Value Your College Degree Now In 30 Minutes! I Mathematically Prove Ivy League To Be A Waste Of Money!

Reggie Middleton's picture


software collage

Friday, the Wall Street Journal ran a piece that essentially channeled BoomBustBlog. It was quite controversial, Why spend six figures on a business degree? Students would do better to train and network on their own.

Imagine that you have been accepted to Harvard Business School. The ivy-covered buildings and high-powered faculty whisper that all you need to do is listen to your teachers, get good grades and work well with your peers. After two years, you'll emerge ready to take the business world by storm. Once you have that degree, you'll have it made.

But don't kid yourself. What matters exponentially more than that M.B.A. is the set of skills and accomplishments that got you into business school in the first place. What if those same students, instead of spending two years and $174,400 at Harvard Business School, took the same amount of money and invested it in themselves? How would they compare after two years?

If you want a business education, the odds aren't with you, unfortunately, in business school. Professors are rewarded for publishing journal articles, not for being good teachers. The other students are trying to get ahead of you. The development office is already assessing you for future donations. Administrators care about the metrics that will improve your school's national ranking. None of these things actually helps you learn about business.

Consider what you could do instead with that $174,400. The first step should be to move to a part of the country that supports your interests. If that's film, move to Los Angeles. Technology, San Francisco. Oil, Houston. You could live decently in these cities for $3,000 per month. Over the course of two years, that still leaves you $100,000 to invest in yourself.

Needless to say, I have addressed this in detail through many interviews, videos and articles over the last few months. Well, now, I offer the means to funamentally, arithmetically and convincingly prove the idealogy behind the assertion...

The Education Bubble Deflator & Valuation Software is now out of beta and available for purchase, download and use. See the end of this article for instructions on accessing the model. Here I will offer a brief overview of the model and the key findings from a hypothetical student funding his undergrad, grad and PhD studies with a 6% Sallie Mae loan. The application is designed to help individuals value their college/university education by calculating and valuing the real cash flows generated by diplomas/academic studies in addition to calculating the real world costs of obtaining said assets. 

We capture, quantify and illustrate the value of a diploma from higher education institutions across different disparate majors and give each a distinct eROI (Economic return on investment) figure for students pursuing these courses.  The app uses inputs of (1) expected salary of a student after completing a major, (2) the tuition payable for pursuing the major, (3) any loans that would be taken to finance the course fee, (4) a blended tax rate to compute disposable income, (4) interest rate for the loan, (5) household expenses that a person is likely to incur, (6) growth rates in salary, (7) Opportunity cost for pursuing a major full time, (8) and an adjustment for the unemployment rate to factor in the impact of unemployment.



The app also computes cash flows that a student is likely to earn over the life of his career after considering his installments for the loan repayment, household expenses, taxes and the opportunity cost for pursuing a course.



Key Findings

The current weak economic environment has seriously dented the economic viability of pursuing a degree (Bachelors, Masters or a PhD) from some of the top universities in the US. The persistent decline in salaries being offered to graduates from these universities coupled with continued rise in cost of courses has resulted in a fall in economic return to students from these majors.

In the US, the trend of increasing duration of student loans and higher aggregate student loans outstanding are a matter of immediate attention. These trends have increased concern over higher student loan default in the near future, resultantly seriously raising the need for evaluation of value of securitized assets based on such loans. In essence, it’s the mortgage bubble all over again.

Return from Undergraduate Courses

Almost all universities (listed below) offer very low returns over a student’s career life if aggregated as an “all majors” category. The high cost of courses and lowering of salary being offered upon completion of courses are major drivers for lower returns.

NPV @6% p.a is negative for all schools on an aggregated basis and even on a specific, major by major basis.

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Even when looked at on a more granular basis, we get the following...

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As can be seen, the returns are middling at best, particularly when compared with other forms of investment over time. Resultantly the break-even year impractically far in most cases - after the year 2040 (assuming a start year of 2013).

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As a matter of fact, we have actually marked the cash flows from this person's education to market, benchmarking it against several other risk assets. From an undergraduate perspective, it's a dismal comparison for the most part. The returns are far lower compared with the 30-year average return on equities (5-6%) and 20-year return on commercial real estate (>7%) and 30-year return on Gold (4.5%). When taking individual majors into consideration, the numbers get even more interesting for diversity comes into play. The accompanying app shows the divergence in value not only between different majors within a school, but also the same majors between different schools, thereby actually valuing both the majors and the schools themselves!

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The model conveniently allows one to actually compare returns on a specific major between schools. This is invaluable in choosing schools. Most students and their parents select schools based on nominal affordabilty and/or repuation.

Now you can compare schools based on actual economic performance upon graduation - the way it should have been done from the beginning!!!



Things Generally Look Much Better For Graduate Degrees, But..... The Catch 22!!!

