You can be financially successful without a college degree. One summer when I was younger, fresh out of college, I worked for a touring drum and bugle corps. It’s a group of 128 adolescents and young adults and 40 staff who drive around the company in buses, performing almost every night for seven weeks, marching on football fields for dwindling audiences. The caravan included several charter buses, a few vans, and several eighteen-wheel trucks.
A conversation I had with one of the truck drivers always sticks in my head. “Why go to college,” he asked, “when you can make a great living on the $50,000 you earn from driving a truck?” I didn’t know whether he was referring to an average salary in the industry, a starting salary, a mean salary for all truck drivers, or what a driver would earn at the top of his career. Regardless, $50,000 sounded better than the starting salary for teachers in the state where I was living, and was almost twice as much as I would earn from my first job, in non-profit, at the end of that summer.
It’s not that I was considering becoming a professional truck driver. I certainly respect those who do that work, but I didn’t feel it was right for me. And I never questioned the value of a college education in itself, but with my first payments for student loans after in-school deferment coming due that summer and my first attempts as an adult dealing with finances leaning towards ignorance, it made sense to me how one might not see the value in an education that costs as much as mine did.
Later, I learned more about the concept of return on investment, and the idea that college might not be worthwhile bothered me even more. Reading and writing about personal finance, more and more I was surrounded by the opinion that everything could be measured by money. Something is worthwhile only if you can gain financially as a result of an expense. A degree is worthwhile only if the income you can earn over and above the income you might have earned without the degree. And in many situations, this plays out, making the college degree worthwhile — for just about everyone, ironically, except for education majors, as I’ve mentioned recently.
Bank of America’s semi-annual Merrill Edge survey was just released, and the results focus on what the group calls the “mass affluent” — those with $50,000 to $250,000 in investable assets. Investable assets for the purposes of the report include “cash, savings, mutual funds, CDs, IRAs, stock, bonds and all other types of investments excluding primary home and other real estate investments.” Not included are the wealthy and households without savings, so this report might reflect the opinions of what we might consider to be upper-middle class.
Understanding the mass affluent approach to college education is one of the goals of the survey. Parents with young children are more likely to see a college education as a worthwhile investment. In families without children, however, almost half of the respondents believe either that college is not worthwhile or don’t know.
Half of all respondents wish they had begun saving for their children’s education earlier; while 45 percent answered no to the same question.
The mass affluent — again, those with investable assets between $50,000 and $250,000 — intend to use their own savings to fund at least part of their children’s education. 58 percent respondents indicated personal savings would be a source of funding. 36 percent of respondents indicate they expect scholarships and grants to cover some of the tuition costs, and that’s the second most popular category of funding after personal savings.
9 percent indicate they intend to use a home equity loan to pay for their kids’ college costs, while 4 percent have no plan at all.
Respondents were asked, “Do you think the cost of college education is worth the return on your investment?” That is the question that was answered “yes” by 75 percent of parents with young children. The question is worded in such a way that it gets the respondents thinking about the financial return. That is, the primary instinct when considering the answer is to consider the financial cost and the likely earnings once the kids receive the degree, across all majors and career paths or across those most familiar to the parents.
Had the question been worded differently, the answers might have been significantly different. What is the difference between an expense and an investment? Sometimes it’s only in the terminology. Why buy a new car when you can invest in your image and your future career path? Either way, you’re taking $30,000 or more out of your pocket for a fancy ride, but the language you use affects how you feel about it. When you think of college as an investment rather than an expense, you begin expecting a financial return — which is possible. You don’t “invest” in a Disney vacation, though both a vacation and an education can often be more about the experience than what you might receive in return.
If the question had been worded, “Do you think the cost of college education is worth the expense?” there might have been a more positive response. At the same time, if the respondents had been asked, “Do you think the cost of college education is worth the investment, considering the cost of debt, the cost of a delay in earning an income, and the cost of the uncertainty of employment?” the answers may have been less favorable. Even a simple, “Do you think the cost of college education is worthwhile?” might have produced different results in the survey.
In the financial industry, it’s the job of writers an analysts to look at everything from a financial perspective. In life, money is just one, albeit important, aspect of measuring the value of something. Financially-minded people want a return on investment for everything they do. Enjoyment and enlightenment are not easily measured by a bank account balance, and are often ignored in the value equation. It’s important to think about the financial considerations of major expenses (or investments) like education, but how much money is in your pocket is not the only measure of value.
Merrill Edge [pdf]