College Secret You Should Know

Those responsible for generating college entrance applications routinely quote studies that your earning power after graduation is higher than if you don’t attend a four year college or university.

Beyond the basic desire take that next step, there are some good reasons to get a college degree. If your chosen profession mandates it, you’re going to college. If your family history is with a particular school, and you’re determined not to break the tradition, off you go.

For most, however, college implies the expectation of future financial success and career mobility. Several years as a financial planner, educator and business person have taught me to challenge the assertions of large institutions like colleges and universities when their self-preservation is involved. When they are right, I freely admit it. When they are not, I discuss it.

There are at least five reasons – as far as your future is concerned – to challenge institutional marketing and thinking from colleges as either wrong, suspect or seriously flawed. Exploring these reasons as they relate to your future will serve as a protective factor in your decision-making. They could well confirm your decision to go to college or provide a sound basis for considering other options.

Timing

If you graduated from college in or near 1983, 1990 or 2009, you may already be keenly aware of the difficulty in finding not only a job in your major field, but also in finding a job at all. In each time period, there were a decent number of jobs to be had. The problem is that many of them paid the same income as if you were only a high school graduate. Current economic conditions are challenging, and that is being generous.

Youth unemployment is the highest in a generation. The unemployment and underemployment rate stands at about 18%. More and more, college graduates are heading home to move back in with their parents.

Colleges don’t address the issue of timing. They can’t afford to. They have a goal for admission applications they must hit to get the number of acceptances that help them meet their financial plan for the year. No offense to colleges and universities, but they have a business to run.

Real Earning Power

The sales tactic most common to all colleges and universities is to focus on your future earning power versus those with only a high school degree. They tell you that college graduates earn a higher annual income than non-college graduates. Colleges have technically earned the right to claim that as true if you consider the average income of all graduating seniors relative to those who never finished.

A liberal arts major, however, without a clear career path (not uncommon) is likely to experience dissatisfaction with the opportunities in the open marketplace following graduation. An accounting major, on the other hand, may have a position with a respectable salary waiting following graduation.

Doctors, nurses, some legal positions, accounting and some finance positions skew the average up. If you’re not working toward a profession with high demand and high rewards, you may find the market for jobs, and the resulting lack of earning power very unkind.

Don’t take the earnings numbers offered at face value. Dig harder and deeper. Explore opportunities for the fields of study that interest you. Learning for learning’s sake is good, but you can learn on your own and save $100,000 or more in the process.

Colleges don’t really talk to you about real or contextual earning power. It’s complicated and difficult to tie down to the individual. And in a sense, it is unfair to the college because they ultimately don’t control many of the factors that determine your success.

Debt

A recent article noted that as many as twenty percent (20%) or more of college graduates will file bankruptcy before age thirty or thirty-five. A significant factor for many is debt accumulated in obtaining a college degree. Beyond that, many accumulate additional debt after college on credit cards and automobile purchases rendering their additional buying power severely impaired. Bankruptcies and mortgage foreclosures are at an all-time high as of 2011. They are expected to continue unabated in 2012.

If you are making thirty-five percent more in income that you would had you not gone to college, but you are paying forty percent of it out in debt payments on non-appreciating or depreciating assets, how far ahead of the game are you?

Colleges infrequently address the issue debt you have to accumulate to go to school. They focus on the lifetime value of the degree so you’re sold by taking the long view – assuming you make wise decisions regarding debt, savings and your life plan.

Capacity to Save

Closely related to the debt and earning power is your capacity to save money for your future. There are two issues – 1) the capacity or resources available to be saved, and 2) the discipline to put a savings plan in place and execute it.

My father barely graduated from high school. I never saw him read a book. Through his barber shop, though, he saved money faithfully every month and built a solid life and retirement. As a result, he was able to adequately care for my mother who had Alzheimer’s disease over the last ten years of her life.

A close friend used to repossess cars early in his career. I was always fascinated at his stories about those with $300,000+ combined incomes who had to file bankruptcy because they spent everything they made every month. That’s $25,000 a month. Nothing went to savings. Credit cards were secured for the purpose of transferring debt as a short-term coping strategy. Marriages failed and families were ripped apart – literally and figuratively.

Ultimately then, earning power is not the issue. Lifestyle expectations and savings discipline make the difference.

Your Life’s Mission & Standard of Living

And that brings us to the issue of expectations. What do you want for yourself? What impact do you want to have on the world? What do you want money to do for you? How expensive are your tastes? Will you have the capacity to afford your desires? Can you delay gratification while you harness the resources to create the lifestyle you want?

Those without a mission and a plan tend to get used by those who do. That’s what marketing is all about. Colleges are fantastic at marketing. Colleges are ready to take your application. Banks and others are ready to lend you money to go.

If you have no plan and workable budget to help you achieve your vision, everything looks attractive, valuable and desirable. All the earning power in the world is irrelevant if you don’t work it into a purpose. If college doesn’t help you get to the place you need to be, it can be an enormous, expensive mistake resulting in the loss of valuable time and money.

Pay attention to timing, debt, the real issues behind earning power, your ability and desire to save money and what you want out of life. Consider these issues relative to a bill of $100,000 or higher for college; a personal investment of up to 12,000 hours to do the work; and the cost of the alternatives should you choose another path of interest. Doing so will increase your confidence in the decision to go to college, or it will appropriately redirect you to other options that might make more sense for you.

 

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