Return from Postgraduate Courses

Postgraduate degrees offer a much better return compared with other asset classes than do undergraduate degrees. The break-even year is achieved much earlier, in most cases within 12-16 years.  NPV @6% is positive in all the cases. The problem is that in order to pursue a master's degree you first must obtain an undergraduate degree which has a very high probability of putting you in the hole!

Return from PhD Courses

Similar to undergraduate courses, return from PhD courses is lower compared to postgraduate courses. The returns are also lower compared to 30-year average return on equities (5-6%) and 20-year return on commercial real estate (>7%) and 30-year return on Gold (4.5%). The break-even year is achieved after a very long time, after almost 26-28 years.

Download Your Copy of the Education Bubble Deflator and Valuation Software Now! 

The cost is 29.99 for 30 days of use, but the first 100 users will get a 1 year subscription.

  1. Subscribe to BoomBustBlog
  2. Pay for the software here - $29.99.
  3. Download the software model here - File Icon College & University Education Valuation Model.
  4. Optionally, download the instructions if you're not comfortable with income and cash flows: File Icon Education Bubble Deflator & Valuation Model Instructions

This file must be opened in Libre Office Portable, a free lighteweight office suite that does not leave traces or changes on the client computer. You can download Libre Office Portable for free here: PortableApps 97 MB. A portable version of LibreOffice packaged in Format, so you can take all your documents and everything you need to work from a USB, cloud or local drive. See for more information.

Discuss this software, its findings and collaborate with othes on Facebook.






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jumped_ship_and_swam's picture

Precisely the point made by a book coming out tomorrow, "Hacking your Education."  You can do a better and cheaper job on your own.  The Universities are not terribly interested in the students' actual learning.  Professors want to do research, administrators want to make money, banksters want to get students hooked on loans, and students themselves seem to want to party.

The homeschooling, in this instance, unschooling model extends to the university.  Delightful creative destruction for students who want to learn and are willing to get off their butts and do it.  Admittedly a minority, but an important one!

Hacking your Education.

LongBallsShortBrains's picture

It isn't an EDUCATION...... it is a SCHOOLING! Big difference. One comes from experience, and the other comes from hanging out, avoiding work, doing drugs and breeding everything you can.

batterycharged's picture

uh yeah but....people with college degrees make more money than someone than just graduated from High School over their life time ....


Too bad they don't have the lifetime data from kids that graduated from college over the last 10 years.



mike904's picture

My daughter graduates this year from an Private hoity toity. Cost was 54k, we paid 16. (per year) she has 11k in school loans and just got a job that pays 82k. Economics degree. 

Nice to see the class of losers your blog attracts. This is a finance blog and the posters are all plumbers and Walmart managers. 








spinone's picture

This is a confluence of a number of factors.  Government grants just increased the cost that colleges could charge for tuition.  Making student loans non-dischargable in bankruptcy means that anyone can get one.  The shrinking labor market, off shoring and automation means there are fewer jobs.  Increased use of H-1B visas keeps wages down for even the most sought-after jobs.

What is the common thread through all these chages?  The increasing power and influence that corporations and finance have over government policy through lobbying and contributions.

The kids don't stand a chance

de3de8's picture

A college degree ain't what it used to be.

Uber Vandal's picture

This article from the New York Times would agree with that:

The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job.


Stuck on Zero's picture

"The best job training is a job" - Milton Friedman


EscapingProgress's picture

I graduate this Spring. In hindsight it was a mistake going to college, but I bought into all of the college hype hook, line, and sinker. Anyway, my advisor asked me this semester if I was interested in going to graduate school. I said, "haha."

thisandthat's picture

Euronews recently run a piece on University graduates vs people who skipped Uni and went straight to labour market, gaining actual work experience and progressing in their careers - it didn't look good for Uni students: the time you take to graduate, you'd be acquiring actual job skills, composing your cv, building trust from employers, starting a web of connections, progressing in your career and, not the least, staying out of debt. Often, by the time those who went to Uni are out, you'll be earning more than they will.

Yellowhoard's picture

You can't live in San Francisco for $3000 a month.

adr's picture

The only problem with the "invest in yourself" path is try walking in a bank and asking for a $175k loan for investing in yourself.

College is just about the only place nearly anyone can be handed hundreds of thousands of dollars for nothing. Although using the money for purposes other than education would be better spent, 99% of the students would never have access to the funds anyway. So any claims about better return on investment elsewhere are false.

If you have access to $175k in cash for college, you probably don't need to worry about what you are going to do after graduation. Most likely your family is a 1%er and your hedge fund internship or silicon valley position is viturally guaranteed.

Best to not go to college at all. I know many high school drugged out failures that are now spa managers and hotel concierges making $40k. A solid F student and 11th grade dropout from my town pooled money with his drug dealing friends and bought a bankrupt nightclub and turned it into a heavy metal club, years later they sold it for a big profit and started another club.

If I stayed at the electronics store I worked at as a teenager, I'd probably be store manager pulling in $65k. No college required for that one either.

