This is a guest post from Jason Barr, who writes about personal development at Start Being Your Best. Jason is a potential Staff Writer for Get Rich Slowly. His first post described what he learned from failure. Jason is 32 years old, has been married for seven years, and has a 2-1/2 year old son. He’s now a financial analyst, but he spent five years in the army as a Chinese linguist.
What is the value of your college education? It seems as though it is almost impossible to find a job today without one, and even advanced degrees are becoming more and more commonplace. But is it really crucial for “success” (defined here in a financial sense; your definition of “success” may vary) that you even have a college diploma? There’s an argument to be made that it’s not.
The value of a college education
I’m currently saving funds for my son (who’s 2-1/2) to attend college. It’s a daunting task. According to collegeboard.com, the price of a four-year university rises somewhere in the neighborhood of 5.5% to 6.5% a year. It’s actually a higher rate of increase at public institutions than at private. An 18-year-old, beginning their studies in the 2009-2010 school year, can expect a tuition bill of $109,828 for a four-year degree at the average private university in the United States (assuming a 5.9% increase year-over-year). That’s the kind of money we’re talking about here.
But, according to the United States Bureau of Labor Statistics, the median income in 2008 for a worker with a high school education was only $591 a week, while a college graduate’s median salary is $978. Seems like a good trade off, right? Surely it’s money well-spent.
Perhaps not. Let’s assume you were able to provide these types of funds for your son or daughter to begin school in September of this year. Four years from now they’ll emerge, debt-free, into the workforce and will secure a job for a salary of $50,856 (adjusted for an annual rate of inflation of 4% assumed for this exercise). Assuming a constant 4% rate of inflation, and salary adjustments to keep up with that pace until retirement at age 65, your progeny can expect a lifetime earning potential of around $5.9 million. Not too shabby, right?
Against the grain
But what if, instead of paying for your child’s education, you provided this lump sum to them in a one-year certificate of deposit, earning the current highest return available (2.24% as of the writing of this article, according to Bankrate.com)? Now the child’s salary would be greatly reduced; the lifetime earning potential would only be $4.2 million assuming the same circumstances as before.
However, assuming that in both scenarios the child in question was able to save 5% of their annual income (assumed to be a lump-sum deposit at the beginning of the year to keep calculations simple), the child with the high school education will have accumulated $646,532 in the one-year CDs by the time they’ve reached retirement age. The child with the college degree would only accumulate $438.132, a difference of $208,400.
Perhaps it could be argued that the child with the college degree could live with the same expense basis as the one with the high school education, thereby freeing up more money for saving and investing. However, I would encourage a recognition of Parkinson’s Second Law, which tells us that “expenses rise to meet income”.
Rich or poor, thrifty or not, the current savings rate as of the end of May for Americans was only 6.9%. For much of the recent past it’s been lower than that, even to the point of occasionally becoming negative. For as many responsible people who are reading these words, there are many more who would be swept along by circumstances and society, spending exactly what they make (or more), year after year.
Public vs. private
What if one were to assume a lower university bill? Perhaps a private school isn’t in the cards for these two kids (and their parents), but a public four-year institution could be.
The current median cost of four years at a public university for the 2009-2010 school year is only $29,021. At that rate, assuming the same parameters as before (rate of salary increase and inflation, etc.), the college grad does come out ahead, but only by $26,090 at age 65. Certainly, that’s a much smaller margin than I would have assumed, and I would guess it surprises many of you, as well.
In fact, for the lifetime earnings calculation to balance (that is, for both the high school and college grad to show the same dollar figure in savings at retirement age), the high school graduate would only need a “head start” fund of $38,030! Just think, for less than the price of a new SUV, four years of college-educated earning power can be rendered moot. This result, frankly, surprised the heck out of me.
Other scenarios could be run, as well. What if you’re not able to provide any funds at all for your son or daughter? My folks didn’t pay for any of my college expenses; I expect many of you are/were in that same boat. One could look at the opportunity cost of college loan repayment vs. a clean slate for a high school grad with no debt encumbrance.
For a graduate of an average private university, repaying a college loan bill of $114,626 at 6% interest (remember, student loan interest is capitalized while the student is in school) will take 10 years and $152,710. That’s assuming they’re able to make the monthly loan payments of $1,273 right out of college, and don’t have to go with a longer-term repayment plan. After this is done, the college grad will only amass $37,272 more in savings than the high school grad, simply due to the long repayment period they must overcome.
Do what works for you
Be sure you always challenge the conventional wisdom. While often times it’s conventional wisdom for a reason, there are often unforeseen circumstances that cause things to turn out differently than one would expect.
Is a college degree a guarantee of financial prosperity over a high school diploma? As with everything in life, the answer isn’t cut and dried. Depending on the circumstances, it’s entirely possible that college doesn’t make sense for everyone, even from a financial perspective.
