Q: Our son is in grade 10 and just completed a school project to determine what it will cost to go to university and obtain an undergraduate degree. Our jaws dropped – he said that if he attends a university away from home, which he would have to because we only have a technical college in our city, it would likely cost over $80,000! We have two other kids and have only been able to save $10,000 in an RESP for him. His marks are pretty good but to be frank, he doesn’t have a clue what career he wants to pursue and the thought of him graduating with a general degree and $50,000 of debt is making us very uneasy. We would rather he attend our local college but before we sit down with him and discuss his future we would really appreciate some insight. ~Maria
A: With the cost of post-secondary education steadily rising each year, it’s crucial for parents and students to put a lot of thought into what career path they may want to pursue before signing up for a general undergraduate degree and figuring it out later. Figuring it out later could end up costing your son tens of thousands of dollars more, as well as lost working time.
It’s also important not to blindly buy into the promise that university graduates will earn $1 million or more during their working careers than graduates from colleges or technical schools. While it’s true that many professionals with university degrees will earn substantially more than those with college diplomas or trade certifications, the reality is that career prospects and incomes for university graduates vary depending upon their field of study.
Start with Why – Why University? Determine his Motivation
Before getting into the financial side of things with your son regarding college/trade school vs. university, there is an important question to ask him that he will likely need some time to reflect upon and answer; why university? Is it because some of his friends and peers are planning to go to university and he wants to do the same? Is it because he is motivated by the perceived higher income he will earn as a university graduate or the status of being a university graduate? Maybe the grade 10 students had a presentation from a university recruiter that made a real impact on him.
Determining his motivation is a good starting point and will make it easier to open up the discussion about the cost of his education. The other consideration is that he is only in grade 10 and very few grade 10 students have a firm grasp on what they want to do as adults.
Perceptions About Colleges or Trade Schools and Universities
There are a number of perceived differences between universities and colleges/trade schools that I would encourage you to discuss with your son. These perceptions are outlined below and will hopefully add some clarity to helping him determine his future course of studies and career path:
You Will Earn More Money with a University Degree
As a group, university graduates will earn more than those without a degree, however, keep in mind that this group includes doctors, lawyers, engineers and IT professionals. If the high income professions are removed from the group, the income gap between university grads and college/trade school grads may not exist at all.
You’ll Find it Easier to Get a Job with a University Degree
You may actually find it easier to get a job with a specific trade certification or diploma from a technical college because their curriculums are typically more focused and/or hands-on rather than general. There are also a number of university degrees that are in high demand like in the fields of medicine or information technology. The point to be made here is that it pays to carefully anticipate what fields of study will be in high demand from employers in the future because that will determine where the jobs will be.
The Quality of Education is Better at a University
I think a more honest statement is that the delivery of education is different at universities than at colleges or trade schools. Depending upon the university, they can be very large and impersonal with large class sizes while colleges and trade schools have smaller classes with easier access to instructors.
These points are just as important as the discussion you will have with your son regarding how he will finance his education and the long term implications of financing his education with debt.
Long Term Financial Impact of Post-Secondary Education
Each year we assist thousands of young adults with student loan debt and financial problems who were caught by surprise after discovering how difficult it is to pay off debt that they accumulated as a student.
The majority of these students had the expectation that they would graduate with a well-paying job and payoff their student loans in 2 – 3 years. The reality is that approximately 60% of post-secondary graduates are graduating with student loan debt and it takes them 10 years to pay it off.
The Canadian Federation of Students estimates that that the average student loan is around $27,000. Keep in mind that students who take longer than 4 years to obtain an undergraduate degree may end up owing more than $40,000 in student loans by the time they graduate.
What is the Opportunity Cost of Going to University Rather than Trade School or College?
Over and above the fact that university graduates will have to deal with larger student loans than students graduating from colleges or trade schools, your son will need to consider the financial impact of delaying the start of his working career by at least two years. Depending upon the field he may enter, this could easily amount to $80,000+ of lost income.
Factoring in the additional student loans he will need to obtain a university degree will put the overall financial difference between a university degree vs a college diploma or trade certification at well over $100,000. This is important information to share with your son as it will help him to make a well informed decision about his future. This will also hopefully motivate him to look for ways that he can add to his RESP and reduce the amount of student loans that he will require.
The Bottom Line on Deciding Which College, Trade School or University is Best
The good news is that your son doesn’t have to make a decision about his future today. Without this pressure you can open the door to a relaxed conversation about what his interests are, the total costs of different types of education and how to fund them. There are so many options to consider and as he grows and matures during these last few years of high school, along with your guidance, he’ll start to see which choice is best for him.
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