Is college worth the cost?

http://finance.yahoo.com/expert/article/generationdebt/43193

by jyrzyk • 19 years ago

21 47 19 years ago

finance.yahoo.com

There is an interesting group of ideas around intelligence, education, credentialism, and signaling.

Getting a degree is a sign that you are smart enough to get a degree. Getting one from a good school is that much better. The biggest loss if you learned the exact same material on your own outside a university is that others aren't signaled that you've received that education.

If you build something good, it doesn't matter where you are. People know you're smart from what you've done.

There are millions of people paying for a credential that means less as more people get it. Companies treat college degrees as a sign that you're not a total failure.

It would be nice if there were better tests for ability. They work for things like the SAT II, but I can't imagine an accurate test for post-graduate ability besides a review of what you've made.

But companies are lazy. They don't have the time or money to really look at the quality of most candidates, so they use signaling tools as filters.

jraines3• 19 years ago

Private, no. (Northwestern and NYU are up to $48K a year just in tuition. Are you kidding me?)

Public, especially an in-state school if your state is fortunate enough have a quality one, definitely yes.

College: still the best four years of your life. (Then again, I've yet to live the four years one would experience after selling a startup for big money. Maybe we could get input from pg or that Broadcom guy who built the underground party den)

especkman7• 19 years ago

You do know that a lot of people going to private schools aren't paying full-price, right?

Need based financial aid grants are often available (ie not loans) and sometimes they are substantial. I've known people who have paid less for a private school than they would have at a state school.

jraines3• 19 years ago

Yeah, I guess I didn't really consider that -- based on how the question was phrased I was trying to consider the whole range of potential costs of college from the most outrageously high to free.

falsestprophet2• 19 years ago

You know a lot of people are paying full price.

dawie• 19 years ago

Yes it is. I believe that the best investment you can ever make is in yourself. Colledge cost me $40K and I have made more than $160K in 2 years after Colledge working. I have made an 33% ((40/120) * 100) on my investment in myself and its still growing. The growth of my investment in myself is infinite and way bigger than any other investment.

AdamG3• 19 years ago

The _price_ of college is only a small fraction of the _cost_ of college.

And yes, I learned this in an economics class... in college.

cperciva• 19 years ago

This article includes one of the most misleading statistics concerning higher education: "People with bachelor's degrees... still earn an average of about $1.2M more than high school graduates over a 40-year career". Yes, there is a correlation between higher education and higher salaries -- no, this does not imply causation!

There are many confounding factors: People who are more intelligent, have parent(s) who pursued higher education, have parents with higher income, or are white are both more likely to receive a bachelor's degree AND on average earn more than other people with the same amount of education. (In the past, being male was a predictor for both higher education and higher earnings, but this is not a significant factor for people born after 1980.)

In addition, the statistic ignores the fact that pursuing higher education shortens one's career -- people who spend 4-5 years in college on average work for 2-3 years less than those who started their careers immediately after high school. As a result, comparing "40-year careers" is bogus -- the only reasonable comparison is between the total careers of individuals, including the time when one person is at college while the other is working.

Finally, even if the statistic were computed correctly and reflected causation, it would be misleading: Different careers are not influenced equally by education. Generally speaking, people don't finish their education before they start thinking about what career the will pursue; someone who was planning on becoming a plumber isn't likely to suddenly decide that he wants to become a brain surgeon just because he finds that he has a bachelor's degree.

Decide what you want to do (either as a single career, or more likely thinking of a number of careers which seem interesting), and look at what qualifications are needed for those. And never forget what Benjamin Disraeli said: "There are three kinds of lies: lies, damned lies, and statistics".

Alex3917• 19 years ago

For various reasons it's actually fairly difficult to do controlled studies like you say. I know a guy doing a study right now who is actually running it backwards. That is, instead of looking at how GPA affects future income, he is looking at how past income affects GPA. For example, business school students usually work for a while before getting their MBA. If you think that students with higher GPAs should earn more money after they graduate, then presumably you also would expect that students who earn more money before going to business schools will get higher GPAs.

The best traditional studies show that GPA accounts for about 3% of job performance, as measured by income and performance reviews among other things. (IIRC Alfie Kohn cites this study in his book What Does It Mean To Be Well Educated?) It will be interesting to see whether or not running the study backwards yields similar results.

especkman7• 19 years ago

As noted, these influences can be very disentangle from any real-world analysis.

There was an interesting study a few years back that looked at the "outcomes" of a cohort of people who had all been admitted to an Ivy League school. Part of the study group attended and graduated from the Ivy League school they were admitted to. The control group ended up matriculating elsewhere for whatever reason.

Past studies showed at a significant improvement in earning potential for Ivy League grads, but they didn't have a distinguished control group. What this recent study found was that for most students of similar qualification (all judged to be Ivy League material by the admissions boards at Ivy Leage schools), attending an Ivy conferred no obvious advantage compared to attending a non-Ivy.

