>The average cost of attendance for a student living on campus at a public 4-year in-state institution is $26,027 per year or $104,108 over 4 years.
This isn't the alternative for most people. There isn't an option to get a mix of 80k in federal and non-federal students loans to throw into the stock market. The real question is, for most people, does it make sense to take on ~80k in student loans and go to school for 4-5 years, or should you try to immediately enter the job market.
Plus, expecting 10% real returns, year after year, in some chosen passive fund is unrealistic modeling.
> The average stock market return is about 10% per year for nearly the last century, as measured by the S&P 500 index.
I don’t know why people are getting hung up on this 10%, it’s just the historic returns everyone in Boglehead and FI/RE communities uses. If you wanted to use the 6-7% real returns after inflation that is fine too. The numbers still are the same, you’ll just get an inflation adjusted number. You’ll need inflation adjusted numbers on your college earnings too though, I don’t think the “extra 1 million earned by a college grad” is inflation adjusted.
I believe there have been studies that show that graduates who are unlucky enough to be job searching during a one or two-year recession have a lifelong income deficit compared to those who don't
You should start a fund!!
So this comparison doesn't really make much sense as those students simply don't have the money to invest in stocks instead. The opportunity costs here are the wages they could earn in the meantime.
When we talk about compound interest it is way off. Also sustained growth of that magnitude - especially if we want it above inflation is very hard and has occurred in very rare circumstances.
>The average stock market return is about 10% per year for nearly the last century, as measured by the S&P 500 index.
So you're getting 10%, but in terms of actual, real, concrete gains it's more like 7%. Also remember that's the average so it's possible to see years of 5% and then a few of 14%.
The 7% number also looms large because at 7% a year you double your money in ~10.3 years; makes it easy to plan for 30+ year investment horizons.
Look, the cost comes from somewhere. You earn it later and pay it later, in taxes or in loan service payments. Either way, you pay it. At least with a loan you have a shot at being done paying one day. And this sort of thing only makes sense as a nation managing a treasury if the people go on to make significantly more from their degrees. With the way education is going, credentials no longer guarantee good pay, and if everyone can go "for free" then every job will require a degree, you wind up in a scenario where a nation wastes 4 years per generation only to wind up with the same economic landscape later. They'll cut these programs well before that happens. There's no such thing as a free lunch.
Because do not forget, you pay taxes in the US as well. On top of your student loans and whatnot.
And no, Germany tried to cut tuition fees already. Those were abolished after, if memory serves well, a year or two.
Society benefits from having a highly educated population, even if wealth generated by that is squandered by a class of people, a society needs people to be educated to be able to innovate and generate new wealth.
If you are only thinking in financial terms there's no way for higher education to ever make sense in the long term, given that over time it slowly becomes the new status quo (as it's happening), and salaries won't ever continue to increase with higher education when there's a larger and larger share of the labour pool highly educated. It is still a net benefit to society to have highly educated people, there's more specialised labourers to draw from to transform ideas into wealth generation.
I don't think we should ever think of education in purely individual's finance terms, I gladly pay my taxes (in parts to fund education) in a country where I wasn't educated in because I know it benefits me in the end, more educated people helps to avoid economical stagnation.
It's not free lunch but giving everyone in a society an equal opportunity to achieve specialised education is a net positive in the long term, even if it costs a lot. The same with healthcare.
> With the way education is going, credentials no longer guarantee good pay, and if everyone can go "for free" then every job will require a degree
That already happens in the USA even with education being as expensive it is, I don't believe it's a sound argument...
At least with free education everyone has the opportunity to attend it no matter your level of wealth or your financial outcomes from it.
Show your work here. Society also benefits from having electricians, plumbers, and garbage men.
Be sure to include how you would prove that graduating with a bachelor's degree indicates that the graduate is educated. From what I have seen, that ain't necessarily so.
yeah, the government let a private corporation manage it, and they lobbied for laws to make sure their loans are un-defaultable. It's just free, guaranteed money for them.
And college isn't getting more expensive because of higher costs, it's getting more expensive because they can add a bunch of fancy amenties that are used as advertisement, even if it doesn't directly help with the education aspect. Even 10 years ago there were thousands of dollars of costs per semester on misc. fees that I couldn't opt out of. it was basically a tax from my school.
So yeah, the cost comes from somewhere, and both the funders and the beneficiaries have every incentive to bloat it.
You can directly compare the value of investing money in education and the stock market. If you had $80,000 to invest at 18 you often would be better simply investing in the stock market.
Most people of course borrow the sums required which means the interest increases the monies owed as opposed to gains from investment earnings. And the monies borrowed are owed come what may, not even bankruptcy allows escape from the debt and accumulating interest.
investing is an awful first thing to do unless you already have a job and stable life setup. Pretty much any sane financial planner will say
1. get your base costs covered 2. get an emergency savings 3. get a long term (3 months) savings 4. THEN you can invest
an 18YO trying to get their home situation put together will probably burn through a good portion just by renting out an apartment and getting the bare necessities. And ofc they need a few months to find what is probably a minimum wage job, which will probably not cover rent by itself.
If they can get over that huge hump, there won't be much left to invest (definitely not a 3 months savings).
College isn't generally worth it for engineering either, unless you really want to work for something government or government adjacent where there is an explicit requirement for a degree.
Learning to code can be done on your own time, and you can get a job without a degree, and software development is applicable to all engineering, with more and more of the "expertise" of other fields being moved into computer software.
Civil is the oddball in that list, because of PE certification, but the rest you absolutely can.
Having a Masters in Aerospace Engineering and having switched to software later, 95% of the work that I did over the 10 years in aerospace involved software packages. 60% of it was matlab, either data processing or analysis, and 30% of it was CAD, which is essentially programming.
Knowing what I know now, if I wanted to get into Aerospace through software, I would work on open source projects for autopilot or some aerospace analysis software, teach myself CAD, and with that portfolio I would absolutely get hired entry level into the companies I worked at, and would learn all the same stuff I learned while working, and the total level of effort to do this would be less than going to a 4 year college. And the only cost would be a decent laptop that can run CAD software.
In a vacuum, yes. In reality, I'm not sure I would have gotten past courses in stuff like Systems, compilers, and networks without being able to poke at peers and professors alike in order to get my head around them. Maybe some curated masterclasses could do the same thing for cheaper ("hundreds" instead of thousands), but those are a much more recent phenomenon; certainly not something widely known nor available a decade ago when I started school.
It's also a matter of "you don't know what you dont know". There are all kinds of stories of prodigies who were tinkering with code since they were 10. Meanwhile, I'm a graphics engineer, and I didn't even know what DirectX was until my 2nd year of college. It's an affordance that is increasingly less of an option, but the ability to see and dabble in different domains really helped me shape what I enjoyed or didn't. Without that experimentation, I saw myself freshman year working as an Android app developer. That changed quickly.
There's a lot of factors to take into account.
For my part: I'm a high earner in a technical field who has a B.A. in English literature, despite having intended to major in computer science. My field of study helped me become more open-minded, improved my writing skills, and helped me to develop soft skills, all of which have been more helpful to my career than my technical skills (based on my own observations and feedback from peers and managers).
University can be a transformative experience if not treated as vocational training; but that's also a good argument for increased vocational training and less emphasis on attending university.
and to those saying an average college grad makes 1M more per lifetime than a HS grad, that included people who went to college when it was worth it. we need to look at the expected earning of someone joining now, but this as expected, can't be calculated.