Just How Hard is University to Overcome


  • Service Provider

    The financial impacts of university on your career in the US is devastating. Using the numbers most conservatively weighted to make the degrees look as positive as possible, straight from the US Bureau of Labor Statistics paint a devastating picture. When combining the average additional weekly income from a degree versus the lost investment opportunity from the college funds... here is how bad it is in the most conservative manner that I can find (no weighting for people starting college later, risk increases from the degree, no accounting for debt loads or other factors that hurt degree holders....)

    0_1466622657110_Screenshot from 2016-06-22 15:02:30.png

    The SP500 Median of 8.8% annual is about the most conservative investment number that you can get. If you go with the Mean it is SO much better. But I didn't want to weight anything unfairly to the non-university side so that there could be no excuse for saying that university was beneficial.

    The HS+ numbers are based on High School plus some extra education but no degree... so industry certs would count for example. I didn't want to use numbers from those HS grads that could not go to college, but mostly only those that did not. The number of things that cause this to be unfairly weighted to university grads is extreme and I'll explore those. but for the moment, I wanted to show that the most damning possible pro-university stats show skipping college as, on average, a landslide win financially over a lifetime.

    Assumptions: That HS+ workers start work at age 17. That BS degrees take 18+4 years to complete. That MS degrees take 18+6 years to complete. That earnings are for 52 weeks in a year. That investing of college funds would take place in total after the degree was completed rather than trickle investing during the university years. That retirement is at age 65. That all investment benefits artificially halt at age 65.

    Pretty much any change to these assumptions removes some amount of pro-education weighting.


  • Service Provider

    So yes, you are reading that correctly. The average US high school grad who could have gone to university but chose to go into the workforce immediately rather than waiting to go to university first and invested the cost of university into an S&P 500 Index Fund instead of spending it on university would benefit to an order of $4.8M - $6M USD better than a counterpart that attended university.



  • What is university?

    (Just kidding.)


  • Service Provider

    @scottalanmiller said in Just How Hard is University to Overcome:

    So yes, you are reading that correctly. The average US high school grad who could have gone to university but chose to go into the workforce immediately rather than waiting to go to university first and invested the cost of university into an S&P 500 Index Fund instead of spending it on university would benefit to an order of $4.8M - $6M USD better than a counterpart that attended university.

    Your problem here is assuming that people would invest that money.


  • Service Provider

    Some things that increase the relative value of skipping college or university that are not accounted for here:

    • Many of the top paying degree holding jobs are not optional degrees and so do not apply to someone in a "deciding" position between university and skipping university. These careers weight the numbers very heavily towards university degrees unfairly as they are not within a decision matrix situation.
    • Likewise many of the lowest paying non-degree jobs are held by those that could not attend or graduate from university and are also not in the decision matrix range and pull down the HS numbers unfairly as they too had no choice.
    • A large percentage of people get their degrees later than age 18 and their career-span in which they can overcome the investment into the university process is vastly shorter. The earlier that a degree is obtained, the most beneficial it is to a career.
    • Going into debt to obtain a degree creates a financial hardship on university graduates that is not accounted for in the chart. If university cannot be afforded out of pocket then the negative impact of the university process increases favouring skipping university heavily.
    • Using median, not mean, market earnings.
    • Assuming that investment advantages end at retirement age. In reality these will not just continue until death but can be passed on to children.
    • University education assumes long life spans. Any serious health issues causing death or an inability to work reduce the value of university degrees while the cost and risk of them remains.
    • Any issues with a university, such as being unable to finish, is additional risk not carried by the skip camp.
    • Any early retirement potential severely hurts the university educated.
    • The numbers are naturally self selecting with anyone unable to attend college either because they simply cannot handle it or because they simply cannot afford it are filtered out of the university degree camp while being left in the other so the university degree numbers are heavily weighted towards those who can graduate from university as opposed to those that do graduate from it.
    • Many people without degrees get them later in life, after already reaching their earning potential, for their own reasons and their income numbers at their peak get added to the university grad ones rather than the high school ones in a very misleading way.
    • Because of how degrees must be obtained over time, the degree numbers naturally indicate a large about of career seniority and or general maturity as those with degrees have a higher mean age than those without so the numbers show that in addition to the value of the degrees themselves.
    • These numbers are the averages for the total economy which includes a large percentage of workers with the highest pay averages that were born and attended university during an era when self education was effectively impossible and do not reflect modern career and educational realities. That degrees were beneficial in the 1950s and 1960s should not be included, ideally, for people making career education decisions today.