If you have the ability to provide a financial gift to your child such as the ones discussed here, you may be wise to consider it, in order to provide options for your children that they may not otherwise have. Certainly there are other things to be gained from a bachelor’s degree than just increased earning potential, just as there may be benefits to some kids to go straight into the work force. It’s really important that a child attend college due to consideration of their goals, not just because “it’s the right thing to do”.
For some people, it may not be.
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I got into a state school, UC Davis, which costs $25,000 a year. But the public school I go to (Sacramento State University) is raising fees by $500 a semester, and it will still only be $5000 a year plus books. Community college and then transfer to this school would be even cheaper. I’m not seeing the concern about high costs here; just choose a cheaper school.
It is definitely important to distinguish between high and low cost public schools. If you’re going to pick the most expensive public school available, don’t be surprised when you graduate with debt!
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I think many universities with expensive tuition are highly over-rated. I think you CAN make a decent living with a 4-year degree earned at a public college that didn’t cost an arm, leg, and your first-born. As an example, my fiance went to a 4-year university with high tuition costs while I went to a community college for two years and then transferred to a public university for my remaining two years. I paid off my student loans easily after graduation. I graduated being only $8000 in debt because of this and a combination of working part-time to pay for the rest. My fiance – on the other hand – Is still struggling to pay off his debt. And I made $10,000 more last year than he did! My degree is in biology/chemistry, and his is in computer science, so our degrees should reward approximately the same salary range.
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Having attended both a public university for my undergraduate degrees and a private university for my graduate degree, and having worked as an admissions officer for over 3 years, I can personally attest to validity of Jason’s math and truth in his observation. College is not for everyone, and that’s okay. Like anything in life, individuals can have choices and how they learn and grow from those choices can produce dramatic, unforeseen outcomes, both positive and negative. To parents: help your children learn from their own mistakes as well as your own past choices, both good and bad. To children (young adults): listen to those who’ve made choices you’re thinking about making, be open to learning from their choices, and then make your own decision that feels right to you.
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Guess what…you young American youths have been duped (what else is new)?
The only thing a college education ever meant was to:
A: Fill the coffers of the schools.
B: Provide the skills necessary for the workers (Slaves) needed to work for Corporate America and make Corporate America richer. History records that most of the Robber Barons and founders of the Corporations that ushered in the Industrial Revolution in the U.S. came from Europe with funding from alleged unknown sources ( We know where the funding came from) with little or no education beyond Grammer School. (You know..reading Writing and Simple Arithmatic). In reality…this is all that is really needed if you have the funding and blessing to become one of the so called elite Captains of Industry.
Don’t take my word for it. Do your homework and due dilligence.
For a while this was not too bad until NAFTA.
Now…you suckers,the jobs that were here are now in Foreign Lands provided by the GREED of Corporate America and their overseas divisions. And by the way…these new slaves work for a bowl of rice. How can you expect to compete?
You don’t need more education…you need a pick axe and a march on…well I won’t say where because there are too many places to name.
But keep the faith and endure. Help is on the way.
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Good write up, and good questions to consider when you are talking about forking over that kind of cash.
I think it is also important to think about the kinds of opportunities that a college degree opens up. For example. While the average person without a college degree will make less then the average person with a degree I would suspect that the bell curve is skewed towards the lower end of the spectrum.
Meaning you will find fewer and fewer HS Diploma toting folks as you start to climb the salary ladder. You will never find a Dr. or Lawyer (Doogie Howser, M.D. is the exception) who is straight out of high school. If you want to have access to the highest paying jobs the bottom line is you need a college degree. There are exceptions, but they are pretty few and far between.
Likewise as you slide closer and closer to the poverty I would theorize that you will find fewer fewer folks with a college degree. As with the previous example, there are exceptions.
Also this doesn’t seem to factor in a persons earning potential down the road… just right out of the gate. The average American is changing careers several times in their life, not just jobs, careers. Gone are the days (well nearly gone) of get a job and keep it until you retire. More likely you will be promoted (more earning potential), gain new skills (more earning potential), and change companies (could be more earning potential). That is to say the professional ladder is a lot longer (more chances for advancement) then the voc-tech ladder.
So while the difference in wages at graduation may be dishearteningly close, at retirement age you are a lot more likely to have widened that gap.
Lastly, this is an hypothetical sittuation. Ideally you work in the job that makes you happy and pays you the best, and ideally there is a job like that out there for everyone. In the real world you don’t always get the dream job, but part of College is figuring that out. To me there is value in that. I say repeatedly that the best thing I got out of my college education is no my masters degree, but rather the experiences and skills I picked up along the way. The degree is just a happy result.
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You really have to choose a field that pays a lot to make college worth your time. Liberal arts degrees are money sinks in the vast majority of cases.
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This one has been my favorite so far! Enough that I actually had to comment to get my vote in.
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Great post Jason – I really like your writing style.
I graduated 4 years ago and now have a job I love – however, it pays the amount of student loans I ended up with per year. I also know that I never would have gotten this job without the degree. I will be paying for it for a while.
