We’ve lived through the tech and real estate bubbles. What’s next?
How about college?
University cost increases long ago outstripped the wage benefit of going. Or so, I’ve read.
Thus, demand will eventually reflect this fact and fall, and the cost of attending college will have to come down. Right?
Undergraduate tuition has no doubt skyrocketed. Take NYU — it costs about $20,000 per semester to go — that comes out to $160,000 for four years. And that’s just tuition. It doesn’t count the stuff you need to survive. You know, like food and shelter.
Let’s take three 18-year-olds with wealthy parents. Each has $160,000 with which to do whatever he wants. (This is more common than you might think: I seem to have many friends with zero student loans.)
Annie goes to college. Her $160,000 goes poof, for now. Paul invests his money and goes to work in a trade. Jim starts his own business. (For simplicity’s sake, I don’t give Jim equity in his own business. Ha.)
Here’s where they are after 20 years:
But wait. Jim’s business could be wildly successful, allowing him to pay himself (and his employees) more. Annie could major in art history, thus depressing her average annual salary. Paul’s investments could do really well.
Now what?
Or, Annie could major in business or technology, thus increasing her earnings power in the information age. Paul could work his way up to management or work in a region with trade-union-boosted wages. Jim’s business could flop after year three. Now how did that initial decision play out over 20 years?
Conclusions:
- One. You can’t model out life in an Excel spreadsheet.
- Two. Life won’t be so bad for anyone who starts out at age 18 with $160,000.
- Three. College doesn’t seem to make sense unless you get a degree that is useful. With a useful degree, college still seems worthwhile, even at today’s escalated tuition costs.
I was a first-generation college student — and that was the best thing that could’ve happened to me in the late 1990s. Especially because I didn’t start out with $160,000 to play around with and because I majored in computer information systems — which gave me a marketable skill.
I grew up in a scrappy blue-collar suburb of New York. My formal education threw me in with a mix of people I wouldn’t otherwise have met and catapulted my career way beyond what I could’ve imagined at 18. I could only afford college because I got a ginormous merit-based scholarship from American University plus need-based aid. (I took on debt for graduate school at Northwestern U.)
Also: A few key professors stepped in with wise advise throughout my life. They’re worth their weight in gold to me. How do you put a dollar value on a good mentor?
No question, the cost of an elite school draws a distinctive line between have and have-not. The system works only for those fortunate enough to have been born on the “have” side, or who’ve hard-work-and-lucked themselves over to it.
More and more smart people are questioning the university system. Education was the great equalizer for my generation and many before it.
But will it be for the next generation?
Explore more:
Generation Z will revolutionize education
Is a college degree worthless?
Why does college cost so much?
There is no college cost crisis
Now it’s your turn. What do YOU think?
“College doesn’t seem to make sense unless you get a degree that is useful.” Hard to disagree with that, but what does “useful” mean? Exposure and insight into great literary expression, profound philosophical reflection, rigorous scientific inquiry — even the much-derided art history — “useful,” surely, even if not always remunerative. Your calculations examine college as a tool for financial success, which it certainly should be. But it is more than that, I hope.
College taught me to think for myself, and it helped me figure out who I wanted to become. But my liberal arts degree only became as valuable as it is today because I added a master’s in journalism — a specific skill, like you mention — on top of it. I didn’t major in business, but I’m far more entrepreneurial than my friends who didn’t go to great colleges.
But. The cost of college is outrageous now. I don’t quite get how we as a society allow that to continue.
For work, I’ve been looking at the unemployment rates by education level, and it really shows how education is the best investment you can make. Uneducated workers not only make less, they’re far more likely to be unemployed than educated workers. The recession hit that group MUCH harder than their educated counterparts. Just having a college education — forget graduate degrees — makes you far more likely to weather economic storms well.
So many more thoughts on this, but that’s a start. Thanks for bringing it up!
The headline doesn’t really match the content.
Your analysis is whether it makes financial sense for students to attend college, but then you concede the underlying thesis that the degree has outstripped its utility.
