When Is an 'Affordable' College a Bad Deal?

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It's easy to imagine that the well-worn path from high school to college to gainful employment has always been the norm, but you don't have to look too far back into the past to find a time when that wasn't the case. Only after the GI Bill took hold following World War II did Americans start going off to colleges en masse. In fact, we only recently surpassed the milestone of 30% of U.S. adults holding a bachelor's degree.

That being said, Americans' drive to get an education is growing at an accelerating rate. Enrollment in degree-granting schools rose 38% between 1999 and 2009, an astounding jump considering the same metric grew by just 9% in the preceding decade.

And that growth isn't just happening at four-year colleges and universities. In 2011, a record 43% of students were enrolled in community colleges. And what was once a small niche -- for-profit education -- has burst outward, climbing from 366,000 students in 2000 to 1.5 million by 2009.

As these for-profit schools become more and more commonplace, it's worth investigating whether they are worth the price of admission.

Dollars and Cents

Other than health care, no expense for American families has increased as much over the past 10 years as college education, so students should weigh their options -- both public and private -- carefully.

Of course, not every school costs as much as, say, Sarah Lawrence, which -- when tuition and room and board are considered -- adds up to $59,170 annually. But based on broad averages, for-profit institutions generally sit in the middle of the pack.

Annual Tuition
Source: The College Board.

If you're after a four-year degree, it's almost twice as expensive to attend a for-profit school as it is to go to an in-state public university. If, however, you're strongly considering going out of state or to private school, there are considerable price advantages to picking a for-profit school.

Price is one thing; what about quality?

There are several ways to address the quality of schooling, and no method will ever be universally agreed upon. In the end, the student is the real judge of the quality of education he or she received.

But there are governing bodies in place that monitor how well schools meet national quality standards. In the past couple of weeks, stock in Bridgepoint Education (BPI), a prominent for-profit school, plunged 61% on news that it failed to meet the standards set by the Higher Learning Commission and the Western Association of Schools and Colleges. Bridgepoint, however, is just one company, and isn't necessarily indicative of the for-profit education industry as a whole.

If, however, you were to use graduation rates as your measure of a quality educational institution -- and after all, what are you studying for if not to get your degree? -- then for-profit options fail badly. Over four-, five-, and six-year periods, for-profit schools have abysmally low graduation rates when compared to both private and public nonprofit schools.

Completion-rateSource: The College Board.

The crucial thing to notice here is that public institutions -- which, if you pick an in-state school, cost half as much as for-profit schools -- have a graduation rate two-and-a-half times that of for-profits schools. After six years, fewer than one in four students at a for-profit school has earned the bachelor's degree they were aiming for. With numbers that poor, it's reasonable to wonder why anyone would enroll at a for-profit school in the first place.

It's All About Flexibility

Beyond the cost advantage versus out-of-state and private institutions, for-profit education also has the added benefit of providing the kind of flexibility most students can't find anywhere else. As most FPE schools have online courses, necessary work can be completed whenever works best for the student.

When Is an 'Affordable' College a Bad Deal?

Total annual cost: $17,280

Cost after need-based-aid: $11,789

Average need-based-aid: $5,491

Average non-need-based aid: $3,436

Average debt at graduation: $13,354

This 136-year-old institution is open to members of the Church of Jesus Christ of Latter-day Saints (LDS) as well as non-members. In fact, BYU's total cost of $17,280, the lowest on Kiplinger's private-school list, applies to students who are not LDS church members; members pay about half the tuition. BYU attracts academically gifted students: 91% of incoming freshman scored 24 or higher on the ACT standardized test.

Total annual cost: $27,900

Cost after need-based-aid: $15,268

Average need-based-aid: $12,632

Average non-need-based aid: $18,887

Average debt at graduation: $20,896

Wesleyan earns plaudits as Kiplinger's lowest-cost liberal arts college. Founded in 1836, Wesleyan was the first college in the world to grant degrees to women. Today, Wesleyan has 31 major and 26 minor academic programs, as well as eight pre-professional programs, including engineering, medicine and law.

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Total annual cost: $28,790

Cost after need-based-aid: $21,465

Average need-based-aid: $7,325

Average non-need-based aid: $7,700

Average debt at graduation: $26,614

In the foothills of the Blue Ridge Mountains, overlooking the Shenandoah River, this Catholic liberal arts college, founded in 1977, attracts its 400-plus students from 45 states and seven countries. Undergraduates are required to take a core curriculum that covers literature, history, natural sciences and theology.

