State College, PA - Centre County - Central Pennsylvania - Home of Penn State University

Penn State Students are Back, Are They Getting Their Money's Worth?

by on August 31, 2014 7:00 AM

After a quiet summer in State College (other than a preponderance of construction), the students have returned to Penn State University.

The hustle and bustle of college life has begun. The debate over the cost of higher education and its benefits continues to rage.

Why the controversy? The cost of college continues to rise at a higher rate than the overall inflation rate. The average 2013-2104 tuition increase was 2.9 percent at public universities and the historical rate of increase is approximately 5 percent.

The latest inflation data shows U.S. running at 2 percent over the past 12 months. Since the government began tracking the inflation rate it's run at a 3.55 percent average. The projection is that the median salary increase will continue at percent.

In other words, paying for college is harder because the cost is rising faster than wages and inflation. Penn State's increase for 2014 was 2.99 percent for undergraduate tuition at University Park. The University Park in-state undergraduate's cost is $27,272 and is one of the highest costs for public universities in the nation.

Is the cost for higher education worth it? How can a parent pay for it and still handle retirement? These are questions that many people are facing.

First, let's tackle whether higher education is worth it. For many, college offers a path to a better future and studies show this to be true. The economic benefits are significant. A 2013 report from College Board, a non-profit organization, indicates that bachelor degree graduates employed full-time earn a median $43,100 from ages 25-29. Compare that to the same age group of people with a only a high school diploma, who earned only $27,900.

So the question becomes: Will the extra earnings compensate for any debt that a graduate has to pay off after college? The gap between pay for college grads and high school graduates has been widening. In 1979, the pay gap was only $9,690.

There are additional benefits to a college education that are less publicized. In a 30-year BMC Health study, it was discovered that a high level of education was linked to lower blood pressure. In addition, the Journal of the National Cancer Institute published a study that indicated a lower risk of colorectal, prostate, lung and breast cancer. Another study by Education Pays shows college grads are more likely to exercise and less likely to smoke. In addition, if you do become ill, college grads are more likely to have health care coverage through their employer. Seventy five percent of college grads had health care benefits while only 65 percent of high school graduates did.

If that wasn't enough, happiness on the job is an important factor given the hours spent at work. Job satisfaction is much higher for those with a higher education. Over half of the college graduates ages 25 to 32 are very satisfied with their job, while only 37 percent of employed adults without college claim job satisfaction.

College also offers a social benefit. Students are exposed to different cultures and viewpoints. They also widen their social circle, which can lead to a solid network of individuals to call upon in a job search or career change. As everyone knows, sometimes who you know helps. With the broad network of Penn State grads, it definitely is a positive for those graduating from our neighborhood University.

So how can a typical middle class family afford to send or help send their children to college? The most common vehicle used currently is the 529 plan. A 529 College Savings Plan has tax advantages to offer. Those funds can be used for qualified education expenses, which according to federal guidelines typically include tuition, fees, books, room and board expenses.

Money inside of a 529 grows tax deferred and is not subject to tax upon withdrawal if used for those qualified education expenses. However, if the money is used for something other than college expenses, income tax and a penalty will apply. If the beneficiary receives a scholarship or passes away, the penalty is not charged.

What's nice is that most college plans can be started with a small monthly amount. Taking $50 a month or a quarter when the child is young can be very beneficial. In addition, it isn't only parents who can contribute but grandma and grandpa can, too. The maximum permitted in contributions for each beneficiary is $300,000.

There are other options for saving too. Depending on your individual situation, you may find other modes of investing more beneficial. My suggestion is not to put your children through college at the expense of your retirement savings. You can borrow for college but not for your retirement.

Overall, the benefits of a higher education seem to still outweigh the costs. Let's hope for the benefit of our beautiful college town that continues to be the case.


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Judy Loy, ChFCâ, is a Registered Investment Advisor and CEO at Nestlerode & Loy Investment Advisors, State College, Pa. A graduate of Penn State University, Loy has been with the firm since 1992, assisting clients with retirement planning, brokerage services and investment advice. She can be reached at
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