The November 10 Wall Street Journal stuck a pin in an otherwise accepted “truth”; that post secondary education is always a good investment. In a front page article titled “A $115,000 U.S.C. Degree Yields Low Pay, Huge Debts” the Journal demonstrates that in the world of college and graduate school, more is not always better.

First a word of caution. The data seem to confirm that the benefits of securing a college education are undeniable. In January 2020 Forbes Magazine concluded median earnings of bachelor’s degree recipients (no advanced degree beyond the BA) working full time were $24,900 higher than those of high school graduates. But that conclusion begs a larger question: in a world where a year of undergraduate school ranges from $15,000 to $75,000, what does the $75,000 student get that the $15,000 student does not? The Journal suggests that when it comes to post secondary education, returns do not necessary correspond to investment.

The article focuses on the University of Southern California. It is ranked by US. News and World Report as No. 27 among national universities. The university website refers viewers to its 2018 rating as No. 17 nationally according to a study by guess who? The Wall Street Journal.

Today’s article does slip a “mickey” into the academic cocktail. The Journal evaluated the $115,000 cost of a U.S.C. master’s degree in social work. The US News Rankings put that program as No. 25 among colleges in the United States. The Journal examined data from the U.S. Education Department and found that after two years of work half of U.S.C. grads with a social work master’s degree earned $52,000 or less. The data show that a lot of this tuition is borrowed and the Journal rightly notes that $100,000 or more in debt is not easily balanced against a job paying roughly $50,000.  A 2018 grad, Mauri Jackson, told reporters that last year she earned $59,000 while trying to manage $243,000 in debt, $167,000 of which was due to U.S.C.

In the divorce world, this is a very common situation. Many couples want to see their kids secure undergraduate or graduate degrees and many have prudently set money aside in UTMA or 529 Plans  to contribute to that goal. But when it comes time to actually select a program, even savvy intact couples often accede to the wishes of an 18-23 year old child.  Query: how many of you would hand a 18-23 year old child $50,000 to $250,000 and say “You pick where to invest it”? And yet, it is done every day.

The problem becomes more acute in a divorce setting. There we are dividing the pool of marital funds. 529 Accounts are technically marital assets and can be divided. But most divorcing couples agree that they want that fund set aside to fund their children’s’ educations. That, itself, is not a problem. But in divorce, most clients have difficulty saying “no” to children for fear of being labeled the “greedy, bad parent.” Their incredibly bright child decides she wants to go to an elite private school which will cost $50,000 a year. Her major of choice is social work, anthropology or art history. These are all great subjects and the education will be fabulous. But the returns on investment are marginal at best when viewed through an economic lens. Had the divorcing couple agreed to limit college costs to $100,000 and retained the other $100,000 they “could” have spent on college, that $100,000 could yield $400,000 in 20 years if invested at 8%.  The average return on S&P 500 stocks in the past decade has been 13.9%. We are seeing many clients telling their kids to borrow their college fund while they keep the 529 funds invested with the idea that they will pay the debt off with the funds they kept invested. Not a bad idea but it ignores the front end question of what returns the degree will yield for their child. Mauri Jackson may very well find her social work employment extremely rewarding but when her head hits the pillow at night, she dreams of the day when she is liberated from $250,000 in debt. Kids, even the bright ones, are not well suited to make those decisions because they have not done many $250,000 transactions. Today, college is there first house and unless they play the game right, there won’t be chips to acquire that actual first house. Similarly, a parent trying to make ends meet on social security is going to wonder whether the graduate degree in meteorology they bought for their daughter 20 years earlier was better than having another $200,000+ in retirement savings. It’s never about the money until it is.