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Community Corner

College Dollars and Sense

How much is an education worth?

College education is a huge investment.

To better understand the cost of college, you should think of college tuition as the aggregate cost of a four-year education. There is no point in thinking of the cost of college in annual terms since one year of college doesn’t do you much good. You need to earn a bachelor's degree, which in most cases consists of four years. If a college charges an annual tuition of $30,000-plus, and $10,000 for room and board, and another $2,000 in fees, the total cost of a bachelor degree is at least $168,000. This number excludes books (which you will probably need), incidentals (such as shampoo) and inevitable tuition increases.

In the end, you will probably spend at least $175,000 for a bachelor's degree from a private college. It is remarkable how many people will commit to spending that much money on an education without knowing very much about the college, with little or no independent research, and with no guarantees. Imagine if you bought $150,000 worth of stock from a company without any independent analyses, without any SEC regulation, and without any recourse if you later discover that the company prospectus did not disclose the whole truth. That would be crazy, wouldn’t it?

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While $168,000 is a lot to ask a middle-class family to spend on something that has no guarantees, some colleges take this responsibility seriously, but many do not. There are colleges that continue to increase tuition and then spend $50,000 buying teak trashcans at $4,000 each. (No, I am not making this up.) Colleges have raised their tuition far above inflation annually for decades – all but one private college have raised their tuition fees every year for the past four decades. Many colleges continue to raise tuition despite the fact that they do not need the money.

To make the problem worse, colleges are increasingly offering loans instead of grants to students. In 1980, loans comprised about 20 percent of all financial aid; now, loans comprise about 80 percent of all financial aid. More recently, a few colleges, such as Princeton, have decreased or eliminated loans; most or all financial need will be met with grants instead of loans. But this trend is limited to a few very wealthy colleges. More than ever, most colleges expect students to borrow money and bear the brunt of these excessive, continuous tuition increases.

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Today, the total tuition+room+board costs of the most expensive private colleges are mind-boggling: Sarah Lawrence $54,410; NYU $51,991, George Washington $51,730; Bates College $51,300; Skidmore College $51,196, Johns Hopkins University $51,190, and the relative bargain Princeton University at $47,020 (making it only the 96th most expensive U.S. college).

Currently, there are over 100 colleges that have a 4-year total cost of over $200,000 – that’s just slightly under the 2010 median new home sale price of $222,600. Those $200,000 colleges include all the Ivies and every highly desirable private college in the nation (Duke, U. Chicago, Johns Hopkins, Swarthmore).

Colleges expect you to pay a lot, and they will expect you to graduate with $20,000 (or more) in debt; you should keep these numbers in mind as you investigate colleges. Be aggressive and thorough in your research.

College research is very difficult.

Some people say they research colleges. The question is: what’s the source of your information? A college’s view book and web site are almost entirely useless. We will discuss a few pieces of useful information in later articles, but you should understand that most college marketing is designed by outside marketing firms whose job is to sell the college. Typically, the marketing firm knows little about a college.

Marlboro College’s view book once contained photos of and facts on Langston Hughes, Eleanor Roosevelt, Jack Kerouac and Janis Joplin. Are they alumni of Marlboro College? No. In fact, only Hughes even graduated from college. But that didn’t stop Marlboro from co-opting these famous names. The view book was created by Mindpower Inc., a college marketing company in Atlanta (Marlboro College is in Vermont). Most Marlboro students felt the view book did not represent the college; one Marlboro student called the view book “grossly inaccurate.”

A University of Pennsylvania view book is emblazoned with “THE NATION’S FIRST UNIVERSITY” on the outside cover. I suppose if using the word “university” makes you a university, then this might be true. (In this case, I will start referring to myself as a “billionaire.”) But this statement is disingenuous at best. Yale was the first college to offer a Ph.D. (in 1860), and many others were far more university-oriented than Penn. But even better is the two-page, full-color overhead photograph (presumably) of a class being conducted that serves as the centerpiece of the view book. The room is an impressive, imposing oak-and-brass library of the private 18th century sort (e.g. books behind glass, statuary of famous dead Greeks and Romans, big white-faced clock with roman numerals, grand round oak-looking table). The accompanying caption informs the reader that “Nearly 75 percent of all classes in the college at Penn have fewer than 20 [students].”

The message Penn is trying to convey to you is clear: We have fancy classrooms, and almost all our classes are small. And yet there are at least 25 students in the picture (the back of the classroom is cut off, so there may be many more). And of the 25 students and one teacher in the photo, only 12 are actually at a table; the others are crammed into fold-away chairs and sitting on the floor. You would think that if nearly all Penn classes have fewer than 20 students, they could have found one of those small classes for the view book.

In 1998, Wesleyan declared itself “The Independent Ivy” even though Wesleyan is not a member of the Ivy League. Siena College once held a contest to win a Palm Pilot for those who requested view books. The University of Miami has sent letters from Gloria Estefan, and Princeton gladly associates its name with F. Scott Fitzgerald (who attended but never graduated from Princeton).

View books often provide the most useless information (Maya Angelou and Tom Brokaw spoke on campus last week) while withholding relevant data (crime statistics, teacher salaries). Colleges do a wonderful job of selling themselves, but much of their marketing ranges from the irrelevant to the deceptive.

Other major sources of information are college guides and special “college editions” of magazines. They typically provide average SAT scores, acceptance rates, number of applicants, number of minority applicants, student/faculty ratio, and many other seemingly objective facts.

The problem? The majority of these “facts” are self-reported: colleges report any number they wish as long as it appears reasonable. For example, a college may exclude “special admits” when calculating its average SAT score, and for this college, a “special admit” may be anyone whose SAT score is low. Some colleges count international students as both “international” and “minority” students, so when they report that they have 400 minority students, half of them may actually be international students.

Colleges massage numbers all the time, and they occasionally get in trouble, but because there are no regulations regarding methodology, colleges continue to report whatever numbers they choose. So even the college guidebooks are misleading because most of the information comes from the college marketing departments.

Several guidebooks contain the results of student surveys. While these can be useful, they are more often entertaining than informative. A student may say that the college’s registrar is awful or the library is great, but such conclusions are naïve unless the student has compared his college’s registrar and library to other colleges’ registrars and libraries. Since most college students have only attended one college, they have no comparative basis to conclude whether or not their college is better or worse than any other college. Therefore, student surveys are of limited value. In addition, most student surveys are highly unscientific, and the student sample size is too small to be statistically relevant.

So colleges are wildly expensive and making an informed decision is difficult, but there are many things you can do to alleviate the cost and obtain good information.

This is the first in a three-part series. The next installment will look at worthless college information, including student-faculty ratios and libraries.

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