Two year schools definitely have their place. I know that because of the way they teach several firms in town will take the community college grad before the University grad because the university doesn’t teach people how to work in the field and they have to train them from the ground up where the community college grads just need to be acclimated to the business.
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Here’s the thing: It’s always parents who mull over whether its best for their child to go to school or not (often before they are in high school). Here’s the thing – the kid doesn’t think like you. It doesn’t matter if you think of some financial theory that would make sense for the child to not go to college. Ultimately they will choose.
For example if they love carpentry, as one of my friends does, they may opt out of college, as he did. This just makes sense to him since it is what he will be doing the rest of his life. It’s his desire. But as for me, I went to college because I wanted to work at a financial institution and you simply cannot get there without a degree.
In the end, your child will choose, not you.
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It’s hard to place a value on other intangible benefits you receive from going to college though. Some of these include: learning to interact with others that may come from vastly different social backgrounds, professional networks, intellectual stimulation from being surrounded by people that are just as smart as you, and of course self reliance after 18 years of living in a nest.
While income potential is fantastic, I don’t think it should be as highly valued as most people make it out to be. I took a year off after I graduated to study abroad through my University, and even though it was a year of lost earnings that could have compounded greatly for 40+ years, I personally would never regret the life experience and friends made.
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First off, disclaimer I’m employed by a University, I’ll spare you the plug for my school though.
That said I’d recommend checking out tuition in the Midwest. The traditional farming and ranching states tend to be hurting population-wise, recruiting is paramount for us and prices are competitive. Here, $6k will get you both Spring and Fall Semesters. A 100k debt boggles my mind, then again pay and cost of living are a lot less for us out here, no one said you had to stay after wards though
Shop around, accredited education comes in all shapes, sizes, and price points. An education may be one of your biggest purchases perhaps chosen though at a time in life when people tend to be the least rational in age, choose wisely.
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I’ve sent my 5 kids to private, elite colleges on financial aid. The costs were cover mostly by grants and scholarships.
I am an immigrant, earning just enough to cover our needs in a frugal way. My kids had to do without lots of things while growing up. We had no other debt but education debts. Going to college to us is a life style which enables us to enjoy our lives to the fullest, to broaden our knowledge, to work up our potential. To earn a degree and get a good job are the result from learning for the sake of learning. We are not realistic but our lives are so much richer.
Sometimes, when you think too much on how to get the most for the $ you compromise the quality of life.
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the value of my education (8 years, you don’t want to know how much it’s worth, vast majority paid for by the feds) is not in how much money i make. it’s in knowing that my work will benefit the public. it’s in knowing that i may work a ton of hours, and work may follow me home, but my talents will be used to further advance the health of people around me.
as my next advisor has told me, those who have the ability also have the responsibility to use it.
someday i will probably make decent money, but for now the last 5 years spent scraping by on a pittance of a stipend will not set me any further ahead income-wise than the day i walked out of college with my bachelor’s degree.
with 5 years experience, someone with my bachelor’s degree will be in the same job, because the ceiling is fairly low. i will be moving up as quickly as possible, since the ceiling is far higher for phd graduates. i am not a follower, and i would be miserable in a long-term bachelor’s degree type job in my field. i am always seeking to gain more control over myself, my environment. my degree was intended to put me in position to do that. and i have a little debt to pay, but no regrets for the increased opportunities i have the chance to earn.
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This candidate failed to see the other factors involved in the college decision — something that I’m always very glad to see J.D. do. I don’t think this candidate’s anywhere near as good at analysis of a complex problem or as willing to look at all angles as J.D. is, rendering both his skills less impressive and his conclusions less valuable. Pass.
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Hi! I personally have worked with people who were making a $250,000 salary 5 years ago, who now work in factories making $8 an hour because other jobs aren’t available. They used to be the ones hiring people & other high up jobs.
I have friend who makes around $85,000 a year. Would you like to make that much? He doesn’t even have a high school diploma.He delivers big yard dumpsters for a refuse company.
My husband makes $23,441 a year & just got his GED& he loves this job.
A friend’s daughter is going to go to college & it costs around $27,000 per year at the college she’s going to.Her parents even said they wonder if there will be jobs available in her field when she gets out. I think it will be tough & really expensive.
My nephew ha just a high school diploma & is working for a company that drills oil & gas wells. He talked his way into the job, knowing nothing about it & now he’s a real expeert at it. He makes huge wages.
So the point is, it doesn’t necessarily mean you will make good money just because you have a college degree. Some of the best paying jobs are learn on the job types.Myself I don’t reallythink acollege degree is worth it, but only you can make that decision. I know at least 4 people who are millionaire that you wouldn’t ever know they are & they never even finished high school . Two never finished grade school.
There is a program that can help you get a college degree for less , if you want one. It’s called http://www.collegeplus.org/ . You can check it out to see, if it’s something that could help you.You do a lot of courses by CLEP.Lisa
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Another thing we may not consider is the question of how many college grads are working in a field directly related to their major 10 or more years after graduation? How many are even still working in college norm occupations?
