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Only 15% of Students Benefit from Attending College

why college is not worth the cost

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Education “experts” are paid to conclude that college is a MUST for every child. But this advice flies in the face of mountains of statistics. By my analysis, only 15% of students or fewer benefit from attending college.

For a very shorthand economic explanation, some companies that don’t require a college degree offer 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). Meanwhile, the median entry-level salary for a college graduate has stayed steady at around $48,000. So families and graduates spend $192k ($72k for college, $120k in forfeited earnings) for a $17k bump in salary. Further, more and more college graduates are stuck in low-wage jobs, when they can find a job at all.

If you are not wealthy, you must weigh heavily your decision to go to college. Going to college could be the single worst financial decision of your life.

Why We Erroneously Think College Makes People Successful

It’s true that college graduates tend to be more successful than those who did not attend college. But don’t get the causation wrong. Colleges admit wealthy high-performing students. Wealthy high-performing students are going to do better than poor low-performing students. The most salient difference between these two groups of people is not college attendance but wealth and academic privilege.

A college is like someone who bets on Tom Brady to win a football game. The gambler doesn’t contribute to Tom Brady’s success in any way. The gambler is completely self-motivated – only trying to improve her own situation by betting on Tom Brady’s success. It would be foolish to attribute Tom Brady’s success to the person betting on him to succeed. And yet that’s what we do with college.

Colleges merely identify who will be successful. And, like picking Tom Brady, they don’t make long shot gambles. Colleges admit rich, smart, and talented students with proven track records. It’s no surprise that they’re successful, just like Tom Brady.

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.

Colleges Pick Students Likely to Be Successful; College Does Not Cause Their Success

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 no matter what you do because of genetics and money.

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 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? It tells us that college – even at an Ivy League institution – doesn’t add any benefit. The kids had identifiable advantages when they were graduating from high school.

30% of billionaires do NOT have a college degree. Roughly 20% of millionaires never went to college. Of course that means 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.

Debunking the $1M College Premium

On purely economic terms, attending college is a suspect decision. – John Lounsbury, SeekingAlpha

The common refrain is that a college graduate will make $1M more than a high school graduate over a lifetime, according to a  2011 Georgetown study. Let’s ignore the obvious bias of a university study “proving” that university education is valuable.
Let’s say that instead of spending $80k on college today, you put that into the stock market for 44 years (a lifetime of work plus 4 years of college). You’d end up with $1.6M, assuming a 7% rate of return. So maybe you earn $1M more working over your lifetime, but for that privilege, you forfeit $600k. 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.

Other studies show that high school graduates without college degrees end up with a higher net worth than college students over a lifetime, even if the high school graduate works as a janitor. It makes sense given that those who forego college earn money earlier, have no student loans, and have 4 more years for their money and skills to grow. So let’s just say, charitably, that the research that a college graduate will earn more is mixed.

Our Beliefs about College are Based on Outdated Data

When we talk about successful college graduates, we are looking at people who attended college decades ago. The $1M analysis, at best, show that 44 years ago (40 years plus 4 years of college) it made sense to enroll in 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 now. Things are a little different now.

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.  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. As more and more people graduate from college, the value of a college degree has dwindled.

College Doesn’t Advance People Who Aren’t Already Privileged

My argument that colleges provide little value could easily be refuted if underprivileged students reliably showed improved outcomes. This is not the case though. Rather, student loans are reliably cited as a problem that disproportionately hurt underprivileged students.

College Doesn’t Reduce Racial and Gender Wealth Gaps

Something that might point in colleges’ favor is if college graduates from disadvantaged groups were able to equal or 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 bringing them to parity.

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 might argue that disadvantaged groups still fare better with a college degree, but one study stated that race and gender are wild cards that can trump all levels of education as determining factors for earnings.

Colleges Don’t Help First Gen Students

Colleges don’t provide a lot of support for first generation, low-income students. First gen, low-income students experience feelings of isolation ad culture shock. while in college. Then their outcomes after college aren’t great either. First-gen student households are likely to lag behind their non first gen-student households in income ($65,200v. $100,900 respectively) and household wealth ($152,000 v. $244,500). First-gen students are much less likely to complete their Bachelor’s degrees than their non-first-gen counterparts (35% v. 43%). Here’s the most damning part of the first-gen college student report though:

Among households headed by those with some college education, the difference in household income between those who have a parent with at least a bachelor’s degree ($70,500) and those who don’t ($67,000) is modest. The pattern is similar for household heads with a high school diploma or less education.

