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Private Universities Get Schooled

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Students turn to state colleges to cut costs.

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It never made sense to push a majority of high school seniors into a one-size-fits-all dream of a college degree, especially when about a third of entering freshman drop out without completing their studies.

The souring economy and the rising cost of a 4-year degree focuses the minds of many students, forcing them to reassess their career choices or forgo a prestigious private university for a state school.

Top Ivy-League schools have large endowments, and can continue to make attractive offers to some students. But more students, faced with the choice of University of Pennsylvania or Penn State or Stanford and the University of California at Berkeley, are choosing the state school, because the cost is lower. The kid will take a hit on prestige, but will survive - contrary to wails, gnashing of teeth and protestations that State U just doesn't cut it.

Binghamton, one of the more selective campuses of the State University of New York, says applications are 50% ahead of last year. The 23-campus California State University system says applications are up 15% over last year.

However, increased reliance on state schools gets dicey because such universities aren't immune from the budget crunch. The University of Florida plans to cut enrollment by 1,000 students and Florida State University plans to reduce headcount by 1,500.

More students may attend junior colleges for two years and transfer to a four-year school to complete a bachelor's degree. This saves money, but comes at a high psychic cost: Students live at home with parents when they're eager to go out on their own.

None of this creates insurmountable problems for a dedicated student who's willing to forego ivy-covered walls and prestige. A combination of work and study may extend the time required to earn a bachelor's degree by a year or even 2, but a student who wants to complete a degree can.

Despite rising costs, the economic benefits of a college degree remain. On average, those with a 4-year degree earn $59,365 a year; high school graduates earn $33,609.

But not all 4-year degrees are equal. There's strong demand for engineers, chemists and computer whizzes, but less demand for those with degrees in art, literature or history. Faced with the prospect of taking on $100,000 in debt, some students are foregoing Chaucer for a shot at a more lucrative career.

This cuts at the essence of higher education, because universities aren't trade schools issuing a credential that entitles the holder to enter the world of high-paying jobs. At its best, higher education imparts critical thinking, a sense of history and an awareness of culture in addition to differential equations.

That's nice, an increasing number of students say, as they wonder how they'll pay the bill.

Some students say they expect to start in their chosen field and move on to something else in a few years, suggesting that they understand a degree in art history qualifies them for Never-Never Land and little else.

Nevertheless, some recent graduates, still filled with the optimism of youth, discover they can't work in their chosen field and are stuck in dead end jobs that leave them little cash after making loan payments. How many oceanographers, fashion marketers or resident philosophers does the world need?

Chances are you can find more than a few serving coffee at the Starbucks (SBUX) in your neighborhood.

Click here for Minyanville's 10-part series on College and Cash.
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