University of Virginia

Don’t always accept the headline

When you come across a nice one-line summary of a complex situation, say “College grads break even at age 33”, you need to ask, “I wonder what assumptions are behind that?”  A study released by the  College Board, “Education Pays 2010”, includes that positive piece of news.  So let’s take a deeper look.

One of the basic findings in the study is that when you compare the incomes of college graduates with high school graduates, you find that college graduates earn more.   They earn enough, in fact, that they make up the cost of college and the cost of missing four years of working by the age of 33.  After that it’s all “profit.”  That’s the quick summary, but you know more than to take things at face value, right?  Look at some of the assumptions:

One:  The cost is for a four year public school, not a private school.  Further, they use a national average of $6,600 per year and the larger public schools in Virginia are closer to $9,000 – $11,000.

Two:  Costs include tuition and fees, but exclude housing, food, textbooks, and having a life.  How realistic is that?

Three:  No income taxes are deducted and people who make more pay more taxes.

Four:  That you can borrow 100% of the tuition and fees at the 6.8% Stafford Loan rate.  The maximum loan amount for a freshman is $5,500.  How are you supposed to make up the difference?

Five:  That all subgroups of the overall population are the same, men vs. women, etc.  They aren’t, so your mileage may vary.

Six:  That a college degree is what separates the earnings of grads vs. non-grads, not talent, ability or some other combination of factors.

Elementary school taught us how to read the study.  High school taught us how to comprehend the study.  Hopefully college taught us how to question the study.

But there is one solid takeaway:  Keep your college costs as low as possible.