Is College a Good Investment with a Lousy ROI?

This is part 2 of 3 in our “My Worst Money Mistake” series. This is one of the most significant money mistakes I’ve made in my life. Stay tuned for part 3 of the series where I’ll talk about the biggest financial lesson I learned in college.

The worst money decision I ever made involved a single letter and cost me thousands of dollars.

Bitter? You bet I am.

Committed to making sure this doesn’t happen to anyone else? Absolutely.

The Price Tag Didn’t Matter

First, let me take you back in time to the fall of my senior year of high school. Like many teens, I was gearing up to apply for college. With my stellar grades and a laundry list of extracurriculars, I felt confident that I could get into any college I wanted to.

Not once did I consider cost as I decided where I wanted to go. It wasn’t ignorance so much as it was (false) confidence: I knew things would work themselves out, and somehow I would find a way to pay for the school of my dreams. Arrogantly enough, I assumed that any school would be lucky to have me, and they’d be scrambling over themselves to pay for my college education just so I could graduate with a diploma with their seal on it.

My parents hadn’t saved any money for college. I hadn’t saved anything myself, either. And yet as I continued to apply to expensive, private schools, the price tag didn’t faze me. I knew my destiny was a prestigious college. My only worry was how I was going to finish all of my applications on time.

Choosing the “Right School” (Read: Most Expensive)

Here’s the profile of two of the schools that I applied to: an in-state public university and a private, east coast school:

School: Boston University

Tuition: about $37,000 in tuition and fees and $11,000 in room and board

Average financial aid package in grants or scholarships: $28,000

School: University of Washington

Tuition: about $7,000 in-state and $9,000 in room and board

Average financial aid package in grants and scholarships: $12,000

Even when I saw these numbers, I wasn’t phased. This doesn’t apply to me, I thought. I knew I wasn’t an average student: I had a stellar academic record that would merit some extra scholarships. I also knew that my family’s income bracket meant extra federal financial aid for me.

Fast forward to spring of my senior year of high school: I’d been accepted into both Boston University and the University of Washington. In the same envelope as each of my acceptance letters were my financial aid packages. Both included a merit scholarship, a few university grants and a federal grant. There was still a big gap between the cost of going to BU and UW. But my BU financial aid package included a big chunk of federal loans that covered almost all of my tuition.

Including those loans, I only had to pay $2,000 in cash to go to BU, which meant moving out to the east coast and four years in a new city that would surely change my life forever. The other option: scrape together $4,000 to attend UW, a school 30 miles from my house. I wouldn’t be taking out nearly half as many loans, but I also wouldn’t be escaping my home town and exploring the world.

The choice was clear. I tore up the UW acceptance letter along with a few others, and I headed out to Boston. It didn’t matter what amount of money I owed in the future. I had the chance to live on the other side of the country on borrowed money, and I didn’t have to pay it back until I got a “real world” job.

My Worst Money Decision I Ever Made

Four years later, I found myself scraping by, making just $1,000 a month with $30,000 in student loan debt. So much for a good investment.

My biggest regret is not approaching college like a serious financial purchase. With any other major purchase, I would have:

  • Compared prices with similar products (could I have gone to a school of a similar caliber for less money? You bet!)
  • Considered the value or appreciation of my purchase (what kind of income could I expect after I graduated? Enough to pay back $30,000 in loans?)
  • Made a purchase within my budget (BU was way out of my budget, but I was determined to go)

Maybe I didn’t treat college like a serious financial purchase because it didn’t feel like one. At the moment, I wasn’t responsible for thinking about how I was going to pay back all of those loans, and taking on $30,000 in debt didn’t seem like real money to me.

But those $500 monthly student loan payments are real now.

It’s hard to look back on college with regret. The memories and the experience I gained were invaluable, and I wouldn’t be where I am today without my degree. It just hurts to know that the one time in my life that I wasn’t a savvy, bargain shopper led me to thousands of dollars in debt.

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