I just happened across two pretty interesting articles that I wanted to share with my own thoughts. They’re both related to experiments in changing how we pay for college. I’m a bit skeptical of both but wanted to share further thoughts here.
The first is an on-time graduation incentive. As I’ve mentioned a few times in previous posts, 4- and 6-year graduation rates are slumping and keep going down. I’ve also mentioned the power of very clear, immediate incentives (particularly financial ones) in driving our behavior, and how embracing them will help us habitualize the behaviors we want. To whit, I’ve caught wind that the University of Baltimore is offering the incentive of a free semester of tuition for students that graduate on time. Possibly a very good incentive structure, though it’s obviously going to lead to a dent in tuition dollars (8% or more) that would have to be made up somewhere else. It could possibly be made up by increasing tuition rates for those that don’t graduate on time, though this might just increase the drop-out rate even as it lowers the late graduation rate.
The second is a “pay-it-forward” system being proposed in Michigan, in which university attendees could opt to pay 4% of their income for the next 20 years instead of paying tuition up front or taking on student loans. Sounds pretty great, though I think it actually pretty severely fails the incentive test that the Baltimore plan seems to embrace. The biggest risk is that those who opt-in will have low-income degrees (like art) and the high-income degrees (like engineering, business) will opt out, lest they pay significantly more than their fair share–this could quickly make the plan insolvent.
The general upshot of this is that state universities are trying to get a bit more creative about how to pay for college and how to boost graduation. For anyone reading with with young kids (or if you are a young kid reading this… at which point: bravo!), this means there may be better payment structures that are going to exist 10 years down the line, which is great.
For those of you in college or about to be, don’t depend on any magic bullet to make life financially easier. Our generation here is probably at a local nadir of financial fortune in college, and we have to play the game smarter than anyone before (and, hopefully, anyone after).
My general advice for those of us in the game right now:
1) See college as a real investment, and do the math. How much more are you likely to make with your degree (pick your most likely major and career choice) than without it? What will your yearly student loan contributions look like? Where does the payoff happen? What happens when you subtract four years’ lost income due to your being in college? (Remember that we’re assuming that you’ll graduate on time–which, of course you will, because you’re the kind of guy that’s reading a blog like this and is ready to make it happen.)
2) If it’s going to be a financially disastrous decision, then you might need to reconsider. You don’t need to be in college to learn a lot that you might be really passionate about. I’ve learned much more language (German, Hungarian, Czech), philosophy, and economics outside of college than in it (in fact, I didn’t study them at all in college) and these are what really get me excited. Worried about not having great groups to discuss your passions with, learn from, etc? I present to you: Meetup.
3) Don’t see late graduation as an option. You’ve got to graduate on time if you’re going to make college financially viable. The odds aren’t with you… unless you stack the deck. Obviously I’m passionate about the idea that everyone that goes to college can and should graduate on time–we’re just not taught the key skills we need to do so. It’s why I proudly wrote How to Crush College, and why I really believe it’s going to be one of the most valuable investments you could make.