  • @JaredBusch said in Just How Hard is University to Overcome:

    @scottalanmiller said in Just How Hard is University to Overcome:

    So yes, you are reading that correctly. The average US high school grad who could have gone to university but chose to go into the workforce immediately rather than waiting to go to university first and invested the cost of university into an S&P 500 Index Fund instead of spending it on university would benefit to an order of $4.8M - $6M USD better than a counterpart that attended university.

    Your problem here is assuming that people would invest that money.

    While true, it doesn't really change the economics. Start making money 5-7 years ahead of time compared to 7 years of (very little) money and hundreds of thousands in debt to pay off even before you start working.


  • Service Provider

    @JaredBusch said in Just How Hard is University to Overcome:

    @scottalanmiller said in Just How Hard is University to Overcome:

    So yes, you are reading that correctly. The average US high school grad who could have gone to university but chose to go into the workforce immediately rather than waiting to go to university first and invested the cost of university into an S&P 500 Index Fund instead of spending it on university would benefit to an order of $4.8M - $6M USD better than a counterpart that attended university.

    Your problem here is assuming that people would invest that money.

    It's not a problem, per se. That is the cost of lost opportunity. If those people feel that some other use of the money is more valuable to them than investing it, that is their prerogative and they should be able to show some usage that is even better than the financial benefits. I'm only showing what the most obvious, basic and "open to all" alternative to college would be.

    It's the baseline. If people don't desire financial return as the comparative, that is fine. But anyone that is arguing for the financial benefit of university must do so in comparison to a minimum, reliable use of the money in another fashion. If the only alternative is simply throwing the money away that statement alone, I feel, shows how much college grads know that their degree was not for career or financial benefits.


  • Service Provider

    @travisdh1 said in Just How Hard is University to Overcome:

    @JaredBusch said in Just How Hard is University to Overcome:

    @scottalanmiller said in Just How Hard is University to Overcome:

    So yes, you are reading that correctly. The average US high school grad who could have gone to university but chose to go into the workforce immediately rather than waiting to go to university first and invested the cost of university into an S&P 500 Index Fund instead of spending it on university would benefit to an order of $4.8M - $6M USD better than a counterpart that attended university.

    Your problem here is assuming that people would invest that money.

    While true, it doesn't really change the economics. Start making money 5-7 years ahead of time compared to 7 years of (very little) money and hundreds of thousands in debt to pay off even before you start working.

    Well, the chart shows that if they literally set the money on fire rather than doing anything useful with it (like buying a house, not going into debt or whatever) that over a full career the college graduates might pull ahead not including any of the other reasons that I listed as to why the list was ridiculously conservative in the direction of being pro-university.


  • Service Provider

    Considering investing to be something that people will not do has validity, few people will be willing to invest rather than to party with it. But nothing makes them do that. If the question is "university vs. throwing money away" then clearly, university is going to win. If the question is "university vs. doing something practical" then university clearly loses. And in any situation where we are discussing it as an option, I think that those are the only realistic options.

    University is so negative that I regularly hear the only ways that people promote is being to both throw away any money that would have been spent on it as well as taking all of that time off of work and doing quite literally nothing, not even working at Mcdonald's.

    What makes it difficult is that there are far more than two choices. It is not "Unversity or nothing". It is "University or this unlimited scope of other alternatives."

    But, I think that it is only useful to discuss practical alternatives to university because only people with a desire to succeed (career, finance, early retirement, etc.) who actually are involved in a university vs. alternative discussion. We have to assume that there is actually a goal in mind, otherwise university could not have a "success" ranking under any condition.



  • An average US BS is $146K? does that include living in the dorms?


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    An average US BS is $146K? does that include living in the dorms?

    It would if that is required. When I was at university in 1994 dorm living was a requirement and that cost was part of the cost of classes. While they broke it out as a line item, it was a required cost so cannot be separated from the cost of the class line item. That it was a separate cost was really a means of hiding the true cost of the degree.

    The site that I pulled the averages from stated that costs like that were included in the numbers. But they have to be as it is a major way that universities make their money.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    An average US BS is $146K?

    Based on an average of four years. If the average length to get a BS is over four years (I suspect that it is) then than number is actually low. I know almost no one who has done it in under four but lots of people who have done it in more, often lots more. Where I went to school, it was 5-7. No means of doing it in four. They didn't offer any possibility of that. Five has becoming increasingly common.



  • @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    An average US BS is $146K? does that include living in the dorms?

    It would if that is required. When I was at university in 1994 dorm living was a requirement and that cost was part of the cost of classes. While they broke it out as a line item, it was a required cost so cannot be separated from the cost of the class line item. That it was a separate cost was really a means of hiding the true cost of the degree.

