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The Biggest Gamble of Your Life (Is College Worth it?)

December 7th, 2006

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In 2005, young people (ages 18-25) in the US gambled $67 billion. Not in Vegas or online poker rooms, but on a betterment program called college. Their hope is that the monies they are spending will allow them to earn more money over their lifetime. Many are paying for this wager by amassing a mountain of debt that will take years to pay off. Is it a good wager? Conventional wisdom says so, but with $67 billion on the line (and that's debt accumulated in just one year by college attendees) we should have more than conventional wisdom or parental pressures to guide the way to smart economic decisions. REEF's economic analysis shows that college is a financial mistake for more than half of the American young people today. Shielded from scrutiny in this transaction by an assumption of 'public good' are universities and college lenders who many expect to provide guidance to these young people. While the data hints at ways for some individuals to improve the odds of a positive financial outcome, half the people attending college should hear the frank counter-intuitive advice, "Don't go to college."

The analysis begins by assessing a college education purely as a monetary investment. Undoubtedly, there are other benefits beyond money to attend college, but it's such an enormous economic decision that it seems foolish to not fully understand the financial ramifications and use that as a primary factor in the decision process. Overall, college grads do have higher earnings than non-grads, but that's only part of the equation. A deeper analysis looks at the costs of acquiring that degree and the monies including interest charges which need to be repaid. (At the end of this piece is a complete listing of the data sources used and a walk through of the calculations.) Using a 40 year time career, here is the total return which look at earnings, college expenses and interest...


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Posted in: News by NewsBot on December 11, 2006 @ 12:00 AM

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