Just How Hard is University to Overcome
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@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average.
Then use the average, not some DeVry jizz fest number.
$135K is insane. $35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good. Even if someone racked up a huge number, it would most certainly fall under the rule of allowing someone to discharge it in Chapter 7.
No matter how insane it feels, those are the average numbers. The average amount of additional income depends on the average spent on college. If you modify down the cost of attending college in any way you can no longer use the amount of additional weekly earnings.
I agree that we can cherry pick cases that make way more sense. Good state university, very low debt, well picked program, student put in tons of effort... you can minimize the damage and in rare cases even show value. Absolutely. That's not the point.
The point is... on average it's a massive loss. We don't have a way to show what specific cases are. But we know that on average, they lose... a lot.
Most people make the case that college is a good investment. But it isn't. Just like bonds... 99% of the time bonds lose compared to other securities. But 1% of the time they win. Likewise, college loses 90% of the time. But 10% it wins. No dispute there. There are smart ways to do college and dumb ways. There is getting lucky and not getting lucky.
But when we step back and look at averages on cost and returns... the average ROI is dramatically negative.
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@Dashrender said in Just How Hard is University to Overcome:
Yes, worse when compared to the cash people, the loan people will always be worse off. But what about loan vs non loan people - could their earning potential actually be many times higher than and actually make sense for the loan people?
This goes against what you said was obvious before... that college might make sense if you have cash but definitely does not if you need loans. But now you are wondering if taking on debt might not somehow fix the college value proposition?
There is literally no means of knowing this. But logic says absolutely not (on average, as always.) Debt makes ROI harder, not easier. So if the situation wasn't a clear win for the cash people, it's a less clear win for the debt people.
How do you propose that debt fixes a problem that cash does not?
John has cash for college, but does better by not going to college and just putting that money in a fund.
Susie doesn't have cash for college so takes out loans and never gets to invest for retirement.
How does Susie win in that case but John not, by going to college? If the cost of college doesn't provide a lifetime ROI, how does adding debt onto that ROI challenge improve the odds rather than hurting them?
The problem that we have in running numbers is that we have no averages with which to work. In the case of case payments, we have rock solid numbers from the government that are as conservative as they can get and those show a bad ROI average.
For loans, we have no such numbers. We don't know the average pay off rate, the average interest rate, the average payoff start time, etc. We leave the world of simple math and go into all kinds of curves and 3D charts which we could do... if those numbers existed for us.
Unless you know of some source of those numbers I think that we have to agree with your earlier assertion that it makes no sense that debt would be a better way to go versus skipping college than spending cash would be. That goes against all common sense. While there might be some loophole on that, I don't see where it is. How does debt make the gamble less of a risk on average?
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@PSX_Defector said in Just How Hard is University to Overcome:
$35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good.
Absolutely, but keep in mind that those are payments that people not having gone to college can, on average, make as well. So would have the equal option, or nearly equal, to be making those payments into investments during the same time frame. Basically anything that you can afford to pay for having gone to college you can invest having not gone. It's not always exact, but it is close.
The person not going to college has more ability to earn and invest during the earlier years when their other self is attending college and spending money rather than investing. Even if the amount is lower, it is still there. Time value of money is on their side in this case, dramatically. And then while the college grad might be able to make payments more rapidly later, they both can pay into investments along the way (one paying into debt as an investment, the other into retirement.)
At the end of the college loan payoff, in theory, one has, in your example, about $30K of investments earning interest while the other has zero, but earns more per week. Starting at that point, which might be ten or thirty years later, only then can the college grad starting putting money towards retirement. Even putting it in faster, the disadvantage is severe because time tends to have much higher value than rate in an investment situation.
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@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average.
Then use the average, not some DeVry jizz fest number.
$135K is insane. $35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good. Even if someone racked up a huge number, it would most certainly fall under the rule of allowing someone to discharge it in Chapter 7.
No matter how insane it feels, those are the average numbers.
Did you not read the WSJ article?
Average for 2015 is $35K. $135K is insanity, cherry picked bullshit numbers to make your argument.
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
$35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good.
Absolutely, but keep in mind that those are payments that people not having gone to college can, on average, make as well.
Guess I wasn't clear.
$1400 a month would be for the $135K number you are throwing around with a nutso 30 year note at usury rates of 8%. $35K would be somewhere around $250 a month on a 30 year repayment plan. $35K would most likely be on a 10 year plan, making the payment $425. Same $135K would be $1600. Using the average, the real average, is much more realistic. Crazy, but not insurmountable. And certainly more possible with a BS from Texas A&M in your hand than a BA from the school of hard knocks.