I’ve known several people with college degrees who found success in non-college fields. A lot of the college degree equalling more money connection may have deeper roots in the desire and ambition of the degree holder than in the degree itself.
Globalization and technology might make this even more pronounced in the future.
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While individually, folks may or may not be more or less successful with or without a college degree, the general principle that going to college improves one’s ability to earn money along with increasing life satisfaction has been proven time and time again in study after study.
College, in many ways, is more than just a GPA. I believe it is dangerous, or delusional, to downgrade the college experience (and expense) because of a perception that a small minority of folks can make $$$ without one. Those are exceptions.
Further, the cost of college is overly inflated by commentators and the OP. After 10 years of college, the “sticker price” on those years stands at about 120,000. In actuality, the price I paid was closer to 50,000, and I have no debt from my schooling as I worked throughout.
If there is waste in college spending, it is for an undergraduate degree, where any local college or small university provides a similar level of education than a big private school. Money is well spent at the graduate level and above, but I see too many families sending their children off to a private undergraduate school costing 30K + room and board. My undergraduate was spent at Georgia Tech, with scholarships, a job maintaining bowling lanes, and
being an RA, cost me nearly 0 dollars for 4 years.
There’s a ton of intangible benefits too which are too tough to quantify.
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I did a media studies degree in undergrad because I expected that I would go to law school. Thankfully I went to law school since that degree, while fun, wouldn’t have done much for me in the real world. It did allow me to get the marks to become a lawyer, so I guess it was alright.
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And then you have to wonder “Was college worth it?”
I went not for the earning potential but out of genuine desire to learn–thus the English major and not engineering.
I think that the “earning potential” of a degree is useless at this point: I can’t get a mall job because they’re afraid I’ll skedaddle when something better comes along, but I can’t get a *real* job either because my degree is about the equivalent of a doctorate in folding t-shirts.
I don’t regret going to college, but I think people should check their motives and the strength of their desire to study before going. The $18,000 debt I’ve accumulated tells me that much.
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People clearly like to give out anecdotal evidence in this thread. The stories of people you know who don’t have a high school degree and make six-figures are the equivalent of the person who exclaims, “My 90-year old grandmother is as healthy as a horse, and she still smokes a pack a day!” While that may be true, I wouldn’t give my 16-year old cigarettes. I also wouldn’t tell them, “You know I cashed out your 529 when you were 6. We just didn’t think college was for everyone, so we decided it wasn’t for you.” This is the problem I have with this article. It’s talking about parents saving for college for their children, and then makes the claim that college isn’t for everyone. But what parent is going to decide, when their child is young, that they won’t open that 529? I understand that not every 18-year old is ready for college or even should go to college. But I can’t imagine a parent deciding that for their child at the point when the parent would be considering opening a 529. Again, when people say that college isn’t for everyone, they are talking about someone else’s hypothetical kid; they are not talking about their own 9-year old.
In addition, for those of you who keep talking about how useless liberal arts majors on (again I assume you mean humanities majors), I urge you to look at real statistics and studies, rather than anecdotes, before talking with your kids about potential majors.
The Association of American Medical Colleges has for years been reporting on medical schools’ increasing interest in humanities majors because these schools recognize that technology is always changing and they want students who can do more than just memorize anatomy. (http://chronicle.com/article/Competencies-Not-Courses/47695) Another poster commented that you should look at the earnings potential of your degree 15 years down the road. We work in an economy where people change career fields–let alone actual jobs–every few years. It is almost fruitless to try to predict what your 18 year old’s major will be worth when s/he is 33. And how many employers have ever asked you about your major in a job interview?
The point of this article really boils down to: it doesn’t make financial sense just to give your kid $100K in tuition costs. You have to raise them so that they will work hard, make connections, get internships or jobs in the summer, etc. I just don’t find that as interesting as other guest posts.
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Neither my husband nor I have a college education. Out of four children, only one has gone on to complete a higher education degree. Two are of college age right now. Both of them began but quit after not being sure what they wanted to pursue in the way of a major. They are both working in a great field right now and earning a good living – upwards of $20-$30hr. with a lot of overtime. They may return to college but it will be with their own money and with their plans certain so that the money they do spend will be worth it to them.
That is basically what Jason seems to be saying here – be sure you know where you’re going and then it will be worth it no matter which way you choose. I believe you will work a lot harder on an education if you have to pay for it yourself and if you are the one who made the decision to attend college. Good comments and thought provoking post Jason.