So first, note that first gen students that finish some college have higher incomes than those with bachelor’s degrees ($67,000 v. $65,200). Second, note that the differences between high school and college students- whether you have a college-educated parent or not – is modest. Getting a Bachelor’s degree skyrockets the income and wealth of those families with college-educated parents, while decreasing or maintaining the same income and wealth for those without college-educated parents.  If college were beneficial, we should see some narrowing between graduates who have college-educated parents and those who do not. College is merely entrenching existing biases and advantages but it does nothing to break them down.

Even when first-gen graduates do well, colleges push these students towards lucrative jobs. 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 (a job that most people find miserable and unfulfilling). 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.

The “Right Choices” Do Not Make College Worth It

Typically when people talk about how students are swimming in student loans without good job opportunities, the blame goes on the student: “You should have picked a better major” or “you went to the wrong college.” The argument goes “college is still a good investment so long as you do [whatever things worked for the advice giver].” I think this is a bad argument for three reasons.

One, that explaining one of the reasons why college is not a good investment concedes my main point that college is not a good investment for many people. The people in the wrong colleges and in the wrong majors are still college attendees after all.

Two, an investment with deadly traps is not a good investment. It’s incongruous to say “He’s a good financial guide. . . but a lot of his investments go bad.” We are paying colleges to provide some guidance to our students, to put them on a better path.  If colleges are selling bad investments, that’s the college messing up, not the student.

Three, the statement isn’t even true that certain colleges and certain majors are good investments. Read on for how little colleges care about making their services pay off for their students.

Majoring in STEM Does Not Make College Worth It

The constant refrain is that if college graduates majored in STEM, then college would pay off. First problem with this argument is that doesn’t take into account the problem of low graduation rates (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 the vast majority of people do not benefit from college. Third, if everyone became an engineer, salaries would go down (economics majors can explain that to us).

Fourth, not everyone has the capability or desire to major in STEM. 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 or they won’t do well in their work or the market gets so flooded with STEM graduates that alL STEM salaries go down. Also, we need more people in the workforce than STEM workers. Everyone deserves to have an education and to use their talents in quality work.

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.

Colleges Don’t Care if Students Get What They Pay for

Because of COVID-19, students started 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 started withholding spring tuition payments until tuition was reduced due to the shortened year and online education. 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.”

Colleges unceremoniously kicked students out of their dorm rooms – rooms that these students paid for in advance. This forced students, who may have contracted coronavirus over spring break, to make quick travel arrangements home, likely infecting themselves and the rest of the nation. It’s not that the colleges cared about their students’ safety – they just wanted to avoid liability.
Colleges also refused to give exemptions to many students who had nowhere to go. Even with millions or billions in endowment funds, college students were forced to figure their way home by themselves. College students and alumni raised money to help, which is wonderfully heartwarming, but colleges with their billion dollar endowments did not lift a finger to help their students. It really goes to show how much colleges care about their success of their students – basically not at all.

College Steers Students to Miserable Career Paths

Everything I’ve written about college so far has been about earning potential. But there is more to a career than just your starting salary. A career is about finding work that you’re good at, that you’re passionate about, and that you’re excited to keep learning and growing in.

In terms of incentives, colleges have every reason to funnel their students into lucrative career paths. That’s how colleges are measured and if colleges are going to have such a high price tag, people are keen to see some return on investment. But even though I’m wary of colleges’ success at even accomplishing this metric, I also think it’s a lousy metric.

Ivy leagues and other colleges are keen to funnel their students into prestigious, high-paying jobs – the next generation of investment bankers and consultants. Ok so you make a good income. But are you fulfilled? Are you making a difference? That seems like a stupid question, but let’s not forget that the people who attend college are the brightest and most advantaged students among us. These are the people who should be creating businesses and changing the world because if not them, then whom? The rest of us benefit when our best and brightest are solving the world’s problems – not just the richest people’s problems. Imagine if we had even 10% of the brain power working on solving poverty as avoiding taxes for huge corporations. College could serve a social goal of igniting this passion toward public service but instead it directs these bright students into serving themselves. And we are all the poorer for it.

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.

The High Cost of College Crowds Out Creativity and Learning

With the high cost of tuition, it makes sense for students to make every credit hour count. Students are incentivized to only choose courses that fulfill a graduation requirement, or would look good on a transcript. This incentive rules out taking random courses for the fun of learning.  You aren’t taking Portuguese, or calligraphy, or underwater basket weaving at $55k a year. And that’s a shame, because if you took a cheaper online course, of course you would.