Not getting into this magic saving of huge sums of money when you are starting to work. That's utter bullshit. The only way one could do that at 18 to 22 would be to either slang rock out on the streets or you came out of the golden crotch of someone already rich. Someone would have to be clearing $27K a year NET before that could even start to make sense. Assuming the standard deduction for federal plus a low tax state you would need to not have a single expense and make $16/hr from the get-go just to get to that number. And since we live in the real world, we need a place to live and eat, tack on ~$1500 a month for bare expenses.
Using all these numbers, you expect a person fresh out of high school, without a golden crotch to lean back on, to make $60K out the fucking gate?
No, only through nepotism would that happen. Which leads to the real crux of the argument. It doesn't matter how hard you work, or how good you are at what you do. Your fate is decided well before you even attempt it. Sure, some people can somehow break loose and become richer than astronauts. But the only surefire way to make lots of money is to come from money to begin with. Hence why I will probably never have millions.
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@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average.
Then use the average, not some DeVry jizz fest number.
$135K is insane. $35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good. Even if someone racked up a huge number, it would most certainly fall under the rule of allowing someone to discharge it in Chapter 7.
No matter how insane it feels, those are the average numbers.
Did you not read the WSJ article?
Average for 2015 is $35K. $135K is insanity, cherry picked bullshit numbers to make your argument.
Wasn't cherry picked at all, it was the number I found when I looked it up. I did not find a lower number.
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@PSX_Defector said in Just How Hard is University to Overcome:
Did you not read the WSJ article?
Average for 2015 is $35K. $135K is insanity, cherry picked bullshit numbers to make your argument.
ons.YOu didn't read the thread above. The WSJ number isn't relevant here. That's the average loan amount at graduation. The $135K number was the number specifically requested by Dashrender to see how a loan of that size would apply.
WSJ is the average loan size. To go with it, the average would have paid $110K in cash as $146K is the average overall cost size.
The WSJ number on its own means nothing. Because the smaller the loan, the bigger the cash payment and we've already shown that 100% cash or 100% loan are devastating. Unless you are suggesting that there is a sweet spot where the curve between them is non-linear and that you can take out X loan and pay Y cash and have neither of the hardships that cash or loans then showing how much on average is cash vs. loan doesn't really tell us anything at all.
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@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average.
Then use the average, not some DeVry jizz fest number.
$135K is insane. $35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good. Even if someone racked up a huge number, it would most certainly fall under the rule of allowing someone to discharge it in Chapter 7.
No matter how insane it feels, those are the average numbers.
Did you not read the WSJ article?
Average for 2015 is $35K. $135K is insanity, cherry picked bullshit numbers to make your argument.
Wasn't cherry picked at all, it was the number I found when I looked it up. I did not find a lower number.
IOW, you read a blog verses the Wall Street Fucking Journal. Someone with an agenda versus someone who is paid to research this shit day in and day out.
$135K is the MSRP for a for-profit, two year "school" like ITT Tech. The MSRP for Texas A&M is $27K a year. http://admissions.tamu.edu/freshman/cost
Only suckers pay MSRP.
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@PSX_Defector said in Just How Hard is University to Overcome:
$1400 a month would be for the $135K number you are throwing around with a nutso 30 year note at usury rates of 8%.
The rate that I used was 4.3%, the one directly from the US Department of Education that is the lowest one available. Grad students and professionals all have to pay higher rates. I specifically went for the most conservative possible numbers to ensure that you couldn't argue that I used an artificially high number.
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@PSX_Defector said in Just How Hard is University to Overcome:
IOW, you read a blog verses the Wall Street Fucking Journal. Someone with an agenda versus someone who is paid to research this shit day in and day out.
One, it wasn't a blog. Two, you didn't provide any number at all. I didn't dispute the WSJ at all, only pointed out that you missed the conversation and are using a number that doesn't mean anything here. While the WSJ is a joke, that's not an issue here. That you are misunderstanding how the numbers apply is the issue. The WSJ is talking about average loan amounts. You'll need to explain how we use that to figure out the total value of college because I'm unclear how you think you will use that to do math as we've already shown that the loan amount doesn't really matter.
You are trying to pick the argument apart by saying things that don't apply and attacking things I didn't even remotely say or suggest to draw attention away from simple math.
