We have an alarming trend in with our current college students and that is that most do not graduate in the normal four years. It does not sound like such a big deal, but it is and that is the point of this blog.
Any high school student who understands basic math should know how to deal with compound interest. If they don't we all have a bigger problem. I am going to use simple compound interest math to show the impact of the decision to take more than the normal four years to earn a BA or BS degree. Here are the assumptions:
(1) Cost for college tuition and books is $20,000 per year
(2) Cost for living expenses is $20,000 per year
(3) Each student entered college at age 18
(4) Each student works 2000 hour per year upto age 60
(5) An interest rate of 5% is used to calculate the "present worth" of their degrees
(6) Assume student A graduated in 4 years and worked for 38 years
(7) Assume student B graduated in 5 years and worked for 37 years
(8) Assume student C graduated in 6 years and worked for 36 years
Here are the results of my calculations on the data above and the "extra" earnings each will need to make to get back "the bait" of their college cost. You can look at this as the "payback" required for any investment. The extra earnings per hour are:
(1) Student A---------------$5.12/hour
(2) Student B---------------$6.63/hour
(3) Student C---------------$8.23/hour
As you can see, there is a cost for not completing college degrees in the normal periods. There are other implications as well. Taking longer to graduate "reduces" the number of college educated workers that we have in our economy. If normal students work for 38 years, the impact of those who take 6 years to graduate reduce our effective workforce by over 5.26%, That alone is a big deal.
I leave to you to show that one of the worst decisions is for your child to get a Masters degree in social work. It has a high cost on the front end and a short period of modest earnings.
PS--Check out my earlier blogs on the impact of how long it takes our colleges to produce a medical doctor. Most doctors don't start real work until about age 35 and only work for about 30 years.
Any high school student who understands basic math should know how to deal with compound interest. If they don't we all have a bigger problem. I am going to use simple compound interest math to show the impact of the decision to take more than the normal four years to earn a BA or BS degree. Here are the assumptions:
(1) Cost for college tuition and books is $20,000 per year
(2) Cost for living expenses is $20,000 per year
(3) Each student entered college at age 18
(4) Each student works 2000 hour per year upto age 60
(5) An interest rate of 5% is used to calculate the "present worth" of their degrees
(6) Assume student A graduated in 4 years and worked for 38 years
(7) Assume student B graduated in 5 years and worked for 37 years
(8) Assume student C graduated in 6 years and worked for 36 years
Here are the results of my calculations on the data above and the "extra" earnings each will need to make to get back "the bait" of their college cost. You can look at this as the "payback" required for any investment. The extra earnings per hour are:
(1) Student A---------------$5.12/hour
(2) Student B---------------$6.63/hour
(3) Student C---------------$8.23/hour
As you can see, there is a cost for not completing college degrees in the normal periods. There are other implications as well. Taking longer to graduate "reduces" the number of college educated workers that we have in our economy. If normal students work for 38 years, the impact of those who take 6 years to graduate reduce our effective workforce by over 5.26%, That alone is a big deal.
I leave to you to show that one of the worst decisions is for your child to get a Masters degree in social work. It has a high cost on the front end and a short period of modest earnings.
PS--Check out my earlier blogs on the impact of how long it takes our colleges to produce a medical doctor. Most doctors don't start real work until about age 35 and only work for about 30 years.
