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The Cost/Benefit Analysis Of A College Degree In One Chart
For all the debate about a college education, its opportunity cost, the trade off of only having a high-school diploma, the impact of a record amount of debt on an entire generation's spending habits, and, of course, the alleged lack of inflation everywhere expect in those critical things that 99% of Americans must spend on daily, perhaps the simplest chart is the following, courtesy of the WSJ: it shows the average annual tuition - call it the "upfront investment", whether funded by debt or equity or both - for both a Bachelor's and an Associate's degrees from 1970 until 2013, as well as the average wages of those with each type of degree, once again expressed in real dollars.
In a nutshell:
- The change in tuition costs expressed in real dollars from 1970 to 2013, amounts to a roughly 275% increase
- The change in real wages for a graduate with a bachelor's degree over the same period amounts to a roughly 10% increase (and an outright decline for Associate's degree wages despite a doubling for Associate's degree tuition costs).
Is there any wonder then why the US middle class, and certainly both Generations X and Y, are hopelessly drowning in debt and why the economy can barely survive from one QE episode to the next?
Read more at the NY Fed which clearly tries to put a pleasant spin on the above chart.
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Paid one-half of college expenses by working for myself mowing lawns and doing yard work in high school and college. Parents pqid the other half. Would have gone into landscaping but my State U didn't offer it at the time and I couldn't afford to go out of state. Never understood why kids would go to a fast food place and wear a paper hat and put up with crap from a "manager". Retired now after a stint in the USAF and doing the corporate bit myself. I live in a neighborhood with a lot of elderly people. Find myself mowing lawns and doing yard work to help them out. Branching out into the light landscaping I can legally do without a degree. More work than I can handle.
Educating yourself and continuously striving though experience and study to be the best in your field is priceless.
Degrees are of little consequence to those who exhibit dedication, professionalism, intellect and competence unless required to overcome a barrier to entry.
Unless it is a rare 18 year-old entreupeneur that's willling to take risks, work hard and long hours to build a business and take care of himself, then there are limited options but to go to school. Our system is not set up to provide higher paying job opportunities or even career paths for the very young high school grads. Paying $10k or $15k / year for college is easier to rationalize sending kids off to college. It's provides them some time to mature, learn some sense of responsibility and gain some basic marketable knowledge that buys them a shot at a higher paying job. At $50k or $60k, its no longer easy to rationalize college and the associated debt burden.
This is yet another core system that has been broken by our central planners. Now, with our big government so unquestionably broken, it will first need to be fixed before we can even attempt to find a solution for unaffordable higher education and soon unaffordable national healthcare.
The last thing we need is a bunch of dumb-ass, arrogant, egotistical, self-serving bureaucrats running around telling us how its all supposed to work. Everything big govermnet inserts itself into that is meant for private sector decisions, is ruined with big governement decisions and all of the "unintended" consequences that comes with it.
Unless it is a rare 18 year-old entreupeneur that's willling to take risks, work hard and long hours to build a business and take care of himself, then there are limited options but to go to school. Our system is not set up to provide higher paying job opportunities or even career paths for the very young high school grads. Paying $10k or $15k / year for college is easier to rationalize sending kids off to college. It's provides them some time to mature, learn some sense of responsibility and gain some basic marketable knowledge that buys them a shot at a higher paying job. At $50k or $60k, its no longer easy to rationalize college and the associated debt burden.
This is yet another core system that has been broken by our central planners. Now, with our big government so unquestionably broken, it will first need to be fixed before we can even attempt to find a solution for unaffordable higher education and soon unaffordable national healthcare.
The last thing we need is a bunch of dumb-ass, arrogant, egotistical, self-serving bureaucrats running around telling us how its all supposed to work. Everything big govermnet inserts itself into that is meant for private sector decisions, is ruined with big governement decisions and all of the "unintended" consequences that comes with it.
The conventional wisdom says that the only path to success is a four-year degree, no matter the cost. ZH comments section wisdom says avoid college at all costs, "learn a trade" and "wish we still had manufacturing jobs". This coming from people who are probably working at a desk (I imagine you aren't under a sink right now making these posts).
