The Economics of a College Degree

Shelbie WilliamsFeb 11th, 2021

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Maria Gonzalez's family immigrated to the United States several years before she was born and worked for decades to grow their florist business in Brooklyn, New York. They worked long hours and expanded to several locations around the city in the hopes of increasing their income enough to afford a good college for their daughter.

With high school graduation approaching, Maria and her parents sat down to consider what colleges she should apply to and what federal grants and scholarships she could get to offset the expense of tuition.

Unfortunately, when Maria applied for student aid, the U.S. Department of Education told her that her "financial need" was determined by a formula that analyzed her parents' assets and income. This formula determined that their Expected Family Contribution would be too high to qualify for any federal grants.

When the Gonzalez family looked further into tuition costs at Maria's top three college choices, they were dismayed to find that their out-of-pocket expenses would be more than $20,000 a year to send their daughter to college! They simply could not afford to contribute the full annual tuition on top of their own mortgage and business costs, so Maria told them that she would apply for a student loan to help cover the cost of her education. It seemed like the only solution.

Unfortunately, the Gonzalez family's situation has become the norm for Americans: too "rich" to qualify for federal grants, but too poor to pay for college outright.

65 million families in the United States meet this definition, landing on the spectrum called "The Debt Zone."

What exactly is the Debt Zone? It is the bracket of annual household income from $50,000 to $200,000 considered "too wealthy" for most federal grants...but typically this income is too low to pay out of pocket for the traditional college experience.

One of three things often occur for these families:

  1. Students skip college,

  2. They drop out when it becomes too costly (especially if they are first-generation college students), or

  3. They graduated with an average of $30,062 of student loan debt (as of 2019) compounded by the additional opportunity cost of not being in the workforce for the last 4-5 years.

While going straight into the workforce is a great option for some career paths, the fact remains that college is a near-essential for most people. This Debt Zone dilemma seems to doom students to a lifetime of paying off their college loans. More and more students and their parents are recognizing the true debt crisis unfolding in education, with the national student debt exceeding 1.6 trillion dollars.

Is there a better way than ushering our youth into a lifetime of compounding debt as soon as they graduate high school?

That's the problem that Pearson Accelerated Pathways was founded to solve. College education is still one of the most important factors in future employment and earning potential, but we didn't think it should be so cost-prohibitive. So, we decided to think outside the traditional four-year college experience and create a higher education option that provided everything that the traditional experience does not: flexibility and low cost, so that as many students could graduate debt-free as possible.


Ready to see if Accelerated Pathways can help you avoid college debt following you around? Take our two-minute assessment to see if you're a good fit!


We saw that the two highest costs of college were overhead and opportunity.

Overhead

Colleges charge you general tuition that covers more than just your classes. It also includes campus upkeep, extracurricular programs, tenured professors, and more. Because they have to be able to make money in order to continue operating, they pass these hefty expenses on to students, whether or not those students take advantage of all the extras that they're paying for.

Opportunity

Opportunity cost is a less obvious cost of college, but consider this: how much money could you have made if you had gone straight into the workforce INSTEAD of going to college?

Sure, the hope is that eventually your degree will pay for itself. But have you ever stopped to think about how long it could actually take to make up for the loss of work experience and pay off your student loans and surpass the income level that you would have been making anyway without a degree? You might be surprised.

Check out this video for a complete breakdown of the opportunity cost of going to a traditional college.

With Pearson Accelerated Pathways, you can eliminate that opportunity cost and achieve the best of both worlds, earning real-world experience in the workforce while still having the time to pursue a debt-free college degree.

As the video explains, taking this alternate path to college graduation results in $135,000 or MORE in savings. What could you do with an extra $135,000 laying around?

If the idea of "the college experience" is not as important to you as getting busy and entering the workforce, consider accelerating your trajectory and turning your Debt Zone into a lifetime of savings. By taking advantage of all the time and money-saving options that Pearson Accelerated Pathways offers, you can be sure of finding the most flexible and affordable path.

However, if you want to spend part of your studies on campus, while still saving money on your degree, it's possible! Talk to a Pearson Accelerated Pathways advisor about your plans. They will help you examine your chosen college and find ways to reduce costs.

There is no one right way to do college. Wherever your unique story leads, Accelerated Pathways will help you achieve your goals without falling into a lifetime of debt. You can learn more about how our program works here, or take our two-minute assessment to find out if Accelerated Pathways is a good fit for you.

Shelbie Williams

If Shelbie has a cup of tea, a good book, or a deep conversation, she is a happy camper. With a background in accounting, classical music, and blogging, she believes learning is one of life's greatest adventures.