Actually, College Is Not Worth the Cost 2021
Many education experts inexplicably conclude that college is a MUST for every child. But this flies in the face of mountains of statistics that show college is NOT worth the cost.
Some companies that don’t require a college degree have starting salaries as high as $31,020. The average family spends $72,196 for a child’s college education (average cost of $26,226/year minus merit aid times four years). The average college graduate comes out with $32,071 in loans. Meanwhile, the median entry-level salary for a college graduate has stayed steady at around $48,000. Further, more and more college graduates are stuck in low-wage jobs, when they can find a job at all. How can one justify spending four years and tens of thousands of dollars for the chance to earn a higher starting salary?
Is College Really Necessary?
If we compare college graduates with non-graduates, college graduates tend to do well financially. However, don’t get the causation wrong. College does not make people successful -successful people go to college. If you’re not already destined for success, college is not going to help you get there.
Consider that children from the top half of the income distribution earn 77% of all bachelor’s degrees. The children of the richest 25% amass 50% of all degrees. As the New York Times provocatively points out, some colleges have more students from the top 1% than the bottom 60%. Wealthy children go to college and wealthy children have better outcomes. If your parents are multimillionaires or billionaires, you’re probably going to be ok in life.
And if college students don’t come from wealthy backgrounds, they’re smart and/or hard-working, as evidenced by applying to and being admitted to college.
A famous study showed that college students who were accepted into Ivy League schools but attended state schools, earned just as much as those who graduated from Ivy League schools. Even more interesting, those with comparable GPA/SAT scores rejected from Ivy League schools earned just as much as graduates from those schools. What does this tell us? That college – even at an Ivy League institution – doesn’t add any benefit. The kids had the advantages baked in before attending college.
Why We Erroneously Think College Makes People Successful
Going to college is irrelevant to students’ success. Instead, colleges saw high-performing applicants and rewarded them with admission. At no point did the colleges nurture these traits or improve on them.
A college is like someone who bets on Tom Brady to win a football game. The bettor doesn’t make Tom Brady successful. The better is just trying to improve her own situation by betting on his success. It would be foolish to attribute Tom Brady’s success to the bettor picking him.
Don’t fall into the trap of believing that college makes students successful. Colleges merely identify who will be successful. Then colleges admit those rich, smart, and talented students and then attribute these students’ inevitable success to themselves and jack up their tuition.
Why College Is Not Necessary for Success
Just dropping this here: 30% of billionaires do NOT have a college degree. Roughly 20% of millionaires never went to college. Big companies that don’t require a college degree include Google, Ernst&Young, and Apple.
Of course 70% of billionaires and 80% of millionaires did go to college. But that doesn’t mean you should. There are millions of college graduates who earn less than the non-degreed millionaires and billionaires. I suspect as colleges increase in price and tech entrepreneurship continues its trajectory in appeal, an even higher percentage of millionaires and billionaires will not have college degrees.
Is College Still Worth it in 2021? NO!
On purely economic terms, attending college is a suspect decision. – John Lounsbury, SeekingAlpha
Further, let’s take a second look at this $1M figure. Is it even impressive as a return on investment?
The figure comes from a 2011 Georgetown study that “proves” college is worth the investment. Let’s first ignore the bias in a university-funded study proving that university education is valuable. The study says that a college graduate earns $2.3 million over her lifetime compared with someone who didn’t graduate – who earns about $1.3M.
Re-evaluating the $1M College Premium
Let’s say that instead of spending $80k on college, you put that into the stock market for 44 years (a lifetime of work plus 4 years of college), you’d have $1.6 million dollars, assuming a 7% rate of return. And that’s without even working! That’s just letting your money sit. So investing that money in college actually loses you money compared to doing nothing. So if you add the $1.6M to the $1.3M in earnings, then the high school graduate comes out ahead. How many people would go to college to earn $600k LESS over a lifetime than their less-pedigreed counterparts?
The $1M analysis also fails to account for 1) those who take longer than 4 years to graduate; 2) progressive taxes; 3) present value dollars; and/or 4) those that make high incomes based on graduate school (lawyers, doctors, CEOs) and NOT based on college.
Why College is a Waste of Money
The last problem with the $1M analysis is that it if you’re doing an analysis on students who’ve worked for 40 years, the best that you can show is that 44 years ago (40 years plus 4 years of college) it made sense to enroll in a college. Proving that a choice was smart in 1965 (the data came from 2009 minus 44 years) does not mean that choice makes any sense in 2021. Things are a little different now.