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When I taught undergraduate non-traditional students, I used to break the ice in the first class by asking them what they hoped to get from their time spent in college. Most of them stated they were there because they wanted to make more money at work and needed the degree to move up their company’s ladder. At the time (in 2005), I believe the statistic from the Department of Labor was that only around 26% of adult Americans have Bachelors degrees (so clearly college isn’t for all, or even most), only around 7% have Masters degrees, and only around 3% have professional degrees (PhD, MD, JD, DVM, etc.) (Note that the 7% and 3% are part of the 26%, not in addition to it.) That said, aside from the money, what about the satisfaction that a graduate feels, knowing they’ve achieved something that few others have completed? Self-esteem has been vastly overhyped in the last 30 years, but I find that people who believe in themselves succeed in life. Success breeds success.
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i’m pretty surprised this seems to be a favorite writer.. I liked jason’s previous post, but this one is terrible. the math isn’t clear at all, and it makes terrible assumptions about income levels… who graduates from college, gets a job, and receives nothing more than a cost of living increase for 40 years? in the 3 years since i graduated from college my base salary increased over 45% due to promotion out of an entry level position. how can you claim that someone making 60% more take home than someone else will save at the same rate? how can you completely discount quality of life from a different job? i’m all for someone not going to college if they have a different job calling (vocational school especially, or military like the author took, these are both excellent career choices for some people) but the financial justifications here are at best not convincing, and at worst totally false.
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@120 Ethel
I think you were speaking of my post when commenting on researching what your field would pay at 15 years. Maybe your field is different, but engineering isn’t too hard to look up at least rough figures.
Let’s say you wanted to be an engineer for 10 years, and then broaden your horizon and be a manager soon afterward. Salary.com has information for an engineer at roughly 2 years, 5 years, 8 years, and then information on 8-10+ years of experience in the field in a managerial role.
I agree people are changing jobs left and right, especially nowadays. But in my situation at least, I wouldn’t go from engineering, to say sales, finance, chemical research, etc. I would definitely move jobs as opportunities presented themselves. However, I would stay in the realm of mechanical engineering.
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Although I appreciate everything I learned in college, I can say that having two bachelor degrees (business and foreign language) has not helped me get a job making more money than someone who didn’t go to college.
Right now I make less money than someone without a college education but has more “experience”- and I’ve been in the work force for nearly 5 years. In my experiences so far, my employers SAY they value a college education, but it is an was not reflected in my pay nor in the requirements of my job or the tasks they give me. But they would rather hire someone that DOES have a college degree, and all the jobs in my field I look for require a degree.
It seems like a catch 22 to me right now. Screwed cos I did go to college, but screwed if I don’t. Perhaps I need a new job.
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Paul (122)–As “low” as 26% with bachelors degrees might SEEM in the US, it’s substantially higher than the percentages in Europe and Japan. We have no real shortage of college grads, apart from a few specialized fields that most American students shy away from.
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As a superintendent of a large school district I found Jason’s writing to be right on the mark once again. Most of the students from my high schools go on to college, but when I do exit interviews with them it is clear that have no idea of the cost of the school or the impact of borrowing to get to a college degree. Most have never really explored the relationship between the cost of higher education, the earning power of their degree, other possible options besides a four year program, or how long it will take to get out of the financial hole that will graduate with. Many head off to private schools instead of public schools, because the parents want bragging rights even through they are placing their child in deep debt. This continues to be a concern that I often speak to parents about. It is for this reason that Jason’s blog, like others he has written, should be required reading for all of my seniors!
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While I agree with some of the conclusions of your article, such as a college degree is not for everyone and should be carefully considered, I don’t think your analysis works from a purely financial standpoint. You are comparing the amount saved for retirement under the two scenarios as though that were the only financial return. I agree with you that those who make more are not likely to save more. But they still make more and whether it is saved or spent, they receive the benefit from it. Your analysis took into account the 5% that was saved, and ignored the 95% that was spent. The 95% that was spent still provided a better house, more vacations, nicer seats at the opera, bigger BBQ, or whatever it is that the college grad valued enough to spend that extra dough on.
The return on investment from the college degree is found by comparing the initial investment of $109K with the additional salary earned over the life of the investment. When I consider the additional income year by year as a benefit, and also the opportunity cost of the salary missed for the first four years while in college as a negative (or an additional investment), the rate of return on the $109K is about 8%. If we ignore the opportunity costs and only compare the cashflows from year five on it gives us a return on investment of 17.5%!
Another way of looking at this is that if someone told you that for an investment of $109K now and additional investments of $30,732 next year (the salary not received because you are in college writing papers) and $31,961 in the following year, etc. for four years, you could purchase an annuity that would pay $14,904 in year five, and $15,500 in year six, etc. through age 65, would you want to buy that annuity? It doesn’t matter whether you spend or save the returns, that is a different calculation.
Of course, this simple analysis ignores taxes, which would lower the return, but also ignores that Social Security benefits are also affected by lifetime salary, so the additional cashflows may not end at 65 (not to mention that some people may work long beyond 65 by choice, a possibility that increases if one actually likes their job).
Don’t get me wrong–I don’t believe that more money will bring happiness. I do believe that digging ditches or working an assembly line for one’s whole life probably will not bring a high level of satisfaction for most people.