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@PSX_Defector said in Just How Hard is University to Overcome:
$135K is the MSRP for a for-profit, two year "school" like ITT Tech. The MSRP for Texas A&M is $27K a year. http://admissions.tamu.edu/freshman/cost
$135K is a random number that Dashrender picked on a line for showing a loan vs. cash balance. You are not following the discussion at all.
The numbers we are working with are the "total average amount paid" for college in the US. Not an MSRP, not unaccredited schools. You should read the thread before picking it apart because this stuff doesn't make any sense.
The average is the average. Ranting that only fools pay average is silly. I might as well rant that only fools go to college. Does that get us anywhere? No, trying using the governments official figures and show that college is making sense financially. That's what we are doing here.
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@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
$1400 a month would be for the $135K number you are throwing around with a nutso 30 year note at usury rates of 8%.
The rate that I used was 4.3%, the one directly from the US Department of Education that is the lowest one available. Grad students and professionals all have to pay higher rates. I specifically went for the most conservative possible numbers to ensure that you couldn't argue that I used an artificially high number.
Which is for the subsidized loans. Which is capped at $3500 per year. Total cap is $9K per year for both for undergrad.
https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized
The rest if you were to use your numbers would be on private loans, which are not at 4.3%. Not usually 8%, but not by much.
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@PSX_Defector said in Just How Hard is University to Overcome:
Using all these numbers, you expect a person fresh out of high school, without a golden crotch to lean back on, to make $60K out the fucking gate?
No, I expect $25K or maybe $30K.
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@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
$1400 a month would be for the $135K number you are throwing around with a nutso 30 year note at usury rates of 8%.
The rate that I used was 4.3%, the one directly from the US Department of Education that is the lowest one available. Grad students and professionals all have to pay higher rates. I specifically went for the most conservative possible numbers to ensure that you couldn't argue that I used an artificially high number.
Which is for the subsidized loans. Which is capped at $3500 per year. Total cap is $9K per year for both for undergrad.
https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized
The rest if you were to use your numbers would be on private loans, which are not at 4.3%. Not usually 8%, but not by much.
I understand. But I was erring on the side of being ridiculously conservative so that no argument could be made against the math... no matter how you adjust it for the "real world" the situation becomes worse for the university path. I wanted to ensure that the level to which it was, on average, returning a negative ROI could not be questioned.
If 4.3% is lower than possible, which I fully agree with, then it just makes the case stronger.
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Neither college grads nor high school grads make $60K with any frequency, even five years after college. It can happen, of course, but the average say that it is rare. Both parties are pretty poor, on average, for the first decade at least. Neither can save or pay off very much. But that's not really important. What is important is how they perform relative to each other.
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Also, just to note that I do read the articles, WSJ even states that they didn't do any research for the data in that article. That article is just interviewing a publisher who spouts off nonsense that is his opinion, like that degrees are as necessary today as they were decades ago. He says nothing to back it up and there is no reason that we are to expect that he's even versed on the matter. He's not an expert that we know of, it's just a random quote that the WSJ included for effect. That article is a paid advertising piece and doesn't even try to hide that fact. It's just a collection of quotes from their advertiser.
Even by WSJ standards it is poor, but the important bit is that the WSJ points out that no research was done very clearly in the article. At least in reference to the debt numbers provided. That's a one year old number that their advertiser claims to have figured out based on government data... which can't be accurate as the government does not have all of that data in a way that they could make that report. It only applies to certain subsets of that data (anyone putting college on a CC would be missed, for example, or anyone taking family loans.)
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The WSJ article, while I don't think much of it, ALSO had, if you kept reading, more information that the debt was split in two portions. So the full debt was $30,867 + $35,000 for a total average debt of $65,867+. That's a lot higher than you were thinking that it said.
And that's just average debt, a year old numbers (we expect this to be higher now) and doesn't include the cash payments made along the way which, we expect from the other numbers, to be close to the same as the debt numbers, which makes total sense from how we observe students in real life.
So if we want to work with this, we can do so. If the averages are the numbers that we had originally for cost we are able to work out the average cash to debt mix. But, we know that this doesn't change the overall situation. But it is very interesting to know where the average loan ratio falls along the curve in this case.
But we lack the numbers as to average interest rate... we only know that it is greater than 4.3%. But is it 4.4% or 7.9% or, likely, somewhere in between? Hard to say.
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@scottalanmiller said in Just How Hard is University to Overcome:
But we lack the numbers as to average interest rate... we only know that it is greater than 4.3%. But is it 4.4% or 7.9% or, likely, somewhere in between? Hard to say.
