College is really, really worth your money

http://stevereads.com/weblog/2011/10/24/college-is-really-really-worth-your-money/

by chrismealy • 15 years ago

18 30 15 years ago

tryitnow• 15 years ago

From the article: " Over the course of his working life, a college-educated white male .... will have earned about $2.3 million. His high-school-educated white-male partner will have earned $1.2 million."

Let's say college costs $100,000 (tuition plus opportunity cost of income, etc). Now let's say instead of spending that $100,000 on college we invested the money instead at 6% per year returns. That will give you $1,028,572.

The difference between college and no college is about $1,100,000.

My point isn't that college isn't worth it (most of the time I think it is). My point is that the gains are not as great as a simplistic comparison might suggest.

On a final note: The analyses comparing college to no college rarely adjust for things like IQ or emotional intelligence, which should really be the included so that there's no bias towards college simply because the smarter more conscientious part of the population decides to attend and complete college.

NinetyNine• 15 years ago

I'd like to refine this calculation after including the interest rates on student loans.

rayiner• 15 years ago

So let's say that everyone takes this advance and doesn't go to college.

How does the economy earn that 6% return?

glenra• 15 years ago

Those people who don't go to college just go get a job instead. (If jobs need training, they can apprentice or otherwise learn-on-the-job, but they won't be spending half that time learning french literature or what-have-you) Since people are doing something more productive with their time than sit in a classroom, their lifetime productivity improves, hence the productivity of the economy as a whole improves.

Given that college is a bad investment for most people, we'd be better off if fewer people did that. (Though the optimum is probably that some people go to college, not all or none.)

brc3• 15 years ago

A good point well made.

The problem is that we're all told 'go to college'.

What we're not told is 'go to college and learn a worthwhile skill'.

Personally I think the value of a college degree has dropped enormously while the cost has risen. Thus these types of calculations are going to look even skinnier 20 or 30 years down the track.

Again, I'm not agitating to not go to college, but I would counsel any college-entry age students into asking what the real-world skills they are getting, and whether it is really worth the cost of admission. Sometimes it's a binary choice - you can't work in a field without a degree. In other cases, it's much less cut and dried.

This particularly applies to higher degrees, where the marginal benefit of each additional qualification drops lower and lower.

rcfox3• 15 years ago

> The problem is that we're all told 'go to college'.

> What we're not told is 'go to college and learn a worthwhile skill'.

I almost agree with this. I think that there is some ideal number of humanities students to be cranked out of universities per year, but we're way over that. As a result, the demand can't meet the supply. In fact, the demand might be reduced due to the troubles involved in filtering through the flood of applicants.

The real problem is that universities behave like anything else: they'd rather make a quick buck. They admit way more humanities students than are needed because they can make more money that way. Engineering students cost a lot of money, they're whiny, and they smell bad. (Disclaimer: I was a whiny engineering student.) Why would you want more of them when you could surround yourself with kids who cost less and will pay you tons of money just to get away from their parents?

eel2• 15 years ago

Won't it take a very long time for the high school graduate to even reach $100,000 in his investment account, assuming he doesn't win a lottery?

If the high school graduate is contributing some monthly amount to an investment account, then the college-educated graduate could also invest at the same rate, making the difference in gains greater again. On top of that, a college graduate has the potential to invest an greater amount than the high school graduate based on the difference in income.

tedunangst• 15 years ago

Why does only the high school graduate get to invest? Can't the college graduate invest some of his excess earnings?

skeletonjelly• 15 years ago

Tricky one. College is an investment in your future. And it's not a linear gain I suppose. And if we're talking long term, inflation is going to bite that deposit in the ass no?

But yes your point is correct, it's not a simple formula. A bit of risk, a bit of "gambling", a bit of crystal ball.

absconditus2• 15 years ago

I think that comparing earnings is missing the point of attending university or college. If what we want is vocational schools then I think that we should discuss that instead.

fallous2• 15 years ago

Sure, but the argument is debt taken on via college vs economic gain over employment. There is most assuredly a non-economic value to be gained from pursuing liberal arts or whatever, but do not confuse that with being able to pay off that debt load incurred for that education.

absconditus2• 15 years ago

What about people who do medical research, which pays very little and often requires a PhD?

slyall• 15 years ago

The trouble is it doesn't compare like with like. College graduates are people with greater than average IQ and other skills. In the past (just 20 years ago) when less people went to college they were even more likely to have greater skills than the average person.