Colleges don’t give a lot of education in being outdoors or in the natural world. During COVID, UC-Berkeley even prohibited students from leaving their dorm room – even for exercise. The Freshman 15 phenomenon shows how unhealthy colleges are for its students. Most colleges are self-sorting so you are unlikely to meet diverse students in college in terms of socioeconomic status, political beliefs, etc.

But the main problem with college is how it teaches its students a weird value system. At my college, becoming a college tour guide was a very prestigious activity. This explained why my family hated our college tour – because the guides were all social climbers. But we loved all our other college tours because there, guides were extroverted volunteers with tons of school spirit.

College is like my college’s tour guide system – a ladder-climbing exercise. It obfuscates passion by increasing competition for roles among prestige seekers 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. But 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.

How College Can Actually Decrease Your Market Value

Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School, lays out a guide for families in making this so-called ROI calculation on college in his new book, Will College Pay Off?: A Guide to the Most Important Financial Decision You’ll Ever Make:
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.
Rather than being a surefire hit, college might actually DECREASE your market value. Increasingly, people are finding that college degrees are worthless as there is a glut of supply of college graduates and not enough demand.

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

So far, of the 4.4M people who attended college, over 3.1M (550,000+2.6M) did not benefit from college because they were already destined to be successful or didn’t get a degree. That’s already 70% of the students who enter college. What about the last 1.3M? Here are some statistics to chew on.
  • 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 will elevate 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. Going to graduate school may actually be a sign that the college degree was ineffective. Maybe if they had more opportunities, 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.

The Few Students Who Benefit from College

So let’s summarize. 44% took undesirable or out-of-field jobs, 40% are set to default, 43% are under- or unemployed, and 37% went to graduate school, in part, because of the lack of opportunities from college.
Let’s be generous. On the low-end, that there is a lot of overlap of these data points.  Assume that approximately half of people who took out loans for college are not getting their money’s worth. For instance, someone with over $50,000 in debt who is underemployed is also likely to default and may also go to graduate school.

So after taking out the people who don’t benefit from college, there are 650,000 people left (half of 1.3M). The last group of people have low debt and found employment requiring a college degree at ok-paying jobs.

I’m not saying these people have dream jobs or are happy. They’re not necessarily rolling in the dough either. The college success stories are those with a degree-requiring job with a decent salary and an amount of debt that is not crippling. Yay success!

Only 15% of Students Benefit from Attending College – in a Chart

Remember that approximately 4.4M enroll in college. 58% get no benefit from college because they never graduate. 15% are worse off after college – because of their heavy loan burden and/or low job prospects. 12% would have done great even without college.  So that leaves the last 15% (and this is a HIGH estimate) or 650,000 students who are getting the advertised benefits of going to college.

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.

The Worst Case College Scenario is Much Worse than The Best Case Scenario is Good

Are you going to be in that 15% of successful college graduates (and do you want to be)? Would you pay $100,000 where that investment ruins your life 85% of the time? Would you even pay $1 for this? At this rate, maybe you’d be better off starting your own company. At the very least, you get some experience, and are unlikely to blow $70k/year for four years for the experience.
College is hardly a sure pathway to success. If you still don’t believe me, you can read one of the 8 million hits for “student loan horror stories.”

BEST case scenario, you COMPETE to work to earn a salary high enough to pay off your college loans (and you might not even like the job).

The worst case scenario is that you spend $100k+ to attend a college you’re embarrassed to name. You end up at a job you could have gotten straight out of high school because you did not learn any relevant job skills in college and are paying off your loans for the rest of your life.

Possible Alternatives to College

I know you’re going to say – college is a risk but there is no alternative. Actually there is. Because even if you end up in a coffee barista job after high school, at least you didn’t have to spend tens of thousands of dollars for that privilege. You could very well be in that same position with a college degree.

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.

Mitigate the Opportunity Cost of Going to College: A Gap Year

The Uncollege movement has some ideas of life without college. It’s an organization that focuses on self-directed learning rather than being spoon-fed by colleges at great cost. 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.

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 ultimately decide to attend college, you will have a better understanding of what skills you need. 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
  • Using free/online learning modules
  • 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 (tips for reducing costs in law school apply here)
  • Graduating early

Conclusion- Why College is Not Worth the Cost

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 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.

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.

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