The only difference was for students who came from more challenging backgrounds, those whose families may have flirted with poverty and/or didn't have significant educational attainment. In those cases, attending an Ivy conferred some advantage over going elsewhere.

pg• 19 years ago

Do you have a reference for this study?

falsestprophet2• 19 years ago

I remember this article and I recall the conclusion it reached was that the students from poorer backgrounds benefited so dramatically because they were indoctrinated with the culture of the ruling class in the Ivy League and would likely not have been elsewhere.

mynameishere3• 19 years ago

People should be apprenticed at 13, and should enter professions at about 18. Only jobs requiring memorization of a large body of prior work (medicine or science) need more than that.

especkman7• 19 years ago

Yeah, I'm glad we haven't formalized that system in the US.

mynameishere3• 19 years ago

You got a lot of upmods but I don't even understand your comment. What are you talking about?

run4yourlives3• 19 years ago

I agree. Let's start em' in the coal mines! You first.

mynameishere3• 19 years ago

And what are you talking about?

david• 19 years ago

Well, I liked your comment. High school has mostly been a waste of time for me. I don't see why kids can't get apprenticed or go to college or do something productive at that age.

AdamG3• 19 years ago

High school wasn't all that bad, and hell, I learned some things - a lot my own, but a lot from good teachers, too. Something I noted when I hit a rough spot a few months ago was that there is no teenage angst when you're working from six AM till eight PM doing hard labor. Not that I was asking for it!

I think it's simply a matter of human nature; given too much leisure, or too high a quality of life, our brains will still be physiologically unable to feel a proportional level of happiness. At the chemical level, there are only so many neurotransmitters to go around.

Anyway, the point of all this is that I would have been thrilled to get a "real" job at that age, but I'm not sure that was right. I was always very much in a hurry to finish school, and now that I have a job and am in college early, I keep wondering if, and feeling like, I've made a terrible mistake.

And a separate point about the article: The cost of college is almost entirely the fact that it uses up the four most productive years of your life. That most people choose college almost on instinct surprises me. Forget buying a house or a car - this decision is orders of magnitude more expensive. If you want to have an extraordinary life, you're going to be on that path by the time you're 22, or you're not. It's worth noting that Einstein made his contributions to physics at the age of 25, and even that was somewhat old to develop something so innovative. At the same time, while he stayed influential and productive in physics, he never published anything as revolutionary. At a certain age - I'm inclined to think it's usually in the early to mid twenties, based on anecdotal evidence only - you just lose that ability. If you go to college, you're basically saying "I'll trade my ability to change the world for a predictable life." And honestly, right now that's a trade I would like to make, but I'm just not doing it, and I don't know why.

And besides, every time I put this in writing I am struck by the incredible level of arrogance and hubris in my words (I'm no freaking Einstein!) and I really don't feel like writing again for a long time.

geebee• 19 years ago

I think you got downmodded because you said kids "should be" apprenticed. It sounds coercive, and that rubs people the wrong way.

But... I strongly believe that a reasonably bright and literate high school sophomore could absolutely begin law school. On average, they probably wouldn't do as well as they would after college, because your writing, reading comprehension, and exam taking skills do improve in college.

But I actually think people would be very surprised with how strong a performance smart 15 year olds would show. I'm not talking genuises here, just pretty smart kids.

especkman7• 19 years ago

Let me propose the radical idea that a college education is not solely justified by it's monetary value.

Jd• 19 years ago

preach it brother!

adamdoupe2• 19 years ago

Can one really put a price on learning how to do a kegstand properly?

mattmaroon• 19 years ago

$27.95

steve3• 19 years ago

women. beer.

run4yourlives3• 19 years ago

Let me propose the radical idea that you can learn a lot - perhaps more - outside of college. :-)

nfriedly• 19 years ago

For me, college was absolutely worth the cost. Focusing on more than just the money, I met dozens of current and potential business clients. My side work as a freelance web developer has come mostly through people that I met in college.

I went to a community college paid for entirely by scholarships, so the cost to me as far as money goes was only that of the books. The largest cost to me, though, was the time invested in classes where I learned very little.

Back to money though, my pay jumped $2.75/hr at my day job as a direct result of getting my two associates degrees.

steve3• 19 years ago

There's another cost, some jobs you just won't be able to do when you have a wife, kids, and lots of loans to pay every month. At college age is part of the very short time in your life where you are free from all this and can easily focus on something harder than virtually anyone else.

Of course, the majority of people will never consider even performing at this potential. But could it be different if college as we know it wasn't so severely required?

That's the first cost that came to mind when I read the title. On the other hand, there were some good parties and women.

jraines3• 19 years ago

Shotgun weddings and medical emergencies aside, nobody's going to force anybody to get married, have kids, and take on a heavy debt burden. Screw the Joneses. And this isn't to say you should be a bachelor for life; I'm sure there are women out there who value freedom and a man who's willing to make sacrifices and go his own way in search of that freedom.

bmaier• 19 years ago

If you haven't realized it yet, most of the education you're paying for in college isn't found in a classroom. College is a nice buffer against the transition to the real world where you can take risks without consequences for the most part. A lot of a college's value comes from your peer group, which is why smart people congregate at the top schools for the most part (aside from career prospects and prestige).

