Just How Hard is University to Overcome
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@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?
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@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.
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@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.
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@scottalanmiller said in Just How Hard is University to Overcome:
@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.
Right, this is exactly like the home loan crisis - the creditors are lending money that is a bad bet. Sadly, as you mentioned our culture says that going to College is a requirement to get a head in life..
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@Dashrender said in Just How Hard is University to Overcome:
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.
Right... and that belief is just an artefact of lacking critical thinking. Which is an additional complaint about colleges. As they are shown to be less and less valuable and more and more risky, people with critical thinking are increasingly avoiding them. Making remaining candidates a worse pool than before.
But based on the US BLS numbers, there is no 200% income increase. It's a sizeable increase (but not a real one, it's VERY misleading) but nowhere near 200% over a career.
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@scottalanmiller said in Just How Hard is University to Overcome:
@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.
I completely agree that if you can't pay cash for college, you absolutely should skip it! My wife paid cash, around $20K for her masters - that was a sound investment, she gained around that per year moving from teaching in HS to teaching in college. She's earning back a bit of that lost $120K from that private education.
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@Dashrender said in Just How Hard is University to Overcome:
Right, this is exactly like the home loan crisis - the creditors are lending money that is a bad bet. Sadly, as you mentioned our culture says that going to College is a requirement to get a head in life..
I agree except... why is it sad? Sending OTHER people to college is great for the rest of us. It takes them out of the career pool, it sets them behind by half a decade or more, it takes their money and puts it voluntarily into a sort of wellfare system that employs a huge number of otherwise unneeded workers. Quite frankly, university is like the lotto... terrible for people who play, but great for those that don't.
I feel morally obligated to point out that the emperor has no clothes. But beyond that, anyone who goes to university knowing the risk is great for me. So I don't see it as sad. I think that it's actually a good thing. No one is forced to go, it's a tax that they pay voluntarily.
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@scottalanmiller said in Just How Hard is University to Overcome:
@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.
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
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@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:
@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.
I completely agree that if you can't pay cash for college, you absolutely should skip it! My wife paid cash, around $20K for her masters - that was a sound investment, she gained around that per year moving from teaching in HS to teaching in college. She's earning back a bit of that lost $120K from that private education.
So this statement tells us what you need to know, let me break it down for you...
- If you can pay cash for college, then my numbers up above tell you the millions of dollars that you are losing. We know that paying cash up front for college is a disaster (on average, there are always exceptions.)
- If you can't pay cash for college then you take out loans and it makes college worse. Even worse than the disastrous scenario that I pointed out above.
So you've made my point for me, but I'm not sure that you caught it. Paying cash is bad, not paying cash is worse. Both cases, university punishes you either the amount that I showed above (on average) or worse.
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@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
What is most important is that you can never consider the irrelevant factors. People who work in "degree only" fields, as mandated by law, should not be in the pool of consideration for college decision making because college is not an option for them. Period.
Likewise, those that simply cannot get into college and/or complete it should not be in the pool.
Both of those groups might be interesting to study, but they have literally zero value to the decision process of deciding whether to go to college or not. People who can't go to college have no decision to make. People going to college by necessity also have no decision to make. it is people considering college vs. not-college alone who are in the decision pool.
Does that make sense? Leaving in the entire pool has a lot of pro-university skewed numbers created by laws designed to prop up the university numbers. If we removed the laws, the market would, we expect, show that teachers that skip college would earn far more than those that don't (on average) just like other fields (on average.) It's legal manoeuvring alone that makes that not the case, it has nothing to do with the market or the value of education.
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I totally get your point, and understand it. But the numbers you present in the OP only apply to the 5% that can afford to pay for college with cash.
Instead you should show what non cash people could afford to do savings wise to show more realistic situation.
For example, as we know from above, college at these numbers cost $700/week. Let's assume a normal person can afford to put $50/week away, and leave the rest of the numbers the same. and to give more to the college side we won't include interest.
So $50/wk for 4 years = $10,400. Now, we can only hope that by the time these people reach 22 yrs old that they can afford to put away more than $50, but who knows.
I'd like to see your OP chart reworked with only $10,400 instead of $146K and see how far ahead they end up.
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@Dashrender said in Just How Hard is University to Overcome:
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 explain to me how it isn't ridiculous to spend $700/wk on something you don't need (I would ignore this spend if it was on food, shelter, water, sanitation, etc.) but not ridiculous to think that money spent on "wants" could be put into some other "want"? You can't have it both ways.
The ability to go to college is the ability to invest the money somewhere else. It goes part and parcel. If you can't afford college, then of course you can't invest the money either. But you didn't have college as an option so it doesn't matter; the decision is not yours to make.
Anyone who has the ability to go to college automatically has the ability to put away their portion of the average cost into savings. And the average says that on average, that's the better bet.
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@Dashrender said in Just How Hard is University to Overcome:
I totally get your point, and understand it. But the numbers you present in the OP only apply to the 5% that can afford to pay for college with cash.
No, they apply the least to those that can pay with cash! A point that you yourself made. The need to take out ANY loans makes my point more, not less.
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@Dashrender said in Just How Hard is University to Overcome:
Instead you should show what non cash people could afford to do savings wise to show more realistic situation.
That's a lot more complex, but it's a simple thing to show. You said it yourself, taking out loans lowers the value. Lower value is lower. Period. It's that simple. If paying with cash is a loss, taking on debt is a bigger loss.
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@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
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@Dashrender said in Just How Hard is University to Overcome:
So $50/wk for 4 years = $10,400. Now, we can only hope that by the time these people reach 22 yrs old that they can afford to put away more than $50, but who knows.
If they can't put more away, then they will never pay off their loans in most cases. Never. Which, in turn, means that they can never retire. The amount of loss increases.
Basically it comes to this... if you can't afford to pay off the loans, you lose. If you can afford to pay them off, you could do better by putting that money into investments.
The BLS numbers show how much more you can make, and the numbers are not big enough to cover the cost. All of this looking at debt doesn't change that.
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@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
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 explain to me how it isn't ridiculous to spend $700/wk on something you don't need (I would ignore this spend if it was on food, shelter, water, sanitation, etc.) but not ridiculous to think that money spent on "wants" could be put into some other "want"? You can't have it both ways.
The ability to go to college is the ability to invest the money somewhere else. It goes part and parcel. If you can't afford college, then of course you can't invest the money either. But you didn't have college as an option so it doesn't matter; the decision is not yours to make.
Anyone who has the ability to go to college automatically has the ability to put away their portion of the average cost into savings. And the average says that on average, that's the better bet.
again, this argument only applies to the tiny percentage that can afford to pay cash for college. and those people aren't worth talking about.
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@Dashrender said in Just How Hard is University to Overcome:
I'd like to see your OP chart reworked with only $10,400 instead of $146K and see how far ahead they end up.
You mean if the average cost of college was trimmed by like 93%? If college is free or nearly free, it probably wins. But if college gets cheaper, more people go, and its value drops again. So that can't happen in a bubble.
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@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:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
But is double enough to offset the cost? Double per year, with fewer years, and the cost of college is a loss. Go back and look at the chart... making double what you would make without college is assumed in the numbers already and is a loss.
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There is another ENORMOUS factor that has been left out. People with higher per year incomes pay much, much higher tax rates. So earning twice as much doesn't give you anywhere near double the buying power. Spreading earnings out over more years lowers the tax burden by quite a bit. So those college graduates not only pay for college up front (or with loans) but also pay with a higher tax penalty for the remaining years.
