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The High Cost of Higher Education

With the rising cost of higher education, more and more people have been asking the question lately: How am I going to pay for my child's college education?

There's no easy answer to this, and for those who want their kids to succeed by sending them to the best possible school, it might seem like the biggest challenge they currently face.

But getting your child into the best possible school raises another interesting question: How do we know that the higher tuition prices at "better" institutions equal a better education and career outlook?

To answer this, a few layers need to be peeled back to see that some colleges deemed "best" may actually trail some others in terms of the value a student (and parents) can receive.

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The Brookings study. While you would expect the average Harvard graduate to make a higher salary compared with a college graduate at an "average" institution, this comparison doesn't take into account the cost of their education and other factors.

According to Harvard's website, its tuition, room, board and fees for this upcoming academic year total more than $60,000 for those without financial aid. So for four years, you're looking at about a quarter of a million dollars. Before you hyperventilate, read on.

Recently, the Brookings Metropolitan Policy Program released a study ranking schools on midcareer earnings, occupational earnings power and the loan repayment rate of the typical graduate. In essence, it wanted to see if the high cost of college correlated with a better overall situation for the graduate.

The study concluded that while Harvard grads do earn a lot and can repay their loans at a good rate, they were outranked in those three categories by such schools as Washington and Lee University in Lexington, Virginia, Harvey Mudd College in Claremont, California, and Clarkson University in Potsdam, New York.

What this means is that other schools may either not cost as much and yield a similar salary and success of loan repayment, or they may cost about the same but generate higher earnings potential.

This is not to say that Harvard or other traditionally highly ranked schools should now be avoided. It's simply saying that there's an alternative to look at when searching for a great value for your higher educational dollar.

Field of study. Another consideration is the field of study. The U.S. Census Bureau published data on earnings by field of bachelor's degree and occupation group, and found that on average, individuals with a bachelor's earn about $2.4 million over their careers.

But remember: Not all degrees and career paths will earn the same. While we know jobs in the technology field have high earnings potential, does that also mean that if your child decides to become an arts major and work in education, she's resigning herself to a life consisting of ramen noodle dinners?

While that's not quite the case, those who go that route earn about a full $1.5 million less in their careers than those who major in computers and math and work in the architecture and engineering field.

This is not to say someone shouldn't go after their dream, but there should be some real expectations about what one can expect to earn to pay off student loans.

Job requirements. So far we've discussed bachelor's degrees, but what about an associate degree, combined with specialized training? In some careers, especially in the creative fields, this may be the most affordable way to go.

Many community colleges are also a fraction of the cost of a four-year school, and they provide the basics to these careers. And with the rise of online, nonaccredited courses, such as those found on sites like lynda.com, they can help the individual learn more specialized skills afterward at a lower cost.

If your child has aspirations of becoming a freelance photographer, graphic designer or Web developer, this route might be worth exploring. Something also to consider is that many times, freelancers are judged much more on what they've done rather than where they went. Using time in college to develop a portfolio can set your child up to jump into this line of work right after graduation without the weight of massive loan debt.

Alumni network. Finally, one of the more overlooked factors is not so much where you go to college, but who you go with. While it certainly doesn't hurt to attend a school long known for successful grads, your child doesn't necessarily need to enroll in Yale or Princeton to tap into a solid alumni network.

According to college research website Campus Explorer, schools such as Penn State ($43,000 out-of-state tuition per year, according to school website) and Indiana University ($47,000 out-of-state tuition per year, according to school website) have some of the largest alumni networks that can help recent grads land their first job and progress from there.

Also, be sure to check out LinkedIn. You can search by schools and see what types of positions grads of a certain college or university have that your child may be interested in. You may be able to find that he doesn't need to attend a school that's a financial reach to attain his dream job.

Choosing a college is one of the most stressful and important decisions your child is going to make in his or her life. But it doesn't have to be an exercise in "the more you pay, the more you get."

By looking at some of the factors above, you and your child can be in a better position to make an informed decision to get the higher educational value you're looking for.

Securities offered through SII Investments Inc. (SII), Member FINRA, SIPC. Advisory services offered through Scarborough Capital Management, a registered investment advisor. SII and SCM are separate companies. Neither SII nor SCM provide tax or legal advice.

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.



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