You paid how much for that college degree?

Disclaimers:

1.    Some of you went to liberal arts colleges with very strong networks. Those are (in some cases) worth more than I can measure in dollars.

2.    Some of you had an amazing experience at a school I mentioned here so I apologize for that, but we are talking about averages. So please replace the name I mentioned with some other school you don’t like. These are just examples.  

3.    The top 10% or so schools still have a name advantage and preferential hiring, but the advantage disappears really fast as you get outside the very top.

Recently, I started working with a new client who wanted to send her son to a private, liberal arts college not many of us have ever heard about. The price tag is about $50k per year for tuition alone and although there is a 529 with some money in it, it is nowhere close to what is needed to finance 4-5 years of college. She was set on this; nothing else mattered because she believes that a liberal arts education gives you a unique perspective on life. After talking to the son, I also realized that he has no idea what he wants to do in college and is planning on taking some classes to figure it out.

You know what else also gives you a different perspective on life? $200k in student loans that one can accumulate from a liberal arts college and a degree in history. Or $200k less in your retirement account because you decided to sacrifice your own retirement in order to send your kid to that expensive school.

I am biased. I have strong opinions on this topic. I have my own liberal arts education to reflect on. But I also spent the last 10+ years in academia and after working at 4 colleges and having kept in touch in with about 100 students, I now have even more ideas. I worked at a small, expensive liberal arts college. I worked at a large state school where many students go because it is located on a beach in Florida. I worked at a big state school with a big football team. And now I work at a huge but cheap state school with no football team. And here is my conclusion: on average (because there is always an exception), at the end of the day, where your kids go to school has very little long-term impact on their professional success in life. The ridiculous price tag is (mostly) NOT worth it.

Here is what else I believe. If you are a parent or financial planner, as you think about your kids’ future/clients kids’ future college plans, at least consider some of these points.

1.    You are doing your kids a great disservice if you do not involve them into the financial aspect of the college application process. No kid should be completely delusional about what paying $50k per year means to his parents’ lives. I am thinking that somewhere in middle school is a great time to start having this conversations. If nothing else, I want you to remember that it is important that your kids are acutely aware of your ability or inability to pay for college when they consider their own plans.

2.    Johnny’s aspirations to go to a big Texas school while you live nowhere close to Texas need to be discussed. Why is this Johnny’s dream school? Do you understand that? Does he know that and can we find an alternative solution that makes financial sense and keeps him happy?

3.    Here is what most parents have no idea about: the individual program where your kid goes to college has way more impact on him/her than the name of the school. Going to a school that has a really good financial planning program (UVU, Texas Tech, CSUN-I had to sneak it in there) is going to results in your kid being taken care of, placed for internships and jobs, and overall, have a great career projection path compared to going to a bigger name school with not a well-developed, major-specific program. It is the quality of the classes in your major and how the program is run that is important. Are there exceptions? Sure. It is much easier to get hired in investment banking if you come from Harvard or Princeton, regardless of your major, than if you come from a New Mexico college no one has ever heard about. Is it impossible though? No. It is not. It may just take you longer and you may have to work harder. 

4.    The big fish in a small pond idea can be used to your greatest advantage in a college environment. Being the best student at a less known place is professionally more impactful than being an average student at a more competitive place. Push your kid to find a mentor, go to events on campus, go and camp in a professor’s office and get to know them. They need to hustle for a better future. This is way more important than the GPA. When the recruiter calls the professor and asks for a few names for an open job, guess who she is going to think about? Your kid.

5.    Did you ask your teenager what her major is going to be? Does he even know it at this point in life, as you are considering paying $150k out of pocket? Here is how I think about it:

If you kid has no clue about what they want to do in life, please go and pay $100 per class at a California community college (yes, it is that cheap for in-state residents) instead of $5,000 per class to figure it out. Let them take all the general education classes at a community college because at USC or UCLA, they are still going to have 300 students in that Math 101 class.

If your kid knows the major and it is not one that is in demand and he really, really wants to do art history, then look for a program that is known in that field. We are going back to point number 3 here. I do believe that in situations like this, paying more is mostly justified.

If she is planning on engineering, I don’t care much where she goes to college. She will be just fine. Together, figure out the supply and demand of the future profession to decide where it may or may not pay to spend the extra tuition money. Higher demand jobs offer more flexibility to where one could go to college and still have a great career afterwards.

6.    Will your kid go to grad school? Please save your money for that. A top 25 MBA is worth way more than the undergrad from the same school.

And now, let’s go back to money. As a financial planner, if I can make you understand that paying for UCLA (sorry, not picking on UCLA but that is a constant conversation I have with people in LA) is just not worth it for an undergrad in economics when you do NOT have the money and when you can go to a Cal State for way, way cheaper, I think I earned my fees. As a college professor who knows how the system works, I am probably more skeptical of your burning desire to send your kids to an expensive school when there is no money for it. And as a future college parent, I do my best. I do have a 529 hoping my kid is going to go to medical school one day but meanwhile, he is going to do his undergrad at whatever school I work for free because at the end of the day, does it really matter?