Financial Strain or Education Gain?

Why both advisors and families need to reevaluate the idea of going to college

Ric Edelman: It's Thursday, August 17th. How much money will your kid earn after they graduate from college? College students say that they expect to earn on average, $85,000 in their first job. Guess what? The average starting salary really is? 55,000. 35% less. And students say they expect to be earning over 200,000. Ten years after graduating. But guess what? The actual mid-career salary is an average of only 98 grand, half of what these college kids expect. So listen to Joe Biden. He's emphasizing that well-paid jobs do not require a college degree. He's provided hundreds of millions of dollars in federal grants for apprenticeship programs. Joe Biden is the first president since World War II to say that you don't need to go to college. The number of apprentices has increased more than 50% over the past year.

Meanwhile, the number of unemployed white collar workers is up 150,000 people in professional services management, computer occupations, engineering and scientists. We can blame AI and robotics. Robotics don't wipe out white collar jobs. They wipe out blue collar jobs. And the fewer blue collar workers you've got, the fewer white collar managers you need to supervise them. Layoffs in the information sector have nearly doubled in the past year, up 55% in finance and insurance, 25% in manufacturing. The Department of Labor says that of the 20 occupations that will create the most jobs through the end of the decade, two thirds will be blue collar jobs, paying an average of 32,000 a year. 

Students are beginning to listen to all this. Only 62% of the high school grads this year say they're going to college in the fall. That's down 6% from 2019. Job growth and jobs that don't need a college degree that's increased twice as fast as jobs that do need a degree. College enrollments down 15% in the past decade. A majority of Americans now say that college is not worth the cost.

Those who are going to college are spending less thanks to state programs. Minnesota is the latest state to give lower income residents free college. They pay college tuition and fees for families earning under 80 grand a year. UNC is doing the same thing. In Minnesota, this is going to help 20,000 kids, but it's creating a crisis. Not in Minnesota, in North Dakota, because Minnesota students are no longer going to North Dakota to go to college. More than half of the North Dakota State University's incoming class consists of students from Minnesota. It's half their football team. There are big implications for the future of North Dakota's workforce, because students tend to stay in the state where they went to school. So if these students are no longer going to go to North Dakota colleges, North Dakota won't have future workers. It's also going to have a big impact on North Dakota's source of population growth. Well, it could be that North Dakota schools are simply a bad deal. They need to get more competitive. 

The Institute for Higher Education Policy says 17% of the nation's colleges are financially harmful to students. 500 colleges with 1.5 million students are leaving their kids in worse financial shape than if they didn't go to college at all. Big employers like Google and IBM say that getting a degree is no longer necessary for some of their job openings.

43 million borrowers owe $1.6 trillion to student debt. Those payments resume in October, and those payments have been paused for more than three years for about 20 million of those people. The restart of payments is going to be $16 billion a month; 400 bucks for the average borrower or 9% of their pay. We're talking $100 billion worth of payments, money that these households would have otherwise used to spend or save or pay off other debts. Everybody's wondering if we're going to have a recession or not. This situation cannot possibly help.

Financial advisors need to change the college planning conversation with clients. If you're one of those clients, make sure you have that conversation with your children as well as your advisor.

You know, every week my wife, Jean, produces her own podcast. It's available at Self-care with Jean.com. Her podcast premiers every Thursday. It's self-care, mindfulness, overall wellness. You can listen to Jean's podcast anytime you like, everywhere that you get your podcasts, subscribe at Self-care with Jean.com.

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