This is why I say don't spout about shit you don't know about.
You didn't even know the difference between subsidized/unsubsidized federal loans and private loans. Then there is what it says it costs and what you actually pay. Then there is the real amount you borrow to do school. Not to mention this magical money fairy bringing oodles of cash when you are 18.
Your research is flawed, that's all I'm going to say about this.
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@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average.
Then use the average, not some DeVry jizz fest number.
$135K is insane. $35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good. Even if someone racked up a huge number, it would most certainly fall under the rule of allowing someone to discharge it in Chapter 7.
No matter how insane it feels, those are the average numbers.
Did you not read the WSJ article?
Average for 2015 is $35K. $135K is insanity, cherry picked bullshit numbers to make your argument.
@scottalanmiller said in Just How Hard is University to Overcome:
@PSX_Defector said in Just How Hard is University to Overcome:
$35K is nuts, but that's the cost of a new car now, not impossible to pay off. Repayment would be on 30 years, not 85, making the note somewhere around $1400 a month if the rate was good.
Absolutely, but keep in mind that those are payments that people not having gone to college can, on average, make as well.
Guess I wasn't clear.
$1400 a month would be for the $135K number you are throwing around with a nutso 30 year note at usury rates of 8%. $35K would be somewhere around $250 a month on a 30 year repayment plan. $35K would most likely be on a 10 year plan, making the payment $425. Same $135K would be $1600. Using the average, the real average, is much more realistic. Crazy, but not insurmountable. And certainly more possible with a BS from Texas A&M in your hand than a BA from the school of hard knocks.
Not getting into this magic saving of huge sums of money when you are starting to work. That's utter bullshit. The only way one could do that at 18 to 22 would be to either slang rock out on the streets or you came out of the golden crotch of someone already rich. Someone would have to be clearing $27K a year NET before that could even start to make sense. Assuming the standard deduction for federal plus a low tax state you would need to not have a single expense and make $16/hr from the get-go just to get to that number. And since we live in the real world, we need a place to live and eat, tack on ~$1500 a month for bare expenses.
Using all these numbers, you expect a person fresh out of high school, without a golden crotch to lean back on, to make $60K out the fucking gate?
No, only through nepotism would that happen. Which leads to the real crux of the argument. It doesn't matter how hard you work, or how good you are at what you do. Your fate is decided well before you even attempt it. Sure, some people can somehow break loose and become richer than astronauts. But the only surefire way to make lots of money is to come from money to begin with. Hence why I will probably never have millions.
You and I suffered the same issue - Scott is only comparing a person who had cash in the bank to pay for college to themselves if they didn't pay for college, instead the money could go into an investment.
And that's a fine discussion on it's own - but it's a rather pointless one as the number of people that are in that situation are so small to not have a real impact on the college situation at all.So this leaves us with Joe average, who graduates HS with zero cash in hand. This person has two options - take a loan for college, or skip college until much later in life (if ever).
I think this discussion is much more worthwhile. It covers the mass majority of the US.As PSX said (and so did I earlier) the 18-22 year old will in most cases make next to nothing. Hell today they are often continuing to live with their parents, that fact would allow them to save a bit more of their near nothing take home.
Scott's numbers in the OP show that non college goers make 1.8 Mil lifetime while college goers make 2.4 Mil, that says that a non college (NC) averages 40K over 45 years (20-65) whereas the college goer (CG) makes an average of 60K/yr over 40 years.
What we don't know is, how rapidly the CG gets to 60K vs how rapidly the NC gets to 40K, and of course they both have to end up somewhere north of those numbers to account for the significantly lower incomes they'll make when they are younger.
I know I didn't get to the 40K number until I was 26, so my non college self spent 6-8 years well below that number.
Again, if the numbers were available to show that the earning timeline of NC vs CG, that would show this much better than the simple math, which while all of course true in it's own right, isn't anywhere near the whole story.
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@scottalanmiller said in Just How Hard is University to Overcome:
Neither college grads nor high school grads make $60K with any frequency, even five years after college. It can happen, of course, but the average say that it is rare. Both parties are pretty poor, on average, for the first decade at least. Neither can save or pay off very much. But that's not really important. What is important is how they perform relative to each other.
This is the linchpin. Does Joe, end up better after taking loans for college, or skipping college? Again it comes to earning averages, and I guess Scott's numbers say College Goers really don't make that much more than non on the averages across the nation. Though I still think it's more important to look more localized than that, and more income based than that.