But the bubble isn’t tied to these metrics, I’ve never met a college freshman who was pursuing a degree based on future earnings laid out like this. Either they trust that such predictions are subject to too much change over the time periods involved, they believe they will rise to the top of any pyramid scheme structured niche field, or they just don’t care about the math.
The bubble of college is predicated on: 1) the intense marketing/mindset created by the perpetual “you have to have a degree” mantra and 2) the ability of recent grads to generally service their debt when its subsidized by Uncle Sam.
When grads are unable to service that debt, which is happening now to an extent, one will start to see changes. When colleges get less applicants, and actually realize they’re getting less applicants, because of their insane pricing, things will slowly change.
But the real change will be when businesses stop caring about having a degree for entry-level work, or when a credible DeVry-like alternative arises to supplant degrees as a useful barometer of competence. When no one hires you because of a b.s. b.a., and instead looks to another source, that will be, in my humble opinion, the tectonic shift that will really cause the bubble to burst.
The largest graduating high school class was in 2008. The numbers don’t bode well for the future of the current collegiate market.
Even those high-talented hard-working people, like yourself, who received merit scholarships to places like AU only serve to hide the problem — those universities are still charging, spending and wasting incredible amounts of resources that can’t be justified for the final product delivered.
The bubble will burst, but it will take more than the math of spreadsheets to move social and political change.
Mike: Yes it is more than that — it’s an alumni network, a valued mentor, a friendship circle, four fun years, a really good time. Heck, I met my husband in grad school. But, couldn’t other institutions and communities solve a similar purpose? I’d argue that a softer degree, while it may have intrinsic value, is harder to value cash-wise, and thus, an arts degree of any type is a luxury that best serves those who are already privileged.
Lexi: Can’t wait to see your next article on this!! I think it’s because the degree, as Ben points out, represents a “barometer of competence.”
Ben: You’ve given some of the best commentary I’ve read on this. I want a human resources expert to weigh in. It seems like, for many jobs in the information age, there is a checklist for new hires and a bachelor’s is at the top of the checklist.
I think this is a great point to make. My schooling cost $240k by the time I was done, and I currently make an income well under the poverty line. I learned things in college, but the most helpful thing was the people I met. However, if I had taken that $240k and used it to travel the world for 10 years, I likely would have met people just as helpful and would have been much further along in my photojournalism career by now. And really, people don’t realize how much money a trade or craft can make you, if you’re good. The highest-paid person that I know personally is a friend who is a welder. He never even finished high school or got a GED, and yet he makes over $120k a year!
thanks for the post, very informative. very helpful for my current study 🙂 nice one!
College will really help someone to grow and to mature! it taught me to me responsible from a happy-go-luck teen to a future-family-oriented adult! i do not mean to brag but my school MSU-IIT is really great!
Hello Andria
You really put a good balance sheet there. And for me having a college degree is really worth it.Because as what my father always said ” Proper Education is something that can’t be taken from you”. Knowledge is the only investment that cannot be taken by any thief. So it really pays to have a college degree.
You really good at accounting. You said it right, going to universities entails a large amount of expenses. My son is going for his post graduate course and we have to buck him up 50% of his school bills because it is really expensive.
College is where we make the biggest decisions in our lives. Because this is where we pick jobs. We must choose wisely. Thanks for sharing this post…
I’ve been looking at the unemployment rates by education level, and it really shows how education is the best investment you can make. Uneducated workers not only make less, they’re far more likely to be unemployed than educated workers. | 😛
Knowledge is the only investment that cannot be taken by any thief. So it really pays to have a college degree. | 😛
Knowledge is the only investment that cannot be taken by any thief. So it really pays to have a college degree. | 😛
i used to think the education it the great investment that our parents give to us so i suggest if you parents work hard and bring you to school please treasure it not all people can go to school.thanks for the great insight.
I likely would have met people just as helpful and would have been much further along in my photojournalism career by now.
I likely would have met people just as helpful and would have been much further along in my photojournalism career by now. | 😛