When we talk about successful college graduates, we are looking at college graduates from decades ago. Currently, 33% of adults aged 25 and older have a college degree. This is a significant uptick from, say, 1940, when only 5% of adults held a bachelor’s degree. As more and more people graduate from college, the value of a college degree has dwindled.
The 1980s were the peak for college graduates, but the value has been declining. The cost of college is so high and the value of a degree so low, the investment is now very risky.
The Disadvantage of Going to College in Two Words – Student Loans
Mindless college cheerleading can set people back in their finances in a way that even stupid decisions like buying a sportscar cannot. As John Mulaney jokes, a duffel bag filled with fake cocaine is better than a college degree because at least you get a duffel bag. You can sell that duffel bag for money, whereas no one is going to buy your college degree.
If you are wealthy, you assume you go to college. Whether or not you attend likely won’t have major implications in your life.
If you are not wealthy, you must weigh heavily your decision to go to college. You don’t have a pile of money to fall back on. You are the most likely to be ruined if they make the wrong choice.
Why Majoring in STEM Does Not Make College Worth It
The constant refrain is that if college graduates just majored in STEM, then there wouldn’t be a problem with college as an investment. Well, first, that doesn’t take into account the problem of graduation rates, which is the single biggest reason why college doesn’t pay off for students (more on that later).
Second, 80% of college graduates major in non-STEM majors. If you think non-STEM majors are a waste, then you are effectively agreeing with me that college is not worth the cost. Third, if everyone became an engineer, salaries would go down (economics majors can explain that to us).
Fourth, not everyone wants to major in STEM, or is good at it. The reason why some professions earn more money than others is because of unique skill sets and limited supply. If you force people into subjects for which they have no aptitude or interest, lots of students won’t be able to graduate. It’s like saying the trick to avoiding traffic is driving local roads – and then the local roads fill up. Now no one avoids traffic. The same thing goes for forcing people into careers that don’t suit them. It isn’t a good plan to maximize college or life success. One hardly needs to go to college to find a job one doesn’t like or isn’t good at.
Finally, even if you major in STEM, success is hardly guaranteed. STEM graduates, like other college graduates, are finding stagnant wages and stiff competition for jobs. 74% of STEM graduates did not have employment in a STEM job. The future doesn’t look rosier either. Nearly 1 in 5 engineering majors were underemployed even five years after graduating. Over the next decade, it’s projected that there will be three new degree holders for every two new high-tech jobs.
Why Choosing the Right Major/College/Internships Isn’t the Answer
As I’ve said above, if college is only worth it if you do X, Y, and Z, then you’re essentially agreeing with me that college is a risky investment. Why would you pay so much money only to be led down a road full of booby traps? Why would you fault a 17-year old for assuming that organizations backed by the federal government and society would lead her astray? One would rightfully believe that the money you’re spending on tuition provides some guardrails from ruining your life and career.
The problem isn’t choosing majors or picking the right college or getting the right internships- the problem is college itself.
The Racial and Gender Wealth Gaps and Other Unsolved College Problems
Something that might point in colleges’ favor is if college graduates from disadvantaged] groups were able to equal of exceed the success of white male college graduates. Here’s a metric by which college could prove its value by taking people who have known disadvantages and making them equal.
But even on this score, college is found wanting. One study found that African-American college students are as likely to get hired as whites who have dropped out of high school. Black families headed by college graduates have a third less wealth than white families headed by high school dropouts. Women with a Bachelor’s Degree earned as much as white men with some college but no degree. One study stated that race and gender are wild cards that can trump all levels of education as determining factors for earnings.
Ok, college, that’s embarrassing.
Colleges Don’t Help First Gen Students
Further, colleges don’t provide a lot of support for first generation, low-income students. Instead, colleges just push these students towards lucrative jobs. And while that seems like a great thing, one student notes that it’s “a false understanding of what upward mobility is for us.” Upward mobility shouldn’t be about uprooting oneself to New York of California, leaving one’s community, and working in banking. Here are college students who beat the odds, who want to change the world, and college pushed them to become a basic venture capitalist instead of fulfilling their own desires.
Again, college is merely entrenching existing biases and advantages but it does nothing to break them down. It does very little to help those who were not born with a silver spoon or people who want to do something different.
Who Should NOT Go to College: The 4 Types of Students Who Don’t Benefit From College
I wanted to give a more in-depth look into whether student loans for college are worth it. Some of this math is fuzzy because it comes from different years and different surveys and most of the statistics are a few years old. Still, I think though you can’t quote the exact numbers, they show the correct general picture.
