College Price vs. Educational Value

There are two camps of upperclass high school students: (1) seniors, who have made their enrollment decisions and (2) juniors who are “in the barrel,” ready to make the plunge into the full-blown college admissions process. For seniors, the hunt is over. They are eagerly anticipating the dramatic new adventure that awaits them at the end of the summer. Juniors, on the other hand, have miles to go before they can rest concerning their higher education futures.

We have discussed at length the preference points that comprise the college search. Distance from home, curriculum offerings, size, political leanings, and (among others) — yes — The Big One: cost. Of course, there are other more subtle preference points that go into making college choices, but I’d like to focus on cost, which can be deceiving.

Marketing is a powerful tool in selling a college. Higher education, like most other consumer products (yes, Virginia, a college education is a “product”) is couched in a variety of ways in order to appeal to prospective students. When it comes to marketing and advertising (oh, by the way, do you watch Mad Men?), I always recall a story I heard long ago about a company that sold a line of women’s fragrances (that’s the fancy term for “perfumes”). They had put a lot of research and development into producing this one particular perfume, but it wasn’t selling very well. So, the advertising firm that represented this particular line of products held a series of meetings to explore what approach could be taken to raise the appeal of this underperforming product. After a couple weeks of futile brainstorming, one low-level employee from the copywriting department blurted out during yet another frustrating meeting, “Just raise the price!” Well, that’s what they did, and guess what? Sales took off. The women who were the target demographic for the perfume now considered its quality to be superior, even “exclusive,” since the price was now so high. That’s called perceived value.

Now, I’m not suggesting that colleges raise their prices artificially just to make them appear more exclusive (or even (I hesitate to use the word) “prestigious”), but some, maybe many, high schoolers and even their parents equate price with value.

Education savings

As I mentioned, higher education is a lot like any other consumer product. In many cases, you can get what you pay for.

Aside from its Nobel-laureate-laden faculty, one aspect of the top-priced schools that struck me recently while walking the grounds of a picturesque Ivy League university is the advantages of a quality physical plant. By this I mean modern facilities: newer classroom buildings, clean and shiny living accommodations, sophisticated sports facilities, comfortable (and don’t forget tasty) dining amenities, and so forth. You can’t appreciate the value of such things unless you’ve attended an institution where the facilities aren’t up to par. The nice stuff isn’t cheap, though.

This fall, the nation’s most expensive schools will have student budgets (tuition, room and board, fees, books, and travel) hovering in the sixty-thousand-dollar range. That’s right — $60,000 or so. That’s per year … more than many families bring in for one year. These are not just the Ivy League schools. Some highly selective, “non-Ivy” colleges and universities have price tags in that region.

But … does that enormous cost represent the best value for you? Ah, there’s the price vs. value conundrum.

To give some illumination to this conundrum, let’s look at a few conclusions from a Pew Research Center survey:

Cost and Value. A majority of Americans (57%) say the higher education system in the United States fails to provide students with good value for the money they and their families spend. An even larger majority—75%—says college is too expensive for most Americans to afford. At the same time, however, an overwhelming majority of college graduates—86%—say that college has been a good investment for them personally.

Monetary Payoff. Adults who graduated from a four-year college believe that, on average, they are earning $20,000 more a year as a result of having gotten that degree. Adults who did not attend college believe that, on average, they are earning $20,000 a year less as a result. These matched estimates by the public are very close to the median gap in annual earnings between a high school and college graduate as reported by the U.S. Census Bureau in 2010: $19,550. A more detailed Pew Research Center analysis (see Chapter 5) shows that this gap varies by type of degree and field of study.

Student Loans. A record share of students are leaving college with a substantial debt burden, and among those who do, about half (48%) say that paying off that debt made it harder to pay other bills; a quarter say it has made it harder to buy a home (25%); and about a quarter say it has had an impact on their career choices (24%).

Why Not College? Nearly every parent surveyed (94%) says they expect their child to attend college, but even as college enrollments have reached record levels, most young adults in this country still do not attend a four-year college. The main barrier is financial. Among adults ages 18 to 34 who are not in school and do not have a bachelor’s degree, two-thirds say a major reason for not continuing their education is the need to support a family. Also, 57% say they would prefer to work and make money; and 48% say they can’t afford to go to college.

Other colleges and universities, such as two-year, community commuter schools, can cost as little as $10,000 or less per year. That’s over 80% less than the Big Guys. What’s the difference? Can one school be five-to-six times better than another can?

It depends on what you’re looking for. Many people are looking for the least-expensive route to a professional or technical credential that can move them into a skilled job. For them, the live-at-home, commuter option makes the most sense. If you’re looking for a broader, more diversified approach to education, then some variation of the live-away-from-home choice makes sense, though it’s more expensive.You’re looking for true value (in education, not the hardware store).

Keep in mind that many expensive schools may have superior financial aid available. This can bring their net cost much closer to the lower-priced schools. One challenging theory says, “Get into the best and most expensive school you can.” Financial aid is the reason. The more expensive schools usually have more money to give in financial aid, thus making their true cost much lower for families who really need the help.

Don’t be blinded by the cost of a potential college, but probe for value points. Once your son or daughter finds the right match, you can usually work out the finances.

Finally, keep in mind the ominous words of Forbes William Baldwin: “Is this system nuts, or what? College has gotten insanely expensive, and the tuition aid formulas have gotten insanely complicated. But if you don’t figure them out you will be crushed.” So, to avoid being flattened by the realities of today’s higher education environment, do your homework and figure out where the value of college lies for you. That which costs the most may not be your best bet. Just remember those perfume dudes.

**********

Be sure to check out all my admissions-related articles and book reviews at College Confidential.