    The site that I pulled the averages from stated that costs like that were included in the numbers. But they have to be as it is a major way that universities make their money.

    OK that explains why it's so high. Yearly at Univ of Nebraska, Omaha it runs around $20k/yr, so $80 total, and really, it's probably closer to $60K total. No dorms required.



  • I'm wondering how the investing figures are figured?

    Do they take the HS+ people and device the cost of college by 4 years, then by 52 weeks to make an investment amount per week, then apply the interest, etc?

    If yes, this is a savings amount of $701/wk. I know very few people who could save $700/wk when they were 18. So assuming the above is correct, it's incorrect in sure ability to save that amount of money.

    When in college, that money is loaned to you - interest free while in school. If not for those loans, that money would never exist, at least not until much later in the person's life.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    OK that explains why it's so high. Yearly at Univ of Nebraska, Omaha it runs around $20k/yr, so $80 total, and really, it's probably closer to $60K total. No dorms required.

    It's an average, as are the income levels afterwards. State schools like UN and SUNY are far cheaper than private schools. I mean like often 1/10th the cost per year! And rarely have dorm requirements or whatever. SUNY is even less than that cost, I believe. Possibly far less.

    But you have to look at averages to get anything useful. Schools like Harvard cost far more, but their graduates tend to earn far more. So if you want the advantages of "average income increases" you need to work with "average cost of acquiring those increases." If we had the same income differential numbers for just UN, then we could work with only the UN costs, as well.

    Individual schools might give us a much better idea into if going there was good or bad. But I don't know how to collect the data on a school by school basis in a consistent way (or at all.)

    There is little doubt that good state schools (here it would be SUNY Empire, Binghamton and SUNY IT) outperform basically any other category in ROI. But people almost universally pick expensive private schools because they believe this not to be the case. So either state schools don't provide good enough value OR a ton of people at the "best" colleges aren't very smart.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    I'm wondering how the investing figures are figured?

    As basically is they can be......

    Take the cost of going to college that they would have to have spent (because there is only a comparison case to be made when someone had the option of college, if college isn't an option, then college can't be better for them because it's impossible.) Then instead of investing that into education, invest it into an S&P 500 Index Fund.

    To be as conservative as possible I used the investment date as the graduation date. But this is unfair to the HS+ side of the argument because the university students would be investing that money into education year by year, not holding it interest free until the end and paying all at once. But I wanted to err on the side of giving university every chance to prove its value.

    So assuming at the time at with their counterparts are done with college, the HS+ person in this case takes that same average cost and applies it to the index fund and never touches it or invests again until they retire when they cash at (and 65 in this example.)

    The interest rate on the Index Fund is based off of the lifetime mean returns on that type of fund with every crash and negative year included (including the entire Great Depression era.) It's a quite conservative interest number for any period of over a decade (and we are way over that here.) 8.8% is the median, ~25% is the mean!

    I calculated the returns annually only, again to be very conservative.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    Do they take the HS+ people and device the cost of college by 4 years, then by 52 weeks to make an investment amount per week, then apply the interest, etc?

    No, but that would be more indicative of the real world comparison.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    If yes, this is a savings amount of $701/wk. I know very few people who could save $700/wk when they were 18. So assuming the above is correct, it's incorrect in sure ability to save that amount of money.

    If you know people who can pay for college, then you know people who can do this. The ability to go to college in America is the ability to make this kind of investment.

    If you can't do this and still go to college, then you are taking out loans (on average) and making the situation even worse for the college bound candidate because not only are they spending the money, they are paying interest on it. So making the differential even more dramatic in the favour of the non-college student.

    Remember, I made this as ridiculously weighted towards the college student as possible to show how bad it is. If you take into consideration an inability to come up with that amount of money, it makes university worse, not better.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    When in college, that money is loaned to you - interest free while in school. If not for those loans, that money would never exist, at least not until much later in the person's life.

    Interest free only for while you are in school. Then you start paying interest. I know people with graduate degrees and professional jobs from those degrees who struggle to make interest payments alone, let alone pay down the debt.

    If it was always interest free it would be different (and would only show that the loans are a bad idea for the economy, not that they are bad for the student.) But they are not. Trust me, I've spent most of my adult life paying off someone else's loans. They are far from interest free.


  • Service Provider

    @Dashrender

    If yes, this is a savings amount of $701/wk. I know very few people who could save $700/wk when they were 18. So assuming the above is correct, it's incorrect in sure ability to save that amount of money.

    Tons of people save for college. Most, I would assume. When I went to college in 1994 I had tens of thousands in savings plus tens of thousands that my parents put in to my education. I dropped out so this was for naught, but the money was still there.

