group (“Dynamic”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Dynamic by the SEC, nor does it indicate that Dynamic has attained a particular level of skill or ability. This material prepared by Dynamic is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Dynamic are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Dynamic, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.

Dynamic does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.

Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Past performance is no guarantee of future results. Actual returns may be lower.

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