I’m so sick of people saying that college pays off when it clearly doesn’t for so many people. Let’s start with four types of students who do not benefit from going to college.
Students Who Are Exceptionally Bright or Wealthy Don’t Need College
In 2012, 71 percent of students graduating from four-year colleges had student loan debt. That 71% represents 1.3M people. Thus, approximately 1.8M people graduated in 2012.
The 29% of college students without loans (550,000 people) will be included in the group of people where college pays off, though they really shouldn’t be. They are destined to be successful, with or without college. These 29% are either rich or smart/talented enough to go to college without needing to borrow money. These people will likely do well with or without college because of their family wealth and their intelligence/hard worth ethic.
Think about celebrities who have gone to elite colleges that were already successful. People like Natalie Portman and Yara Shahidi at Harvard, Emma Watson at Brown, Brooke Shields at Princeton. Think about famous offspring – Malia Obama and Jared Kushner at Harvard, Chelsea Clinton at Stanford, the Bush’s at Yale, JFK Jr. at Brown.
These people will be considered successful graduates, but let’s not put the cart before the horse. The elite colleges picked these people because of their own or their parents’ accomplishments and connections. They didn’t become successful because of their colleges or their college performance. The colleges benefit from the celebrities, and in exchange, the celebrities feel “smart.” But come on, if these people never attended college, they would be fine.
Students Who Don’t Graduate Do Not Benefit From College
The 71% statistic above covers only those who are “graduating.” It does not cover those who don’t graduate. Only 41% of students graduate from a 4-year college within four years. If approximately 1.8M people graduated college in 2012, representing 41% of the people who entered college around 2008, that means 4.4M people were enrolled, and 2.6M did NOT graduate. Most of the non-graduates cite money as the reason for not being able to graduate. (See above, wealth is a significant indicator of success before, during, and after college).
One study shows that some college credit is associated with slightly higher wages (~$6,000 more) and employment. However, the highest salary increase occurs between high school graduate ($37,675 mean earnings) and earning 1-12 college credits ($43,732). The mean salary actually fell by $3,000 for those with more college credits ($40,315 for 13-60 credits and $41,576 for 61+ credits). So more education does not necessarily lead to more skills or a bigger salary.
You might point to outlier dropouts like Bill Gates or Mark Zuckerberg as successful dropouts, but that doesn’t disprove my point. Gates and Zuckerberg did not benefit from taking out student loans and would not have benefited from earning a college degree. If anything, Harvard should pay Gates and Zuckerberg for attending and making dropping out look so glamorous and profitable.
Students With a Lopsided Student Loan-to-Salary Ratio Do Not Benefit From College
- 17% of those with student loans owe more than $50k (5% over $100k). Those people seem unlikely to do well, so encumbered by debt.
- 43% of college graduates are underemployed in their first job, meaning they work at jobs that don’t require a bachelor’s degree.
- In 2012, 44% of borrowers in 2007-08 took an undesirable job or a job outside their field due to education cost.
- Based on projections, nearly 40% of borrowers may default on their student loans by 2023. Currently, 1 in 8 student loans is in default.
- At 15% of 4-year private and public nonprofit schools, 15 percent of students earn less than $25,000 per year, even a decade after they first enrolled. The data is worse for 2-year and for-profit schools.
- 63% of college graduates who made less than $50,000/year say their degree was a bad deal.
These are the people for whom going to college may have put them in a financial hole for the rest of their lives. These are the cautionary tales. But let’s not count them out yet – maybe they’ll go to grad school!
Students Who Go to Graduate School Did Not Get Their High Earnings From College
Approximately 37% of college graduates obtain graduate degrees. Granted, one can only go to graduate school after obtaining a bachelor’s degree. Still, I want to figure out the value of a college degree, not a graduate degree.
Doctors, lawyers and MBAs are going to lift the median earnings for college graduates even though it’s graduate school, not college that brought their fortunes. Furthermore, many people go to graduate school because they did not think their college degree was sufficiently competitive in the marketplace. Maybe if they hadn’t gone to college, they would have found a different career that didn’t require graduate school. And if it’s your plan to go to graduate school, it would probably behoove you to go to the cheapest college possible to cut down on debt.
The other factor would be that most people who go to graduate school come from wealthy backgrounds. In any case, I’m assuming this group would be subsumed in another group in my analysis.