Are there any studies that show the college "premium" for more closely matched people? Perhaps based on SAT scores. So we could see the premium for a person with 1000, 1500, 2000 SAT score of going to college vs not.

tieistoowhite2• 15 years ago

I don't believe dropping out is necessarily the better option, but the article doesn't argue why not dropping out is.

The data needs to be adjusted for the fact that "college educated" has become an entrenched label in society. Without the label, society values a person much less. That is all the data in the article proves.

rcfox3• 15 years ago

Maybe I'm misunderstanding you, but the article uses data to show that society values college-educated people more, and you want it to adjust for this? What?

tieistoowhite2• 15 years ago

Adjusting for society's bias towards the label helps isolate the actual effect of college.

What I would like to understand is whether college is valuable because society thinks so or is there something that college does that is unique to it. (and if the latter is true, is it worth $50k a year?)

Jach• 15 years ago

The single-value averages here are worthless. At the very least, control for degree.

nwhitehead• 15 years ago

I don't buy it. Looking at college-educated versus high-school educated people is the wrong comparison when advising people whether to go to college or not. The relevant populations are people like you who went to college and people like you who decided against college.

phamilton• 15 years ago

Let's compare the lifetime earnings of an engineering degree with a humanities degree.

I would guess that the difference between a high school grad and an English major is similar to the difference between an English major and an engineering major.

fallous2• 15 years ago

How about controlling college grads vs trades. I'd eat my hat if a B.A. in Lit comes anywhere close to a licensed plumber or electrician.

brc3• 15 years ago

You'll generally find the B.A. in Lit doesn't like 'the market'.

Of course, the simple explanation for that is 'the market doesn't like them', so it's mutual dislike.

This is why you'll generally find the largest agitators for changes away from market based economies towards controlled economies (read : more 'fair') are people with the most worthless qualifications. Show me someone who likes socialism and I'll show you someone who studied a (monetary) value-less qualification at university.

Of course, it's a crying shame that poets get paid a fraction of reality TV stars, but that's just a reflection of what society values more.

And that's why plumbers make so much money, because a flushing toilet is about the most valuable thing in society, especially when yours isn't.

fdschoeneman2• 15 years ago

The data shows correlation, not causation. I can think of at least two causal explanations that would account better.

1) Children born to wealthy parents are both a) more likely to go to college because their parents can pay for it, and b) to step into high paying jobs because of their social networks than poor kids. Thus while there is correlation between college degrees and earning potential, the root cause is being born into a wealthy family.

2) Smart people are more likely to go to college than dumb people, and smart people are more likely to do well in jobs which require intelligence. Similarly, intelligence is the causal factor, not simply attending college.

College may very well be worth the money; but your statistics prove no such claim.

Rusky• 15 years ago

But in both of those points, isn't it possible that going to college could 1) improve your social network and 2) help you raise your intelligence? Same outcome.

Just because something isn't causal doesn't mean the statistics are worthless.

fdschoeneman2• 15 years ago

I'm sorry if I made it seem like I believe the statistics are worthless. I merely wanted to show that they don't prove that a college degree is "really, really worth it."

eel2• 15 years ago

I'd like to point out two additional potential explanations.

3) Children born to wealthy parents are more likely to go to better primary and secondary schools (possibly private schools, or possibly by living in better neighborhoods.) This generally leads to smarter people as mentioned in #2.

4)Secondly, wealthy (or even middle-class) parents are more likely to have a culture of appreciation for education, as education likely played some part in getting them to where they are, and that culture will tend to rub off on their children.

pdeuchler• 15 years ago

"encouraging them to take a rather more sure route to success"

I think you're preaching to the wrong crowd here

chrisbennet• 15 years ago

"Past performance is not a guarantee of future returns." Like real estate, the value of college may have peaked.

jjchiw• 15 years ago

Maybe in IT college is overrated, but when is something about i don't know let say medicine.... If I were sick I'll pay the best doctors I could, I won't be looking for somebody that has a fancy ad or millions of likes or followers or pluses and does not have a degree in medicine....

Maybe in the verge of death I'll look for a shaman...

Overall my point is that college is not overrated for all the careers. The article did not focus only on IT....

And IT is not only about coding

College is really, really worth your money

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