College Grads: Kudos on a Great Investment

Sure, you have debt now, but you'll get it back — and more

   
College Grads: Kudos on a Great Investment

It’s been a bit of an odd weekend for me.

Why? Well, on Sunday, I should have graduated college. I was supposed to put on my cap and gown, and sit through hours of my classmates’ names being called, all to walk across stage and receive what my four years were really all about: a diploma.

But I did all that last year.

You see, I finished my degree early and traded in that final year of parties … er, classes … for a year here at InvestorPlace.

While many questioned my decision when I made it, one thing is clear now that my “extra” year in the real world has come and gone: I couldn’t have made a better decision.

Because before working in the world of finance, I rarely thought about investments, much less the idea that college itself was one. But that’s precisely what it is — and precisely what a diploma symbolizes.

So, before I write anything else this week about the investments you and I might make in the financial markets, let’s take a quick second to celebrate the one great investment made by my classmates who did walk across stage on Sunday, as well as the countless college kids across the country who have or will soon be doing the same.

This might sound a bit silly coming from me — someone who has on several occasions decried the high cost of college and the resulting debt that’s sinking students and the broader economy alike. I see grim facts and figures — like the class of 2013 being the most indebted ever at an average of $30,000 in loans — and can’t help but be a little concerned about the debt-hangover college can cause.

But if we remember that college is an investment, we soon realize that a scary pile of debt is just the cost of playing ball right now.

Just consider a recent report titled “Should Everyone Go to College?” that has been making the rounds. The report was framed to show why the answer is “no,” but as The Washington Post noted, the ROI it breaks down actually makes the case for why most people should indeed go to college.

As the Post notes, researchers at the Hamilton Project have calculated that the annual ROI for a college education has stayed at around 16% for the past few decades … and that’s not even including financial aid. That’s a pretty darn good return — much better than the average 6.8% return you’ll get in stocks, and almost on par with the breakneck pace they’re running so far in 2013.

If you break it down by college major, things aren’t quite equal across the board. My private liberal arts degree won’t have the same ROI as my friend who got an engineering degree at a cheaper but still high-quality state school.

But that’s still not a case against college.

As The Atlantic recently noted, more nuanced discussions — whether looking at geography, school, degree and jobs — are important to consider when looking at debt itself and make it difficult to lay out a blanket statement regarding the detrimental effects of student debt.

And to top it off, looking at the flipside of the coin shows that even a nuanced look at what said debt can lead to shows that, in just about all cases, college is still one savvy investment.

For one, the Post goes on to say, “The school category with the lowest ROI still has returns of about 6%. Worse than the stock market, sure, but still better than just about any other investment you can think of.” Not to mention, every single major listed still reports higher lifetime earnings than the average high school graduate.

And as Gettysburg College president Janet Morgan Riggs noted in a previous interview: “College graduates make about a million dollars more than high school graduates across their working lives.”

Yes, the investment comes at a cost (in this case, student debt). But that’s why it’s called an investment, not a freebee.

So go ahead, recent grads. Congratulate yourselves — not just on surviving four years of frat parties and finals, but on starting out your investing career on a pretty good note.


Article printed from InvestorPlace Media, http://investorplace.com/2013/05/college-grads-kudos-on-a-great-investment/.

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