A Disadvantage of Going to College: A Wrecked Financial Life
The Few Students Who Benefit from College
Evaluating the Pros and Cons of Going to College
TL:DR, Why College Isn’t Worth the Money
In the BEST case scenario, going to college is working hard for four years and spending about $80,000 for the chance to COMPETE to work 40+ hours a week for 50 weeks to earn a salary high enough to pay off your college loans (and you might not even like the job).
Why College May Not Be Worth It – in a Chart
I’ve summarized this article into the above chart. As you can see, I conclude that 15% of college students benefit from college, but 85% do not. And that 15% is giving the statistics a lot of benefit of the doubt.
Though it made total sense for me to go to college 20 years ago, it might not make sense for someone like me to make the same choices today. A lot changes in 20 years. Beware of people who use their own experiences from decades ago as evidence that college is a good investment today.
Going to College During COVID-19 (2020-2021 and Beyond)
Because of the switch to online learning in college, students are starting to wise up about the lack of colleg e value.
Because of COVID-19 – students are questioning the value of a college education more now than ever before. College students say that online classes aren’t worth the high cost of college. And administrators have not done much to offset this thinking.
Some students are withholding spring tuition payments until the college reduces tuition due to the shortened year. As one student striker notes: “If the university truly needs our tuition, this will be a big blow and they will be forced to lower tuition. If this isn’t a big blow, then it proves what we’ve been saying — they have a huge fundraising arm, and if this doesn’t affect them, they can afford to reduce tuition.”
Should I Go To College During COVID?
Are There Non-Monetary Benefits to Going to College?
It’s possible that college was the meeting place for someone very important to one’s career or life – say a business partner or a spouse. It’s possible that college is about expanding your mind. I think college CAN provide these things, but at an incredible cost.
This is a very expensive matchmaking proposition, but meeting your spouse in college may count as a benefit. Research shows that 28% of marriages are between people who attended the same college. I can’t put that information into whether college is worth it (without figuring out whether the marriage is happy or in any way successful) but perhaps some of these effects could be replicated if you moved to your chosen college’s town and used a location-enabled dating app. This is especially true if you’re thinking of attending a school like Brigham Young.
Of course, meeting someone is luck – not college. People who go to college, people who teach at college – they live in the non-college world as well. You can meet them there. You don’t have to spend tens or hundreds of thousands for serendipity.
Are There Social Benefits of Going to College?
College isn’t even that great a place to hang out with like-minded smart creative people. Ivy leagues and other colleges are keen to funnel their students into prestigious, high-paying jobs. College gains nothing from creativity but everything from churning out the next generation of investment bankers and consultants.
I went to an elite high school with a rigorous admission test. This guaranteed a certain caliber of students. These days though colleges are moving away from objective measures like the SAT/ACT. The most likely effect of removing the tests is the admission of more wealthy students who can’t hack the SAT without cheating. As I shall say again and again, being rich is a very good predictor of success. Of course, meeting rich people is not a bad thing… but college is not necessarily the best place to meet smart, passionate people.
Does College Provides a Good Education, At Least?
With the ridiculously high cost of tuition, it makes sense for students to make every credit hour count. That means each student is incentivized to choose courses that will have a good return on investment. Those courses would fulfill a graduation requirement, or would look good on a transcript.
This kind of incentive rules out taking random courses for the fun of learning. And though you have some idea of what classes or teachers you may like, but you don’t know the whole story. Most people have a tale of serendipity – being at the right place at the right time, finding something new. College doesn’t allow that. You aren’t taking Portuguese, or calligraphy, or basket weaving for fun at $55k a year. And that’s a shame, because if you took a cheaper online course, of course you would.
So you’re not expanding your mind in terms of new ideas, new courses. Colleges don’t give a lot of education in being outdoors or the natural world. During COVID, UC-Berkeley even prohibited students from leaving their dorm room – even for exercise – and that’s only a good education in totalitarianism. Professors often have no real world experience to impart to their students. Most colleges are self-sorting so you are unlikely to meet very diverse students in college in terms of socioeconomic status, political beliefs, race, etc. To me, this is not a recipe for a good education.
How College Stifles Your Career
At my college, becoming a college tour guide was a very prestigious activity and thus it attracted social climbers. Thus, when my family toured the university that my sister and I would eventually attend, we all hated it. Every single other university we visited had student volunteers as tour guides and we found those people to be delightful.
So much of college is like my college’s tour guide system – a ladder-climbing exercise. It obfuscates passion by increasing competition for roles they don’t want while keeping out others who might love the role. Especially at elite colleges, there’s such a mad scramble for prestige. It really gets in the way of what most people actually want in their lives – happiness and meaning.