aswanson• 19 years ago

Mine was free. However, a flaw in my character led me to believe that a) It was trade applicable 2) They would teach me to build things. I studied electrical engineering, and it was mostly applied mathematics and physics with little systemic perspective. If I had to do it all over again, I would have studied pure mathematics, comp sci, and physics and built things on my own. But hey, free is free.

rokhayakebe2• 19 years ago

Take it from someone who quit. If you want to climb the corporate ladder than definitely go to college and sell your parents house to finance it. It will be worth it. I've seen it work. If you want to build your own ladder (as what I am doing now), then I suggest you check that college thing again. I look around and I see my friends who graduated from school and they all make 1.5 to twice what I make a year, but not for long. The difference shows sometimes in our lifestyle and the way we look at the future. They see title, I see users. They see corporate car, I see users. They see 401k, I see Acquisition. Their biggest dream is to make Project manager or CEO. Fuck it I am CEO, and my wildest dream is to get that call from Sergey asking me for advices.

trekker7• 19 years ago

Cool post. Do you have a website going right now? What do you do?

rokhayakebe2• 19 years ago

I sort off have a website for the consulting stuff I do now, but because I sometimes get crazy here I would like to keep that aside. As for what I do, I had 2 jobs and left one lately. Now I am focus on my main one, as a part of a mobile software devel team ( I am not a coder, just a talker, but I sure know how to bring in deals ).

run4yourlives3• 19 years ago

>Project manager

Good god you're friends dream small...

chaostheory• 19 years ago

Like a lot of things in life, it depends on what you want and how you want to get there. It also depends on the institution's culture (we're going to ignore GetDrunkAndParty U).

For technical and engineering pursuits, a good college is a great place to get a fast and wide overview of theory, competing technologies (or philosophies), and different specializations/tech aspects (database, programmer, ...). (I think this is why I'm more of a generalist as opposed to java or php master...)

More importantly, (a good) college puts a lot of smart, driven people in the same place and time. Going to college allows you to form important relationships with these people that can strongly affect both your personal and professional life both now and in the future. I think both Apple and Microsoft are great examples of my last point.

Finally (assuming you got a useful degree), in case all your entreprenuerial endeavors fail in the short term; a degree can net you a high paying job with a lot of free cycles to relax/regroup and get ready to start that next idea you have =)

far33d2• 19 years ago

Name one other place where are surrounded by smart, thinking people of the same and opposite sex constantly for 4 years.

Name one other place where the law basically doesn't apply and you are basically encouraged to take huge risks with your friendships, your learning, and your life (sometimes).

Sure, college is expensive. Sure, you have to do a lot of things you don't want to do. But, you also don't have many opportunities to learn things that are totally impractical from true experts in the field. Take advantage. Love every minute. Get out of there and do something amazing.

Last, a lot of the people I met in college are incredibly smart and amazingly successful. Some of them work on the most innovative software around. Some write for world-renowned publications. And some of them just have really rich parents. No matter what, if you go to a good university, you will meet people that will help you someday later. Yah, privilege is a bitch, but if you have the opportunity to have it, why not?

AdamG3• 19 years ago

Because it makes you feel guilty?

I find the feelings of guilt and responsibility are very much intertwined. It seems the best-adjusted people don't feel either.

far33d2• 19 years ago

I try not to feel guilt about it. Rich white folks get what they want through privilege. Going to a top notch college is a great equalizer for everyone else who wasn't lucky enough to be born to the right parents - if you can get there.

imgabe• 19 years ago

Here's some interesting numbers. Let's say you go to a college for four years and it costs $25,000/year, $100,000 total. To pay for it, you take out some college loans at 7% interest that have to paid back in 10 years. So, your loan payment is $1161.08/month. In total you'll pay $139,329 by the time the loan is paid off. So, you earn 1.2 million more over your life time than the non-college grad, but after the cost of college you're only ahead by about $1,060,000. I'm supposing here that by "over your lifetime" means until you retire, that is say from age 22 to age 65.

Now, suppose you don't go to college but instead you start working at 18. You apply yourself to your job, learn what you can on your own time, and by age 22 you've got four years experience and you've been promoted the point that you can sock away $1161.08 per month in savings. Say you do this for 10 years and keep the money in a conservative mutual fund that earns an average return of 7% per year. After the 10 years are over you've got $200,965 in savings. At this point, you stop investing. Even with no additional money, by the time you're 65 (33 years later) you'll have $2,011,064.27 or roughly $1 million more than the guy who invested his money in college.

Of course these are just some made up numbers. A lot of people who aren't motivated to go to college are probably also not motivated to save that much money and live that frugally. If college costs you less than $25,000 per year it might be worth it, or you might go into a profession that allows you to earn way more than $1.2 million more than the average high school grad. On the other hand, lots of colleges cost a good deal more than $25k/year. Also, the high school grad might invest his money more aggressively and earn more than 7% interest. It would be interesting to see where the crossover point is in terms of college cost, loan interest rate, investment interest rate, and so on. The point remains that a return of 1.2 million over 43 years on a $100,000 investment is pretty crappy (around 5.8% compounded monthly, slightly better than an online savings account)

Is college worth the cost?

Related Stories