I watched the starting salary of my profession go from $70k to $25k from 1999 to 2009. During the same period the cost of the degree went from $90k for four years to $210k. That's some ROI right there!!!

What did I learn with my Ivy League degree? Unless your daddy is a millionaire or some communists picked you as a manuchurian candidate to represent them, you're pretty much fucked. But you are exposed to some truths of the world that will make you angry and post on blogs like Zero Hedge.

lindaamick's picture

Traditional liberal educations used to teach students how to think critically.

Thinking critically used to grease the wheels of imagination and creativity.

Seems like today education is really job training. No need to go to college for job training.


RebelDevil's picture

Reggie, you forgot about engineering. That's one of the most important majors at any university.
I wonder if engineers make any positive return too.

thisandthat's picture

Medicine - that one career you don't want skills to be based on first-hand experience...

e-recep's picture

manufacturing is still moving to china, so i guess the heydays of engineering are over, too.

RebelDevil's picture

Well, one could always move to china, but most wouldn't.

Never One Roach's picture

The guy selling cell phones (and plans) in the Mall now makes more then my family doctor (not to mention my kids pediatrician who went bust two years ago). The New Paradign will have unforeseen consequences. He (my family doc) tells me fewer then 8% of the doctors now accpet Medicaid or Medicare and more docs are dropping out faster then ever before. What will the future hold? Perhaps "affordable" care that no doctor accepts?

1000924014093's picture

Middleton is correct only if money is the ultimate arbiter of value.

trebuchet's picture

An education is not only about a return on $ invested. 

It is the smile in the morning you have when ordering a coffee knowing you could change your job/profession/career/ and likely have a damn site EASIER job than they have, that doesnt involve cleaning toilets.


still if you want to clean toilets, you have that option with a college degree. 


Option value. Quality of Life. Hard to value.

Lordflin's picture

Quite true... my oldest left home at seventeen with an associates in chemistry and a 3.5 GPA... attended university, flunked out, met and moved in with a hobbit she met in an online gaming universe called world of warcraft, and now she cleans toilets for a living. My next in line attended university, majored in physics, math, and medical technology, maintains a 4.0, and wonders why everyone doesn't take advantage of the opportunities afforded in this world... I have had to point out that everyone does not want to put out the effort.

Humanities has largely become a waste of time... shouldn't be, but it is... but one can still receive a first rate education in the technologies if one so chooses... not that there is not propaganda and politics in science... unquestionably there is... but still real applicable ideas are taught. If I had the choice between my background in science, or 175,000 added to my bank account, I would take the training without hesitation... although a second to my family, my grasp of the sciences is one of the great joys of my life....

HalinCA's picture

Thank you Reggie ... I resent it out to about 50 of my friends who have kids in high school.  

BeagleOne's picture

Pheonix is misspelled in the graphs.

ebworthen's picture

True.  Phoenix.

How about Fenix College, as in Marcus Fenix?

Gears of War 3 and other gaming skills, how to correctly use a chainsaw, etc.

ebworthen's picture

Higher Education = Higher Affirmation

Colleges and Universities = Dream Factories

Tuition = Debt Bombs

tony bonn's picture

reggie - this is superb analysis and information...the wsj ran a very similar analysis c. 1983 on the very same subject and came to the same conclusion about b-school....the direct and opportunity costs frequently outweighed the compensation losses of staying on the job. the other analysis to make is comparingg 100,000 in financial investment - with the market the way it has been it might be a real horse race to the bottom....

i am not against knowledge but i am dead set against the rockefeller owned education racket funneling people through education factories on conveyor belts to brainwash and fleece them with outrageous boiler room tactics of how you need a degree or else you're a failure or stupidfuck....

these racketeers should be prosecuted and jailed for educational terrorism....there are so many jobs which do not require degrees or all of the education contained in a degree.....if you want it, get it, but it should never be protection money paid to the mob to get a job...

there are so many people who go to college whose iq's do not justify it. if your iq is lower than 108-110 i wouldn't waste the money.....some professions certainly require higher academc training but a lot of knowledge can be obtained through other channels and more cheaply.

it is time for a revolution in education and in many cases it means, just say no. but don't ever conflate that opinion with ludditism or other forms of ignorance....intelligence, education, and knowledge are three different properties whose blending should be context sensitive.

Stuck on Zero's picture

Alternative: Save the money and lie on your CV.  Your chance of getting caught is nil.


Stuck on Zero's picture

Okay.  Why did I say this?  Dealing withNational and local recruiters.  Here's what I learned from one of the biggest.  At the clerical and blue-collar level about 10% of the CVs have gross omissions and exagerations.  At the Middle manager level about 30% of the CVs carry major fabrications.  At the CEO level about 80% carry major fabrications.  We recruited a CEO from a huge NY firm and got someone with an incredible background.  We were not happy after employing him and found that nearly 100% of his CV was fabricated and he did omit his previous convictions for embezzling.  This, by the way is backed up by the statistic that college graduates are more likely to lie on their resumes than others.