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Total annual cost: $29,490

Cost after need-based-aid: $22,605

Average need-based-aid: $6,885

Average non-need-based aid: $4,150

Average debt at graduation: $20,500

With a focus on global education through its numerous study-abroad programs, Drury provides the opportunity to explore diverse cultures and international issues firsthand. Its Global Perspectives 21 program includes such subjects as Asian ethics, Russian cultures (with travel to St. Petersburg, Russia) and Mediterranean cultures (via travel to Volos, Greece).

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Total annual cost: $29,520

Cost after need-based-aid: $20,994

Average need-based-aid: $8,526

Average non-need-based aid: $4,366

Average debt at graduation: $32,380

This private Catholic university, founded more than 60 years ago, attracts a high-achieving student body (65% of incoming freshman scored in the top tier of the ACT) and keeps them coming back. The freshman retention rate is a solid 88%. The university offers 42 undergraduate majors and 32 minors, plus seven graduate programs.

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Total annual cost: $30,370

Cost after need-based-aid: $17,647

Average need-based-aid: $12,723

Average non-need-based aid: $7,388

Average debt at graduation: $28,657

Established in 1920 as Marion College, Indiana Wesleyan is one of the fastest-growing Christian colleges in the country. The school’s main Marion campus has 3,200 students, and more than 12,000 adult students attend classes at regional campuses in Indiana, Kentucky and Ohio.

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Total annual cost: $30,410

Cost after need-based-aid: $23,580

Average need-based-aid: $6,830

Average non-need-based aid: $9,873

Average debt at graduation: $18,850

Hillsdale’s campus stretches over 200 acres in southern Michigan. The liberal arts college prides itself on offering high-quality academics without accepting federal or state taxpayer subsidies. An impressive 90% of incoming freshmen scored in the top tier of the ACT, and a low student-faculty ratio (10-to-1) helps keep students engaged with professors.

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Total annual cost: $30,850

Cost after need-based-aid: $16,300

Average need-based-aid: $14,550

Average non-need-based aid: $0

Average debt at graduation: $16,311

Only 355 students are enrolled at this Catholic liberal arts college, and the 11-to-1 student-faculty ratio helps keep class sizes small. Founded in 1971 and located 65 miles northwest of Los Angeles, Thomas Aquinas provides grants and loans through its financial aid program, but it accepts no government or archdiocesan subsidies.

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Total annual cost: $31,678

Cost after need-based-aid: $25,051

Average need-based-aid: $6,627

Average non-need-based aid: $11,833

Average debt at graduation: $23,404

Located near Boise, the College of Idaho stresses the importance of off-campus experiences, from internships and community service to study-abroad programs. Students are also encouraged to become leaders, through the college’s leadership program. Under this hands-on, freshman-to-senior program, students develop skills in communication, problem solving, decision-making and team development, enabling them to become mentors to younger classmates by the time they graduate.

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Total annual cost: $31,830

Cost after need-based-aid: $19,890

Average need-based-aid: $11,940

Average non-need-based aid: $10,445

Average debt at graduation: $23,500

This liberal arts university, less than 50 miles southeast of Topeka, offers more than 40 fields of study and more than 70 extracurricular and co-curricular activities, from honor societies to varsity athletics. Fewer than 1,000 undergraduates attend the school, whose alumni include four Rhodes Scholars and a Pulitzer Prize winner.

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That's in stark contrast to the historically rigid schedules most students expect when attending a traditional university. This may help explain why twice as many for-profit education students are over 24 years old, and are married or have dependents. They are also more likely to be working day jobs.

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Though that flexibility may sound enticing, based on the completion rates, clearly, many people who thought they could balance work, family and school weren't able to, and dropped out before graduating.

It's likely that traditional colleges and universities will soon catch up to for-profit education and start offering the same flexibility. But that doesn't help students who want to start working on a degree right now. For-profit schools should only be considered after the costs, quality, and potential outcomes are weighed. For far too many, for-profit education hasn't lived up to its promises; but if you go in with eyes wide open, there's a chance it could work for you.


Motley Fool contributor Brian Stoffel does not hold any positions within the for-profit education sector. You can follow him on Twitter, where he goes by TMFStoffel. The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended writing puts on Bridgepoint Education.

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