It’s hard to justify going to follow one’s passion when you’re investing so much money into college. And if you didn’t go into college, maybe you wouldn’t feel so bad traveling the world, starting a risky business endeavor, or just opting out. College limits what you perceive to be your options to investment banker, doctor, consultant and lawyer. And surprise, surprise, these professions are some of the most miserable. For more on this, I’d read Andrew Yang’s book, Smart People Should Build Things. Colleges are taking our best and brightest, our idealistic and incredible youth and morphing them into hedge fund managers. Imagine what would happen if they just pursued their dreams of a better world with four years and $100,000. Maybe we’d all be better off.
How College Does NOT Prepare You To Be a Grown-Up
I’ve seen the argument that college is necessary to prepare 18 years olds to “grow up” and to become an adult. No, getting a job or joining the military is how to prepare an 18 year old for the adult world.
College is an alternate reality – it’s the scenario least like reality or all realities. Reality doesn’t let you live on borrowed money to rehash your high school years. In reality you mix with people in a host of different ages, occupations, and socioeconomic groups. You get good at reality by living in reality.
As an adult, you’re going to be learning new things constantly and college is not good preparation for that either. You are never going to live a college life again – because who has the time to take 4 years off to learn new skills full-time in their 30’s? No, online education is more like reality than college.
College is not reality and it doesn’t help to prepare you for reality. And it’s an expensive fake reality at that.
How College Can Actually Decrease Your Market Value
Looking at the actual return on the costs of attending college, careful analyses suggest that the payoff from many college programs — as much as one in four — is actually negative. Incredibly, the schools seem to add nothing to the market value of the students.
Why People Don’t Understand That College is a Waste of Money
Whenever I read about someone in college, I hear about their low-budget ramen-loving lifestyle. But there is irony in scrimping on health while dropping hundreds of thousands on college.
People always say “I didn’t understand what I was doing when I signed my student loan payments.” Yet people don’t need to be taught how to eat on the cheap.
It’s not that students don’t understand money. Instead, they are lured by an industry of adults telling them the costs are ok when they’re clearly not. Let’s not be those adults for this future generation. Let’s give them clear guidance that college is often not worth the cost.
Alternatives to College?
I know you’re going to say – college is a risk but there is no alternative.
I believe you can succeed without college. Or at least you can take a few years off trying to. College will still be there when you’re done experimenting and traveling.
The Uncollege movement has some ideas of life without college. Billionaire Peter Thiel offers a scholarship for bright students NOT to go to college. The idea is, give a smart kid some money, and they’ll probably end up better than a cog in the student loan machine.
More research is showing that nearly half of “good” high-income jobs are held by blue-collar workers, not requiring a college degree. Consider blue-collar jobs before considering college. Many offer on-the-job-training and stability – because people are always going to need plumbers.
Mitigate the Opportunity Cost of Going to College: A Gap Year
It won’t cost them any extra if you take one year of their college savings and use it to:
- start a business
- support yourself in a job learning how to pay bills, cook, clean, etc.
- travel and learn to speak a language fluently
- try a risky career choice – like acting, music
- take classes online in coding, SEO, literature, philosophy so you can take more advanced courses if you decide to attend college
You could say, all you’ve lost is time, but you haven’t lost any time. For one, you can make up the year by taking more classes in college and graduate in three years. For the second part – you will know what it’s like to apply for a job and to support yourself. If you decide to go to college, you will have a better understanding of what you can get out of it. Also you will have more confidence and maturity, and you will have lots of stories to tell.
How to Make College More Affordable
If you can go to a top college without accruing a lot of debt, it will likely be an ok choice. For others, college and student loans are a calculated risk. It might pay off, but it could very well be a huge mistake. One should consider every opportunity to save money such as:
- Taking many AP courses in high school to qualify for college credit
- Making use of as many free or online learning modules as you can (so you know what unique classes and experiences college can give you)
- Delaying college until you know what you want to study, and working and saving money in gap years
- Applying for many scholarships and financial aid
- Attending community college for your first 1-2 years and/or taking classes at the community college
- Going to a cheaper college if you plan to go to graduate school
- Working part-time in college (I knew a few people who worked full-time while maintaining a full course load as well)
- Reducing expenses while in college (some of my tips for reducing costs in law school apply here)
- Graduating early
Conclusion- Why College is Not Worth the Cost 2021
College can be a wonderful asset to your career and a fun and rewarding four years. But don’t get blinded by the fantasy and ignore the finances. College is an expensive gamble and you should treat it as such. Personally, I don’t believe going to college is a good use of your time or money.