The cost-benefit analysis of college doesn't work in your favor if you're doing it wrong. Getting a degree in something worthwhile from a well-known in-state school with reasonable tuition, while working full-time to keep your debt low, is far better than "learning a trade". Taking loans to get a degree in mythology from University of Phoenix is not going to end well.
Even still, how many 60+ year old plumbers do you know that are happy with their occupation?
Let me give you the perspective of a 50+ year old drywaller. I live in a $1.8M, 9000 sqft home on a 4+ acre gated estate. It's not how much drywall I can finish, it's how much the people I hire and train can finish. Being the boss is AWESOME and I am very happy with my life choices. If you choose to work for the benefit of your boss it's you own damn fault for pissing away your money and not saving it to start your own business that benefits YOU.
It is just like EVERYTHING - a college education can be a good or bad use of capital.
Just because a % of people borrow $250K to get a worthless degree does not mean taking on a reasonable amount of debt to get a worth while degree is a bad thing.
Just like an auto loan -
Borrow $50K at 7% for 96 months to buy that flashy car that you park in the front yard of your trailer park to impress your neighbors -- bad idea
Borrow $25K at 3% for 48 months to buy a car so that you can drive to a job that pays you $35K more a year -- good idea.
Can have the same type examples with a credit card, mortgage, business loan or even a HELOC.
I really don't understand all the angst. Obama is going to fundamentally change all this.........right? (One can hope)
Obama federalized the entire student loan system. So no, he doubled down on making it worse.
I only went to college because uncle sam paid for it via GI Bill. Otherwise it would have been a trade skill hands down.
The modern U.S education system is a long 5 lane superhighway built to extract as much money from as many “job-training commuters” as possible via the many toll booths erected along the way. It has a loop built into it called “Life Long Learning” which sends the commuter through the same booths again and again. If you are an under-privileged minority, you are encouraged to use the superhighway via the “Easy Pass” system. All are encouraged to get on the fast-track.
I would rather take the old foot path, almost abandoned in modern times – a home school primary and secondary education follwed by a true “Classical” post-secondary at a Liberal Arts College where Western Civilization’ Great Books are studied.
One can either choose to pay for the privilege of sitting through the educational system’s designed traffic jams (and not really get to the destination intended) or get a classical education that fast-tracks the mind to enable one to discern the shortcuts to your destination without the system.
Yet if one measures a post-secondary education primarily by the false promise of a great starting salary and future earning potential, then those misplaced priorities will find its proper punishment on the super-highway, for a true education concerns itself with enlarging the intellect – not the wallet.
The profs teaching psychology, sociology, anthropology, LBGTQ know it is a scam. If they are teaching at a "prestigious" private school they know that the idiots in their class who are paying $60,000 tuition and who will never get a job are funding the profs' retirement fund. The odds of flunking anyone out have dropped dramatically. Plagiarism? Cheating? Who cares? Give them and "A" or "B" and on to the next lecture on "Transvestites in Film" or whatever.
Looks like diminishing returns has set in.
There is no measurement of whether the quality of education received provides knowledge to make it through a major financial crisis. In other words, what is the value of of having knowledge as to how to make it through a financial crisis.
Statistics: "There are three kinds of lies: lies, damned lies, and statistics." - Benjamin Disraeli....
LOL 15K average ANNUAL tuition??? WTF kind of schools are they including to get these bs numbers?
Last time I checked (AKA every non-bullshit school) one has to pay at LEAST 35K a year, and at most 65K a year. 15k?? GTFO.
Universities and colleges always run their shill game for new entrants on their pyramid scheme a few months before the fall session. Canadian universities were out shilling en masse last week. The true costs of a university education need to be articulated more often and with more metrics of assessment.
Qualitative and quantitative assessment have not caught up
to the ever changing reality that there are fewer rather than
more jobs being added year over year. Universities and colleges
are slated to go bankrupt over the next decade. Ivy league
schools will stay standing but the middle-of-the-road schools are going down big time. Princeton researchers are predicting that half will fail over the next decade. This means an ever decreasing demand for highly trained individuals in education
and more part time work in academia. Clearly, the end game is not growth.