The New Math on Choosing a College

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Worldwide Invest Better Day 9/25/2012

Despite the rising cost of tuition, demand for a college education remains incredibly high. What's changing, though, is the way that students and their parents decide where they'll go to get that education -- and that thought process has some encouraging implications about what the future may bring.

This month, The Motley Fool is reaching out to millions of investors to help guide them in their quest toward financial knowledge and independence. But while most people think of investing as buying stocks and mutual funds, the biggest investment many people will ever make is in their education. It's more important than ever to get your money's worth.

Checking your wallet
Not so long ago, choosing a college was simple: Students would apply to a host of schools and pick the best one that accepted them. Schools with strong reputations and high prestige attracted the most promising students, and competition remained fierce to get coveted spots on the rolls of the best-known colleges and universities in the nation.

But now, the reality of tough times has set in, and the economics of deciding where to go to college have become a lot more important. A brand-new study from the student loan division of Discover Financial (NYSE: DFS  ) reveals several key elements of the college-decision equation:

  • More than four out of every five parents still believe college is very important for their children's future.
  • Parents are cost-conscious about college, however, with 86% of those surveyed saying cost is an important part of deciding where to attend.
  • The after-college cost-benefit analysis of higher education has also gotten a lot more attention. Seventy percent of parents believe that earning potential is more important than or as important as choosing a major.

Parents aren't the only ones paying attention to the payoffs of a college education. Much of the scrutiny that Apollo Group (Nasdaq: APOL  ) , Corinthian Colleges (Nasdaq: COCO  ) , and other for-profit educational institutions have gotten from the federal government in recent years has centered on what happens to students after they finish their course of study. When student-loan default rates are high and job placement rates don't match up to students' expectations, it's hard to defend against criticism that the value an educational program provides doesn't add up to what it costs. And even if for-profit schools have gotten the lion's share of bad press, all colleges and universities face the same questions, especially as a tough economy reduces the number of opportunities waiting for graduates.

Marshaling all your resources
The encouraging result from the survey is that parents are more aware of their financing options than ever. With Discover and competitors Citigroup (NYSE: C  ) and Wells Fargo (NYSE: WFC  ) offering a wide array of loan products with different provisions and features, parents and students have to navigate a complicated array of potential solutions that have huge financial ramifications. With many students carrying five- or even six-figure debt with uncertain prospects to repay it, the best way to solve a potential problem is to attack it before you incur debt in the first place.

In addition, understanding financial aid options makes it much easier for parents and students to compare offers among multiple schools. Just as students fight to get into the best schools, schools fight among themselves to grab up the best students. Pitting schools against one another may have been unheard of until recently, but now, it's a perfectly acceptable strategy to try to eke out some extra incentives.

Be smart about education
A college education can be a vital part of putting together a successful career. But you can't just pick a school, drift through classes, and expect a perfect job to drop into your lap. It takes work, and the more of that work you do up front in picking the best school for you, the more likely it will prove to be the perfect fit.

Please stay tuned throughout the month for other informative articles covering a wide range of important topics. Let me also encourage you to take a look at the special website we've set up at On Sept. 25, we're taking a day to celebrate the art of investing, and we encourage your participation. Take a look at the site now and get on the path to personal prosperity.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter @DanCaplinger.

Fool contributor Dan Caplinger paid a lot of attention to cost when he went to college. He owns warrants on Wells Fargo. The Motley Fool owns shares of Citigroup and Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is an education in itself.

Read/Post Comments (2) | Recommend This Article (6)

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  • Report this Comment On September 12, 2012, at 11:27 AM, CluckChicken wrote:

    Also be smart about what you are getting a degree in. If you have a little interest in Business but really like English Lit, get the degree in Business and then return to school later for the English Lit. The opportunity to learn will always be there but the ability to pay may be another issue.

    Also if you are going for a non-technical dregee the difference between University of Big Learning and Community College of Learning may not be as big on your earning potenital as the cost difference. The technical and business degrees usually still have a significant difference in earning potential between Large schools and Community ones.

  • Report this Comment On September 12, 2012, at 2:00 PM, TMFDarwood11 wrote:

    Another option to consider is co-oping. It's possible to get an engineering degree and paid experience in your field of endeavor. One such college is Purdue University. Another is Drexel University.

    This is a practical option which provides work credit and real world experience plus pay for work completed. In the Purdue program, a student graduates in about 5 years, with 9 on-campus sessions and 5 work sessions. .

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