For recent grads like Peter Turchan, college led to some soul-searching about whether the experience was worth the whopping price tag.
Turchan graduated two years ago from Fordham University and has a good job, as a sales associate at a commercial real-estate brokerage in New York City. But the crippling financial hangover has left him dispirited. “I’m over $100,000 in debt, and find it very hard making payments,” says the 25-year-old. “I often think about whether college was worth it. Before college I was making better money, and think about what I could be doing now if I had focused on saving and furthering my career.”
If I ever suggested skipping college and going straight to work to my own parents, I would’ve been skinned alive and left to the dogs. It’s an article of faith in American society that after high school, you go to university and get at least one degree before launching into the workforce.
But with college costs continuing to spike, debt loads metastasizing, and dim economic prospects ahead, at some point you have to ask the question: How expensive does higher education have to become, before it’s just not worth the lifetime debt burden?
The numbers are stomach-churning – both for prospective students, and their parents. Average college debt has now climbed to roughly $24,000 a head. Total student debt is projected to pass $1 trillion this year. And, since it usually can’t be wiped away in bankruptcy, it can stay with you for a lifetime.
“For the first time in history, student loan debt is now greater than credit-card debt,” says James Altucher, author of books like Trade Like a Hedge Fund and managing director of Formula Capital. “It’s a shame, because then kids become indentured servants, taking jobs and pursuing careers they don’t necessarily want. Instead, if they had a five-year head start over their peers by not going to college, they could figure out how to make a lot more money – and wouldn’t have to deal with massive debt.”
It’s a shocking suggestion, to be sure. But it’s also being promoted by billionaire PayPal co-founder Peter Thiel, who actually gives scholarships to promising youngsters to drop out of college and put their entrepreneurial skills to work. With college costs rising by 5 to 8 percent a year, you’re starting to hear rumblings that — based on a cold-eyed cost-benefit analysis – pricey degrees might not make the cut. As long as you can keep the debt manageable — and at attractive interest rates, such as those offered by federal programs – he says education is still an excellent long-term investment.
“A good rule of thumb is that your total education debt at graduation should be less than your expected starting salary, and ideally a lot less,” says Kantrowitz. “That way, if you don’t over-borrow, you should be able to repay your student loans in 10 years.”
Indeed, there are ways to minimize costs without ditching higher education altogether. Forgo pricey Ivy League universities in favor of state colleges, which charge a relatively manageable $7,605 per year for in-state students. Do two of your four years at an affordable community college, before transferring to complete your degree.
Take full advantage of financial aid, natch; Fastweb’s search engine combs through 1.5 million scholarships worth a combined $3.4 billion. And some elite institutions, like Harvard, have sufficient endowments that they can offer deeply discounted or free tuition to students from families of modest income.
But at the end of the day, you should be allowed to ask the question, of how much is too much for a sheepskin. The conventional wisdom about higher education is so strong, though, that Altucher has received plenty of blowback about his views. “The reaction has been violent,” he says. “People get so angry that they send me death threats, or say I should be sterilized, or that the government should take away my kids. But I just don’t think it takes $200,000 in debt to teach kids how to think. There are a lot of different ways to learn.”
