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College degree is still worth the (very considerable) cost

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With college costs soaring and new graduates struggling to land jobs, is higher education still worth the money?

Yes, according to an analysis by one recent college graduate who has studied the issue carefully.

Sarah Millar, who is now gainfully employed as a research analyst at ConvergEx Group in New York, examined the topic in a new report combining empirical data with her own experience as a 2011 graduate of Trinity College in Hartford, Conn.

"Did I just waste the last four years of my life?" Millar writes. "Sure, I enjoyed my time at Trinity, but I could have used that time -- and money, for that matter -- to actually start a career."

(Millar points out that she wrote a 200-page senior thesis, in English and Spanish, on democratic transitions in Spain and Portugal -- which, if nothing else, raises questions about the exacting standards of her alma mater.)

The good news is that college pays off, Millar concludes, citing data from a variety of government and private sources.

The average take-home pay of college graduates is nearly twice that of their high school counterparts: $38,950 vs. $21,500. Even factoring in student-loan payments, college graduates make more in their first year of work than those with only high school diplomas. And history shows that a college graduate can expect his or her income to increase 2.2% annually over a lifetime vs. 1.9% for the high schooler.

The advantage of college shows most clearly in the vastly different unemployment rates of the two groups: 4.4% in November for collegians compared with 9.6% for those with only high school diplomas (and an abysmal 13.8% for those who never finished high school).

Over 40 years, the college graduate's earnings would top that of a high-school counterpart by more than $1 million. Financially speaking, college is worthwhile as long as the total four-year cost is less than $715,000, which, at least at the moment, it is.

"The bottom line of this analysis is that college pays, literally and figuratively," Millar writes.

But Millar details the high price of higher education.

College costs have climbed an average of 6.4% a year since 1981, far surpassing the 0.4% annual rise in income growth, Millar writes.

Students (or more likely, their parents) shelled out an average of $73,500 in tuition payments over the last four years. And when measured againt the $84,500 earned by those who entered the workforce four years ago, the college graduate is $158,000 in the hole. Add in student loans and the deficit can top $200,000.

For the sake of comparison, someone could purchase a Subway or a Tasti D-Lite franchise for about the amount spent on college, Millar writes.

She points out two factors to consider when deciding on college: the name brand of the school itself and the intended course of study.

Average starting salaries of new graduates generally are higher at big-name schools such as Caltech ($69,600) or Princeton ($56,900), Millar writes. The average for a UCLA grad is $49,200. More examples can be found here.

Perhaps more important is what a student majors in.

"A poetry major from UPenn may not fare as well as an electrical engineer from Penn State," Millar writes.

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-- Walter Hamilton

Photo credit: University of Chicago

But Millar details the high price of higher education.

Young people think college is critical but too expensive

Students at UCLA study. Many worry about the expense of college.

Amid today's grim economy, young people think higher education is an even more critical stepping stone for their generation than it was for their parents.

But they worry that college is far less affordable than it was just five years ago. They fear taking on loads of student-loan debt. And they oppose proposals to cut federal financial aid.

Those are the findings of a survey released Wednesday by three public-policy groups -- the Institute for College Access & Success, Demos, and Young Invincibles. The groups polled 872 adults, ages 18 to 34, from Sept. 25 to Oct. 4.  The margin of error is 3.32 percentage points.

In a nod to the rancorous debate about the role of the federal government in backing student loans and funding other elements of higher education, the sponsors of the study stressed that respondents' opinions cut across racial, econonomic and -- most important -- political lines.

"Young adults across party lines are looking for leadership from Congress and sending them a message: make college more, not less, affordable," Jennifer Mishory, deputy director of Young Invincibles, said in a statement. "Protect the student aid that helps millions afford college and job training every year."

For example, "significant majorities" of Democrats, independents and Republicans are against reducing  access to federal Pell grants or charging interest on loans while students are still in school, according to the survey.

The poll found that 76% of people say college is less affordable today than five years ago and 73% believe graduates have more debt than they can handle. And even though it could reduce the federal deficit, 3 of every 4 respondents do not want Pell grants to be cut.

“This survey clearly shows how young adults view higher education today: It’s more important than ever but also less affordable and it comes with too much debt,” said Lauren Asher, president of TICAS.

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Photo: Students study at UCLA. Credit: Mariah Tauger/Los Angeles Times

California launches revamped 529 college-savings plan

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California's revamped 529 college-savings plan is in place.

Investment giant TIAA-CREF has taken over management of the state's ScholarShare program from Fidelity Investments. Among the changes to the plan are a new lineup of investment options.

The revamped plan has 19 investment options, with fees ranging from 0.18% to 0.62%. That compares with 15 investment options costing 0.25% to 1.06% in the previous plan.

The accounts of existing ScholarShare investors will be transferred automatically to funds with similar investment styles and time horizons, according to the state treasurer's office. Click here for details about the changeover.

ScholarShare has more than 300,000 accounts holding roughly $4.3 billion in assets.

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Photo credit: Notre Dame University

California to close part of 529 college-savings plan

CollegeCalifornia is dropping a portion of its 529 college-savings plan.

Early next year, the state will close its “advisor-sold” unit, a small portion of the 529 in which residents invest in the plan through brokers and financial planners.

The state this year announced a revamp of its 529 ScholarShare plan, with mutual-fund
giant TIAA-CREF replacing Fidelity Investments as program manager.

TIAA-CREF will oversee the so-called “direct” portion of the 529, in which residents invest directly in the program (as opposed to buying through brokers or other outside advisors, which normally involves additional fees).

The “direct” unit, which has assets of $3.9 billion in 277,343 accounts, is much larger than the “advisor” unit, which holds $283 million in 22,565 accounts. Investors in the advisor program will automatically be shifted to the direct portion next spring.

TIAA-CREF will begin managing the direct program Nov. 7. Annual fees will range from 0.18% to 0.62%.

The state treasurer’s office tried to maintain the advisor program but couldn’t find a company willing to manage it.

“The decision to drop the advisor-sold plan was a difficult one and made only after ScholarShare made a concerted effort to keep it going,” Joe DeAnda, a spokesman for the treasurer’s office, said in a statement. “In the end, we were not able to find a manager that could deliver a competitive plan for our account-holders, and we felt the best option was to transfer them to our direct-sold plan.”

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-- Walter Hamilton

Photo: Graduates of Emory University's School of Theology celebrate during a commencement ceremony in Atlanta. Credit: David Goldman / Associated Press

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