And, as has already been mentioned, there are a lot of intangibles to consider. But if this is a purely financial analysis, which you have said is your definition of success for this exercise, it is pretty simple. What is the present value of the $109K investment versus the $1.7 million return over the next 45+- years? Of course, if you only spend $20K for college, which can be done, the return is even better. And the intangibles are normally (though not necessarily) all on the college side.
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i think a college education is highly overated. i am currently in my second year and i cannot see myself working in the field i am studying for. not to mention the job scarcity. so many graduates are taking longer and longer to get employment and some that ate lucky to get one are stuck in dead end jobs. i want to be an entrepreneur and i have a few ventures in the works instead of staking my financial life on an unstable job market
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+1. Insightful. Unlike my reaction to the post that explained to everyone that attending an expensive private university puts you in a financial hole, this is a thought provoking article that makes you reconsider your preconceptions about a college education.
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Here’s a practical example. When I was hired by a fortune 100 company for tech support back in the 90′s, I started as a temp. Another guy with more experience had been temping longer. We both got hired as employees. I was brought in as a level 4 because I had a degree. He was a level 2 because he didn’t. I switched to development, so did he. Starting two rungs down has definitely compounded for him over the years and I expect he still makes less than me even though we do essentially equal jobs. If I leave, not having a master’s degree will hurt me in the same way.
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If you are going to college simply to train for a job by all means do the calculations and make your plans accordingly.
Because the degrees that I pursued were not neccesarily the ones that get you into high payng professions, I would have to say that college was probably a wash financially. But in terms of life satisfaction, it was worth every penney. I learned about subjects that I would have had a difficult time exploring on my own – statistics, various sciences… I also learned some ways of thinking that I wouldn’t have on my own – the scientific method, looking at data critically etc.
I think everyone who is the least bit interested should go to college but not so that they will be financially richer, so that they will be intellectually richer and better citizens.
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Very interesting article and comments – now to add my 2 cents.
First, I think the answer to the question is “it depends.” While you offer essentially a “life-cycle costs analysis” with a quasi-’net present value’ of college versus no college that favors no college or a neutral stance, you don’t do a good job of outlining your assumptions, which might be skewing your answer. Some of these assumptions have been brought up, i.e., it looks as though you assumed a liberal arts degree. I’d like to see the same for a technical or professional degree with comparisons. As noted by other commentators, it is difficult to near impossible to practice in engineering, medicine or law without the prerequisite education, undergraduate, masters and post-graduate. You also didn’t include possible scholarship opportunities and how that might reflect in your analysis. Additionally, many community college systems have reciprocity agreements with the state universities that allow someone with an associates degree to matriculate to the state university for a follow-on bachelor’s and beyond. Also, what about getting an associates degree or technical vocational certificate – how about comparing those? I know that some ultra-sonographers, or radiation therapists can make good earnings over their lifetime. The former are examples of vocational programs which I find in US society lacking due to the emphasis on a college education. Perhaps that might have helped bolster your argument.
In reply to the commentator that said they went to college to out of a genuine desire to learn – as an engineer, I also went to college out of a genuine desire to learn, and took English and several other liberal arts classes while meeting my engineering degree requirements. In fact, most degree programs require some broadening outside of their core curricula. I learned a specific way to solve problems and where to find information to help me solve those problems. Education is a life-long endeavor. Assuming those that didn’t take the path you did weren’t doing it out of a desire to learn is naive.
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GENERAL COLLEGE COURSES – THE BIG RIPOFF !!
Anyone who has a 4 year college degree knows the first 2 years are spent for “General College” classes like geography, economics, history, etc. and those classes are a WASTE if you are seeking a basic degree in liberal arts or even a specific degree in the sciences.
I have a 4 year degree in Chemistry which has served me well over the last 15 years, but if I had to do it again in today’s world, I would have chosen a good 2-year degree at a community college. It would have cost less than half, I would probably make 80% of my currently salary, and I would have started my career 2 years earlier- ALL POSITIVES!
I am responsible for hiring people at my job, and I can tell you that the 2-year degrees are now more popular than ever and you still get a great education.
Wish I would have been smart and cut my education in half!! Thank goodness I didn’t continue to a master or even worse a PhD.
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Wow. I couldn’t disagree more with Conrad (#134). My gen ed classes, while they seemed sort of pointless to a college freshman eager to get on with her upper-division science, ended up being some of the most satisfying, mind-broadening, interesting classes I took. I wouldn’t go back and avoid them if you paid me. I’m a firm believer in the importance of gen ed classes — they make for a well-rounded individual, which is critically important (a darned far cry from a “waste”).
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Higher education is over-emphasized. It’s nice to think that everyone needs to go to college, but college or post-graduate work isn’t suited for everyone. When everyone pursues a higher education, the pool of talent invariably gets watered down. Graduating everyone from college only means that the degree standards have to be lowered to ensure that everyone passes.