    Later when I went to college again, I paid for it out of pocket, both undergrad and grad school. The amount that I was paying for some of that was above the $700/wk range. That I could do it without loans isn't really a factor, had I taken out loans it would have just made it worse, not better.

    So those numbers, in my case, are insanely conservative. I could have put something like $50K into an investment on day one of my university experience rather than at the end of it, and many tens of thousands more when I returned and did it again. And this was over twenty years ago. So much more, comparatively, than the numbers show in this example.

    Nearly everyone I know in the middle classes save for their kids' college education AND the kids work and save towards it as well. Combined the numbers may not be $50K, but often it is much more and even when it is less, it is still a substantial number.


  • Service Provider

    One part that you have to look at here is the big picture. Sure, few 18 year olds can save $700/wk. That's a silly number. And yet they spend $700/wk... that's an even sillier number. The more ridiculous you think the ability to pay for college is, the more ridiculous you actually think that college is.

    Wherever the money comes from... trust fund, personal savings, working parents, grandparent gifts, doesn't matter. The point is if the same time and money were applied to getting a normal job, some study on your own and putting the same money that would be thrown at college into a simple investment account, the average puts skipping college into the "win" category, financially, by a staggering margin.

    And it also puts skipping college into the "low risk" category. University appears to be both bad on average, and risky as it carries a vastly higher chance for total failure as opposed to just "not being quite as affluent as I could have been."


  • Service Provider

    Another way to cool at college prices... if you can spend it, you can save it. If you can't afford college, that just says that you can't afford it. It's that simple.

    I think that it is just a cultural thing in American to think of crippling college debt as somehow different than, say, crippling credit card debt. If we were comparing the benefits of investing versus credit card debt would we be concerned about someone's ability to invest versus pay off the loan that they took out? No. It's only because it is education that we tend to overlook the penalties of that system.



  • @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    I'm wondering how the investing figures are figured?

    As basically is they can be......

    Take the cost of going to college that they would have to have spent (because there is only a comparison case to be made when someone had the option of college, if college isn't an option, then college can't be better for them because it's impossible.) Then instead of investing that into education, invest it into an S&P 500 Index Fund.

    To be as conservative as possible I used the investment date as the graduation date. But this is unfair to the HS+ side of the argument because the university students would be investing that money into education year by year, not holding it interest free until the end and paying all at once. But I wanted to err on the side of giving university every chance to prove its value.

    But what are the chances that someone who could go to college would have $146K in the bank ready to invest on the day the college person graduated? Again, you're talking about them needing to save $700/week. Few 18 yo are making $700/wk, let alone having $700/wk to put into savings. I suppose if they get what I'll call lucky, when they hit 20 or 21, they MIGHT have a job that allows them to save over the $700 to try to recover the missing money from previous months/years, but even that seems very unlikely.

    So while this is a good math exercise (maybe), I don't see how it really stands up.



  • @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    If yes, this is a savings amount of $701/wk. I know very few people who could save $700/wk when they were 18. So assuming the above is correct, it's incorrect in sure ability to save that amount of money.

    If you know people who can pay for college, then you know people who can do this. The ability to go to college in America is the ability to make this kind of investment.

    If you can't do this and still go to college, then you are taking out loans (on average) and making the situation even worse for the college bound candidate because not only are they spending the money, they are paying interest on it. So making the differential even more dramatic in the favour of the non-college student.

    Remember, I made this as ridiculously weighted towards the college student as possible to show how bad it is. If you take into consideration an inability to come up with that amount of money, it makes university worse, not better.

    Well now you're just being ridiculous - what percentage go to college and don't come out with student loans? 5%? a number that low isn't even worth considering.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    But what are the chances that someone who could go to college would have $146K in the bank ready to invest on the day the college person graduated?

    You are missing my point. The chances are "on average." Because they either are spending this money already (on average) OR worse, they are taking out loans to do this.

    So having $146K is exactly what they have to have already by that point. I've made this financially conservative in their favour dramatically already. In the real world they have to have had one quarter of that up front, each year as they want (or maybe at the end of each year.) Or worse, they are taking out loans and have to have that money plus interest later.

    So no matter how unlikely you feel this is, it doesn't matter. Having that money at that time or more is the average amount actually spent by students. This is a simple number game. It doesn't matter how unlikely it feels. This is the amount that students are spending in the real world. That it feels outrageous isn't a factor.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    If yes, this is a savings amount of $701/wk. I know very few people who could save $700/wk when they were 18. So assuming the above is correct, it's incorrect in sure ability to save that amount of money.

