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A college degree - are private colleges worth it?

Q: My son is a sophomore in high school. He is a strong student, probably in the top 15% of his class. We haven’t saved sufficiently for a four-year private college. We could probably afford a college like Umass or one of the other state schools. If he attended a private school, we would probably need to look at loans and grants (and him graduating with some significant debt). My question to you – is there any data to support the value of a four-year private college education vs. a four-year public college education? I know there are many factors in these decisions (like his major, etc.) but it would be helpful to see real hard data to see if students from private colleges really do better in the workforce post-graduation. Can you shed any light? I can’t seem to find a whole lot of information out there on the internet.

A: Choosing a college is an incredibly difficult process in 2010 and beyond. I unquestionably support the value of an undergraduate degree. The College Board, a non-profit membership association, publishes their findings on the value of a college education every three years. Their latest report, entitled Education Pays 2010, provides quite a bit of compelling research to support my strong opinion that education does pay! A four-year college degree recipient will often enjoy a healthier lifestyle, a higher job satisfaction level and become a more engaged citizen. Finally, the college graduate will likely out earn their counterparts who do not hold a four-year degree. Read an overview and download a free copy of the complete report here.

There are a number of factors that should be evaluated when considering different schools and universities. Some of the factors worth discussing include: location, majors and/or academic programs, the size, student services available (e.g., library, housing, transportation, etc.), retention and graduation rates as well as financial considerations. Your son’s high school guidance office should be a good resource to help him narrow down the options to a manageable number of schools on his “list”.

The price tag is a significant consideration. However, be careful that you are comparing “sticker prices” as opposed to the published prices commonly available on websites and included in many of the college guides. Most academic institutions will provide some type of aid to students. Beware of eliminating a school simply because of the published “sticker price.” Because many private schools have healthy endowments, these schools can typically offer more aid to students. There may even be private schools that are ultimately less expensive for your son based on grants and scholarships.

By August of 2011, the US Department of Education will require all accredited institutions to post a net price tuition calculator that will compute a forecast of the tuition and required fees that a student would expect to pay annually and cumulatively. This is designed to provide a truer picture of actual costs based on the aid package that a student would be eligible for. Some institutions already have tools like this on their financial aid websites that you can use to obtain a truer picture of the actual cost to your family.

The College Board reports that in the 2010-2011 time period, that “full-time students receive an estimated average of about $6,100 in grant aid from all sources and federal tax benefits at public four-year institutions, $16,000 at private nonprofit institutions, and $3400 at public two-year colleges.” (Source: Trends in College Pricing 2010, College Board). This free report, Trends in College Pricing 2010 is worth downloading and reading. The full report is available here.

I consulted Kristen Fox, Managing Director of Eduventures in Boston. Eduventures provides research and consulting services for higher education institutions. Fox encourages you to consider overall value of the institution and specifically think about educational outcomes. Fox offers the following questions to help you and your son with your decision:

- Does your son know what he wants to be when he graduates? A student who wants to enter into a career that is not at the high end of the pay scale may want to consider the best public school or private school with the best package as opposed to taking out significant loans.

- Research graduation rates. How many students graduate in four, five, or six years? The difference between an average graduation rate of four vs. five vs. six years can result in a significant difference in the total cost of education.

- Does he need the support that a smaller institution might be able to offer?

- Does he feel comfortable with the debt burdenx that he may be taking on? College seniors graduating in 2009 carried an average of $24,000 according to the Project on Student Debt. If he would be taking on levels of debt that are at or exceed this average, pause to consider if this is really worth it in the long-term. In addition to career and financial outcomes, your son should also consider the other outcomes, both personal and educational. For example, does the university offer international opportunities, experiential learning and volunteer opportunities that will contribute to non-financial outcomes?

Another piece of research the Fox shared is an article published by Pay Scale. The article compares degrees and which lead to be the most lucrative career options.

Fox also referred me to a Business Week article that provided a return on investment (ROI) calculation based on the college attended for the school’s four-year graduates. Click here to review the data. Many educators and industry analysts (including Fox) have questioned whether the higher earnings are actually because of the four-year degree from a specific college. Or could there be other factors that influence the ROI of the college degree?

Fox contends that "part of the reason that we may see that students who attend these top universities get higher salaries is because they are more likely to come from middle or upper middle class backgrounds, which then helps them to obtain higher paying positions.” Or could it be that four-year private schools graduates tend to gravitate to higher paying jobs like investment banking or biomedical engineering? It is difficult to establish a direct correlation.

What is clear is that there are many good public and private institutions to consider. A college degree is clearly worth the effort. Choosing what college is best for your son will likely be a process of eliminating many choices and then researching the final contenders to determine the best match for your son and his aspirations. The bottom line is that you should consider the various elements of educational value – both financial and non-financial.

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