JAHNCKE: Making cost-benefit college choices

Students should use online tools to compare payoff to costs

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It used to be accepted wisdom that a college education pays off. No longer. Today, the payoff is distinctly uncertain and widely debated.

No issue could be of keener interest to students and parents making their final college choice in the next few weeks.

Unfortunately, the college-advocacy establishment is offering boosterism rather than useful guidance. That includes the College Board, which is an association of about 6,000 colleges.

The College Board has devoted two monographs to the payoff question, “Education Pays 2013” and “How College Shapes Lives,” together exceeding 100 pages, replete with an overwhelming array of statistics.

Only a single page addresses the key question. Entitled “Earnings Premium Relative to Price of Education,” it compares the expected lifetime earnings of a college grad, net of the cost of college, to the expected earnings of a high school grad.

The problem is that the board looks at average students and median lifetime earnings. This is questionable, given the tremendous variation in college students, colleges and career paths. It is of no practical value to a real student.

No real person fits the board’s composite profile — a virtual student who is one-third an attendee of a private college and two-thirds a public university student — paying a blend of private and public tuition.

It is as though the board is an auto manufacturer selling its cars by citing its fleetwide average fuel economy. Car buyers want to know the fuel economy of the specific car model they are considering.

The payoff debate is not an esoteric academic exercise. The stakes are huge. The stunning escalation in college costs over the past several decades has made college today a huge and risky investment for students and families — and the nation.

Not only have costs increased, but so has enrollment — in itself, a good thing. The combination has led to a massive increase in the nation’s aggregate annual college costs, and the bill is being put on the nation’s credit card in the form of federally guaranteed student and parent loans.

Outstanding student debt has tripled over the past decade and now totals about $1.1 trillion. It is the second-largest category of household debt behind home mortgages. Alarmingly, among graduates in repayment status, the 90-day delinquency rate is above 20 percent, according to the New York Federal Reserve Bank.

This is a national crisis caused in part by the fact that many recent college graduates have not found good-paying jobs, and cannot meet their loan obligations. In May 2013, McKinsey & Co. reported that as many as 42 percent of recent college grads hold jobs that don’t require their college skills.

Tragically, many loan delinquents went to college in good-faith reliance upon the now-questionable notion that college always pays off.

Fortunately, genuinely helpful information is becoming available about the payoff of individual colleges. For example, Payscale is a website that crowd-sources data about career positions and earnings of real graduates of specific colleges. These graduates provide their personal data in return for a free career-compensation evaluation within their field.

Payscale combines this college-specific earnings data with data about the actual costs of specific institutions as reported to the federal Department of Education to produce a College ROI (return on investment) Report listing payoff results for 1,312 individual colleges.

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