Most people go to college for a better job, but college doesn’t prepare you for the working world. There are tons of classes with no applicability to the working world but which are still required anyhow. It’s a messed up system that just puts people into debt and wastes time.
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If all you are concerned about in life is money then yes maybe this is the way to go, but one of the recurring themes here at GRS is that experience are worth more than stuff. I made it out of 4 years of college and one year of grad school with about 70,000 in debt, but I loved all 5 years. I met incredible people that I will always be friends with and had experiences that going straight into the work force would not have given me. I also have a very satisfying job that I could not have gotten without my degree, and not hating going to work every day is worth all of the money to me. I went to a public school, but one that was out of state, becasue I believed it was the right fit for me, and never regretted it.
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I’m sure someone else has mentioned this before now, but have any of you in the “No, don’t do college” camp tried to find a job that pays above minimum wage without a degree?
Did the calculations above factor in health, or vacations, or medical coverage, or happiness? I’m not saying more money equals more happiness, but would you consider it a lie that the majority of 55 year old men working in a MacDonald’s are not happy?
I find this article troubling to the extreme in it’s attempts to over simplify this equation. It’s nearly impossible these days to find a good paying job without a college degree, in America.
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@Allen #138 – I’m in the “no, I don’t have a college degree” camp and I’ve made way more than minimum wage. On the other hand, I never made more than $60K (San Francisco wages) and never graduated out of the assistant position.
If I go back to work (on disability now) there is no way a fast food joint would never hire me, but moving out of the assistant role would be just as difficult. Its not black and white.
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While I can understand that for this blog, approaching this question from a purely monetary viewpoint makes the most sense, I was hoping you were going to discuss the non-monetary value (if any) of college.
I attended one year of private university, one year of community college, and three years of public university, which I’m guessing is a pretty unique experience. But for a nation where we directly foot the bill for our education, we don’t have enough debate about the purpose of college…is it about learning a smattering of subjects? sharing the “college experience”? developing a skill with which you can directly transition into a paying job? Which of these is worth the hefty price tag? How much learning can I more cheaply accomplish using library books?
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Hi! To Allen post #138,yes most jobs do pay above federal minimum wage , which is $7.30 an hour , but there are some that do not. My husband makes $11.27 an hour. The medical insurance costs us $162.00 every 2 weeks. He gets 3 weeks paid vacation, plus 6-8 holidays paid , but no sick time .If he were to die the company gives the beneficiuary 1 1/2 years wages & that is not something we have to pay into to get.Lots of people are out of work right now& where he works has had a lay off , but he only has been laid off 2weeks down to 3 days a week & then 2 weeks at 4 days a week & now back up to working 6 days a week.It’s not what lots of folks on here call a high paying job, but we have been able tolive on it with 3 people & one time we had friends who were out of work living with us contributing nothing & still did good. That made 7 people living on $670 every 2 weeks & I know people who have much less. We feel God has blessed us to be able to have all we do. We have no credit cards & never have.We have 2 cars which have no payments & are a 1999 Chevy Metro , which gets 52-55 MPG & a Mercury Sable 1996 , which is larger & still runs good. Of course, they need repairs sometimes ,but that’s still lots less than new payments & higher insurance with new cars.The only debt we have are 2 bills , 1 hospital & 1 dental which are paying on & they total around $3,300 .I buy clothes at yard sales. We have several computers . They are older & slower but am able to use them& got them free through helping out at the computer club & someone gave me one they didn’t want anymore.We do rent ,but that has it’s advantages too. We are free to pick up & move if we want to, no maintenance for repairs & no property taxes.It works pretty good for us. Tell me some of how you live. Blesssings, Lisa
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Thanks for this analysis, but I would consider an analysis from an economic opportunity perspective to be more interesting. I think over-education has diminished the value of a college degree (too many degrees chasing after too few jobs). A good plumber’s hourly rate is rather close to a good engineer’s rate. This practical knowledge/labor type job will have an increasing hourly rate as more and more Americans chase fewer corporate jobs.
Those are my thoughts on why I will encourage my children to think of all the options after HS.
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This writer fails to look at the big picture. I would not vote for him to be a regular GRS contributor. He knows numbers, but he fails to point out other valuable elements of a college education.
The value of a college education includes a long list of intangibles including critical thinking and problem solving abilities, creativity and resourcefulness, the ability to evaluate information sources and to research and articulate your opinions, a sense of accomplishment and self-worth, the satisfaction of pursuing your personal interests in depth, and connections to professionals and colleagues who can a student get ahead. All of these are qualities that can help a person get ahead in the job market, but (even more importantly, in my opinion) they make huge contributions to personal quality of life, no matter your income level.
Part of the reason so many college graduates are buried in debt is because they make two faulty assumptions:
1) You can only get a quality education at a private institution
2) It’s impossible to work while attending school
I worked nearly full-time for five years while I attended an affordable state college and graduated with *no* debt of any kind. I am a first-generation college graduate currently pursuing a Master’s degree in Education. I’ll acquire some debt this go-round, but the knowledge and skills I will gain from being in school will enrich the rest of my life in ways that I cannot measure. Big paycheck or not, studying at the college level will always be one of the most valuable pursuits of my adult life.
