Memphis Commercial Appeal, October 26, 2008, Sunday

Memphis Commercial Appeal

October 26, 2008, Sunday

Memphis Commercial Appeal

College isn't always a sound investment
Many being forced to weigh loan burden vs. earning potential

By Megan Twohey

CHICAGO -- Kelly Stevens is suffering from buyer's remorse.

The 29-year-old from Fargo, N.D., took out more than $60,000 in loans to pay for a bachelor's degree in fashion marketing from the Illinois Institute of Art. She was convinced it would allow her to open her own store or work for a major fashion company -- basically, to make more money.

But nearly a year after graduating, she is waiting tables at a comedy club. Every week, she gets rejected from half a dozen marketing jobs. She can no longer make payments on some of her loans. She can barely scrape by.

"I can't open my own store in this economy," Stevens said. "Marketing jobs are among those that have been hardest hit. Sometimes it feels like I should never have gotten that degree."


Priscila Adeniji, a finance major at Chicago State University, is faring better than many college students these days. She has job offers from consulting firms with starting salaries of $55,000 a year, but many of her former classmates are struggling. Alex GarciaMCT

Money is only one of the reasons to go to college, of course. But with college costs skyrocketing and the economy worsening, the question of whether higher education is a worthy financial investment is no longer a no-brainer.

For decades, the earnings gap between college graduates and high school graduates grew and grew. Get a bachelor's degree, and you were almost guaranteed to be a lot better off.

But the gap in income has started to shrink in recent years. U.S. Census data show that in 2007 people with a bachelor's degree earned 90 percent more than high school graduates, down from a 96 percent gap seven years earlier. Meanwhile, more students are taking on more debt. And some graduates are unable to land jobs that allow them to pay back their loans.

Most experts insist that going to college is generally worth it. College graduates still earn substantially more than high school graduates on average: $59,365 annually compared with $33,609.

But they caution that some college choices are no longer a wise investment. Students destined for low-paying careers, they say, simply cannot manage certain debt levels. Loans can surpass $100,000 depending on the school and the borrower.

"If you're going to be a nursery school teacher your whole life, you should not be taking out a lot of loans," said Sandy Baum, senior policy analyst for The College Board and an economics professor at Skidmore College. "That's the problem. It's an investment people make without knowing how they will pay it off."

People in business jobs can manage $46,000, according to calculations the Chicago Tribune made with a formula created by Baum. So for Stevens, paying back nearly $65,000 in loans was almost certain to be a struggle. Now that she is stuck in a low-paying service job, it has become impossible.

Meanwhile, about one-third of college students drop out -- dashing any return on their investment.

Does attending an elite college make a difference? The answer is unclear. While some researchers have found that graduates of top schools earn more on average than those from less prestigious institutions, others have found no difference.

Debbie Quinn, director of guidance at West Aurora High School, said she doesn't dissuade students from going to college because of the cost. But she encourages them to think about their career path and potential earnings.

Recognizing that the cost of college could steer students away from important but low-paying professions, Congress passed legislation last year that will gradually cut interest rates on certain government loans, allow borrowers to make smaller loan payments if they are earning less and forgive the loans of students who serve in public-service careers for 10 years.

Private colleges are increasing the assistance they offer, so fewer students are required to take out loans and those who do will take on less of a burden, said Ron Ehrenberg, director of Cornell University's Higher Education Research Institute.

"The concern was that with high loan burdens, we were influencing the professional outcomes of students," Ehrenberg said.

Experts point out that the college experience is not just about financial rewards. There is also that business about learning a few things. Students are able to explore their interests. They often become inspired by subjects they never knew existed and are able to view the world through a broader lens.

"There's value added when it comes to critical thinking and moral reasoning," said Ernest Pascarella, a University of Iowa professor who has studied the effects of college.

The education also extends outside the classroom, through exposure to classmates from different backgrounds and participation in extracurricular activities.

Priscilla Adeniji, 22, a finance major at Chicago State University, says her choices at college appear to be paying off.

Scholarships have covered almost the entire cost of her education, making this the first year she has had to take out a loan, for $5,000. She graduates in December and the Big Four consulting firms already are dangling jobs with salaries starting at $55,000.

"Career-wise, college has been very important for me," she said. "But it's also about knowledge. If I wasn't in school, I wouldn't be able to understand what's going on with the economy and with other things that affect my life."

Greater Memphis Reacts

Tracey Dysart-Ford, Christian Brothers University dean of admissions: "I think students are taking into account the ability to find a job and the outcome of what their degree can provide. Some do talk about earning potential, but many want to be assured that there is a market out there for their specific field/career aspiration."

Daniel Bergeron, Arkansas State University Counseling and Career Planning Center staffer: "While I am not aware of it happening on our campus and I have only heard anecdotal evidence, I am hearing from other campuses that students are being asked to send money home to help pay parents' mortgage to avoid foreclosure on the family home. I can't vouch for the veracity, but it would certainly be a switch on the 'send money' letter."

-- Compiled by Mark Watson