    If you know people who can pay for college, then you know people who can do this. The ability to go to college in America is the ability to make this kind of investment.

    If you can't do this and still go to college, then you are taking out loans (on average) and making the situation even worse for the college bound candidate because not only are they spending the money, they are paying interest on it. So making the differential even more dramatic in the favour of the non-college student.

    Remember, I made this as ridiculously weighted towards the college student as possible to show how bad it is. If you take into consideration an inability to come up with that amount of money, it makes university worse, not better.

    Well now you're just being ridiculous - what percentage go to college and don't come out with student loans? 5%? a number that low isn't even worth considering.

    In what way am I being ridiculous? I'm showing how NOT ridiculous I am being. Any that come out with student loans make the case even more strongly for skipping university, not the other way around. Loans and interest make it worse, not better.

    Think about how credit cards work. Buying things that you can't afford makes you poorer, not richer.



  • @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    When in college, that money is loaned to you - interest free while in school. If not for those loans, that money would never exist, at least not until much later in the person's life.

    Interest free only for while you are in school. Then you start paying interest. I know people with graduate degrees and professional jobs from those degrees who struggle to make interest payments alone, let alone pay down the debt.

    If it was always interest free it would be different (and would only show that the loans are a bad idea for the economy, not that they are bad for the student.) But they are not. Trust me, I've spent most of my adult life paying off someone else's loans. They are far from interest free.

    OH that one I know. My wife went to a private college, tuition was $60k/y then she had a 50% uhh.. not grant - anyways, when she got out, she had $120K in debt... ug! Took us 20 years to pay it off.

    Today she's really pissed about it to - what a complete waste. She wanted to be a teacher, teaching institutions for the most part do not care where you got your teaching degree, as long as you have one. UNO would have cost her half what she paid for private and been every bit as "good" an education.

    sigh.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    So while this is a good math exercise (maybe), I don't see how it really stands up.

    That's the beauty of math. If the math is right, it stands up. Period. If the doubt isn't a mathematical one, it's just emotions overriding the logic. Show how the math is wrong? Either they have the money and the math is right, OR they have to take out loans and the math has been favouring universities unfairly and my point is made even more dramatically. Correct?



  • @scottalanmiller said in Just How Hard is University to Overcome:

    Another way to cool at college prices... if you can spend it, you can save it. If you can't afford college, that just says that you can't afford it. It's that simple.

    I think that it is just a cultural thing in American to think of crippling college debt as somehow different than, say, crippling credit card debt. If we were comparing the benefits of investing versus credit card debt would we be concerned about someone's ability to invest versus pay off the loan that they took out? No. It's only because it is education that we tend to overlook the penalties of that system.

    Well, the belief is that your earning potential with a degree is 2-3x that without one. That's proving to be less and less true.


  • Service Provider

    @Dashrender said in Just How Hard is University to Overcome:

    @scottalanmiller said in Just How Hard is University to Overcome:

    @Dashrender said in Just How Hard is University to Overcome:

    When in college, that money is loaned to you - interest free while in school. If not for those loans, that money would never exist, at least not until much later in the person's life.

    Interest free only for while you are in school. Then you start paying interest. I know people with graduate degrees and professional jobs from those degrees who struggle to make interest payments alone, let alone pay down the debt.

    If it was always interest free it would be different (and would only show that the loans are a bad idea for the economy, not that they are bad for the student.) But they are not. Trust me, I've spent most of my adult life paying off someone else's loans. They are far from interest free.

    OH that one I know. My wife went to a private college, tuition was $60k/y then she had a 50% uhh.. not grant - anyways, when she got out, she had $120K in debt... ug! Took us 20 years to pay it off.

    Today she's really pissed about it to - what a complete waste. She wanted to be a teacher, teaching institutions for the most part do not care where you got your teaching degree, as long as you have one. UNO would have cost her half what she paid for private and been every bit as "good" an education.

    sigh.

    So run some numbers.... think about all of that money spent AND all of the interest. What if you had paid all of that, both what you had up front and what you spent later to pay off the debt and its interest, into investments. And instead of taking years off from working, she was working in another field. Sure, she might earn less per day or week, but she would have had a much longer career that started earlier (time value of money says that early money is worth more than later money.)

    Even if all you had was $120K in retirement investments today and nothing else, would you be ahead? But after interest and years of interest accumulation as you put the money aside, it likely would be much higher, maybe $200K or $300K easily.

    That's the difference that I am trying to show. AND your wife doesn't even count because she has a career that doesn't use a "no college" option. So she's not in the decision pool here.