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I have to disagree with #121 (Kay). By the time I was in middle school, I knew that I wanted to be a teacher, and I knew this goal required a college education. In addition, my parents made it very clear that I was going to attend college; this was an important expectation they had for me. The method of payment was never discussed. During my senior year of high school, my dad considered financial aid but quickly rejected the idea because of his take on privacy issues. So, my parents found a way to pay for all four years of my education at a public university. BUT, I truly appreciated how lucky I was to have a “free ride.” I worked very hard and earned excellent grades, and I honestly thanked my parents many times for paying my way for me. In addition, as an undergraduate student, I had some of the best times of my life. I am now a teacher, and although I do not make gobs of money, my college education was DEFINITELY a great investment, and I know that my parents do not regret it. Just realize this: not all teenagers are as shallow and unappreciative as people seem to think.
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I’ve seen a lot of articles with the cost benefit analysis of a college education, but they never factor in what the numbers dont capture which is the value of expanded opportunities. My wife is almost done with her degree and she’s either been passed over for jobs or just flat out not even looked at because she didnt have a degree. Not only are the jobs she’s getting lower paying, but they’re also less rewarding than those she probably could have been doing with a degree.
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Although, money is an important consideration, the choice to go to college or not should never come down to money. Either the student is excited to pursue a career and lifestyle involving continuing education or they do not. If they prefer to take on a trade or work in a job that doesn’t require a degree, then your financial analysis makes perfect sense and college is a waste of time. But, for someone who aspires to earn a degree, continue their learning, and take on a professional career, the numbers are insignificant. I know for myself, a 4 year degree really increased my earnings and lifestyle. However, the most important thing that I got out of college was being surrounded by students and professors of a very high caliber with high standards. It raises your standards and sets you up for life. You can’t quantify that and you can’t really learn that in an hourly retail job, even if you have a large CD trust fund.
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Quick: how many people do you know with at least one degree who have been laid off in the past year, through absolutely no failing on their part? How many people have pursued degrees only to find out, whoops, that field dried up and went away while you were studying to enter it?
Degrees are certainly worthwhile, in many cases. But in some they may not be. And in any case, having a degree doesn’t automatically give you financial stability forever, and lacking one doesn’t automatically consign you to minimum wage. Jason’s point was, there are a lot more factors. Consider them all to make the best choice for you/your kids.
I’m sure someone else has mentioned this before now, but have any of you in the “No, don’t do college” camp tried to find a job that pays above minimum wage without a degree?
Plumbers often make more than people with degrees in, say, English. Sales people can make 6 figures without a degree. Construction workers, hair stylists, camera operators and even “executive assistants” often make quite decent wages for their region without degrees. And that’s just getting started. The only thing that can stick a sensible, hard-working person in minimum wage is a really bad local job market.
The value of a college education includes a long list of intangibles including critical thinking and problem solving abilities, creativity and resourcefulness, the ability to evaluate information sources and to research and articulate your opinions, a sense of accomplishment and self-worth, the satisfaction of pursuing your personal interests in depth, and connections to professionals and colleagues who can a student get ahead.
College is not the only place to learn all that – I learned it from my parents. But ironically, you listed the most important semi-tangible advantage of college last: connections. After all, sadly, it’s not what you know but who you know, and college can introduce you to recruiters and so on.
Although, money is an important consideration, the choice to go to college or not should never come down to money.
That’s a nice ideal, but for some people everything must come down to money because they simply don’t have enough. That’s what I most liked about Jason’s article – it shows that if you can’t afford to pay for college outright and can’t stomach the debt, there’s still hope.
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It sounds like a great alternative to end up at retirement better off for not spending the money for an education. But what about the life inbetween do you have a wife and family live in poverty level. What kind of standard of living could you expect to provide for them. Studies show that you likely will not live as long because you will not have the means by which to maintain good healthy life styles. I agree with a previous post where is the critical thinking there is more to life than retirement.
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Among the things the author left out is the fact that, on average, students attending private college pay about 65% of full tuition. There is often a substantial gap between published college costs and what students actually wind up paying.
Another consideration is that the income numbers assume full employment, which can be especially “iffy” for those without post-secondary education.
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I find it funny that so many commenters are annoyed with shallowness of this post.
Jason wrote about financial aspect of graduating college compared with not attending it at all.
He covered it quite well except for not taking into consideration the grants and stipends that can substantially lower the overall cost of college.
Of course such onesided evaluation is, well, onesided
The real value of college is incalculable, mostly because it depends on the person attending it, the teachers met there, the contacts established, eyes opened, horizons widened etc, etc.
One thing is sure – the article was a perfect stimulus and spurred very vigorous comments.
I’m sure Jason have profited immensely from your input.
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