November 10 the Wall Street newspaper stuck a pin in an otherwise accepted “truth”; that post-secondary education is always a good investment. In a front-page article titled “USC $ 115,000 Diploma Makes Low Pay, Huge Debt,” the Newspaper shows that in the college and graduate world, more isn’t always better.
First a word of warning. The data seems to confirm that the benefits of getting a college education are undeniable. In January 2020, Forbes magazine found that the median earnings of those with a bachelor’s degree (no graduate degree beyond the bachelor’s degree) working full-time were $ 24,900 higher than those of high school graduates. But this conclusion raises a larger question: In a world where a year of undergraduate study ranges from $ 15,000 to $ 75,000, what does the student of $ 75,000 get that the student of? $ 15,000 does not get? The Newspaper suggests that when it comes to post-secondary education, the returns do not necessarily match the investment.
The article focuses on the University of Southern California. It is classified by the United States. News and World Report as # 27 among national universities. The university’s website returns viewers to its 2018 rating as No.17 nationally according to a guess who? The Wall Street Journal.
Today’s article slips a “mickey” into the academic cocktail. The Newspaper estimated the cost of $ 115,000 for a master’s degree in social work from USC. The US news ranking places this program as the 25th largest college in the United States. The Newspaper looked at data from the US Department of Education and found that after two years on the job, half of USC graduates with a master’s degree in social work earned $ 52,000 or less. Data shows that much of this tuition is borrowed and that Newspaper Correctly notes that a debt of $ 100,000 or more does not easily compare to a job that earns around $ 50,000. 2018 graduate Mauri Jackson told reporters last year she made $ 59,000 trying to manage $ 243,000 in debt, of which $ 167,000 was owed to USC.
In the world of divorce, this is a very common situation. Many couples want their children to earn undergraduate or graduate degrees, and many have cautiously put money aside in UTMA or 529 Plans to help this goal. But when it comes time to select a program, even knowledgeable intact couples often grant the wishes of a child between 18 and 23 years old. Question: How many of you would hand $ 50,000 to $ 250,000 to an 18-23 year old and say “You choose where to invest it”? And yet, it is done every day.
The problem becomes more acute in a divorce setting. There we divide the pool of marriage funds. 529 Accounts are technically marital assets and can be divided. But most divorcing couples agree that they want this fund set aside to fund their children’s education. That in itself is not a problem. But in divorce cases, most clients find it difficult to say “no” to children for fear of being labeled a “bad greedy parent.” Their incredibly bright child decides she wants to go to an elite private school that will cost $ 50,000 a year. His favorite field is social work, anthropology or art history. These are all great topics and the education will be fabulous. But returns on investment are marginal at best when viewed through an economic lens. If the divorcing couple had agreed to limit tuition fees to $ 100,000 and keep the remaining $ 100,000 they “could” have spent on college education, that $ 100,000 could earn $ 400,000 in cash. 20 years if they were 8% invested. The average return on S&P 500 stocks over the past decade has been 13.9%. We see many clients telling their children to borrow their college funds while they keep the 529 funds invested with the idea that they will pay off the debt with the funds they kept invested. It’s not a bad idea, but it ignores the original question of what the degree will pay for their child. Mauri Jackson may very well find her job as a social worker extremely rewarding, but when her head hits the pillow at night, she dreams of the day she will be free from $ 250,000 in debt. Children, even the smartest ones, aren’t in a good position to make these decisions because they haven’t done a lot of $ 250,000 transactions. Today, the university is the first house and unless they play the game well, there will be no tokens to acquire that first real house. Likewise, a parent trying to make ends meet with Social Security is going to wonder if the graduate degree in meteorology he bought for his daughter 20 years earlier was better than having an extra $ 200,000. in retirement savings. It is never about the money until it is.[View source.]