Why College Is Often Not Worth the Cost

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Most articles addressing whether college is worth the cost inexplicably conclude “of course!” But this doesn’t make sense based on basic economic facts.
Average costs for four years in college are between $44,000-165,000 (public to private schools) JUST FOR TUITION.  Adding minimum living costs, this could easily balloon to $84,000-$205,000 at 5% interest. The median entry-level salary for a college graduate is $48,000. Even entry-level salaries at the high end are $71,000 (pre-tax).
The best case scenario (assuming no financial aid) is spending $84,000 and four years of hard work on college, likely not learning relevant job skills, in order to qualify for, apply for, and get hired to work 40+ hours a week for 52 weeks in order to earn $50,000 after taxes to pay off your loans (and you might not even like this job). The worst case scenario is that you spend $200k in loans to attend college and end up at a job you could have gotten straight out of high school.
Am I missing something or are the numbers not adding up on this investment?

Why College Is Not the Key to Success

College graduates may do well financially but that doesn’t mean college is a good investment. That’s because it’s not college that makes people successful; it’s the fact that these students could get admitted into and graduate from college are proxies for all sorts of other advantages that make these people successful.

77% of the bachelor’s degrees awarded go to people who grew up in the top half of the income distribution, and 50% from the top quarter. As the New York Times provocatively points out, some colleges have more students from the 1% than the bottom 60%. So when the statistics talk about better outcomes for people who go to college, there’s a correlation – wealthier people go to college and wealthier people tend to have better outcomes.

And if college students aren’t from wealthy backgrounds, they’ve overcome significant odds, are very smart and/or hard-working, and are committed to their own success as evidenced by applying and being admitted to college – all indicators of future success that have nothing to do with actually going to college. The traits that make people aim for selective college admission tend to be traits that would make them successful. Going to college is irrelevant – they develop these traits in high school.

Why College Isn’t a Good Investment

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. BUT, as I’ve said above, those that go to college are fundamentally different people than those who don’t, so it’s an apples to oranges comparison. It’s like noting that Olympic-qualifying runners are faster than those who don’t qualify and concluding that going to the Olympics means you’ll run faster. Rather, qualifying for the Olympics means you’re a faster runner than someone who doesn’t qualify. You’ll still be fast whether you go to the Olympics or not.
Don’t believe me? Another analysis states that the $1M figure fails to take into account 1) graduates 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. Further, other studies show that high school graduates end up with a higher net worth than college students over a lifetime, even if the high school graduate works as a janitor. It depends on saving one’s money and investing it in the stock market. Fortunately for those with only high school degrees, you earn money earlier, you have no student loans, and you have 4 more years for your money to grow.
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 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.

Why Student Loans are Not “Good Debt”

With hundreds of thousands in student loans being given out like candy, 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.

Most of the people weighing the benefits of college are not wealthy (i.e. if you are wealthy, you assume you go to college but if you’re not, you weigh the options). So the people who are deciding are the people most likely to be ruined if they make the wrong choice. They don’t have wealthy parents to fall back on.

I wanted to give a more in-depth look into whether student loans are worth it. I will admit that 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. This is all to get a general picture, not write a thesis.

3 Types of Students Who Do Not Benefit From College

Students Who Are Exceptionally Bright or Wealthy

In 2012, 71 percent of students graduating from four-year colleges had student loan debt (The site states that 71% represents 1.3M people, and thus, that must mean approximately 1.8M people graduated in 2012). Thus, 29% of college students (ones without loans) 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 for free. 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 successful ahead of their college time. People like Natalie Portman and Yara Shahidi at Harvard, Emma Watson at Brown, Brooke Shields at Princeton, Dakota Fanning and the Olsen Twins at NYU, Jodie Foster at Yale. Think about famous offspring – Malia Obama and Jared Kushner at Harvard, Chelsea Clinton at Stanford, the Bushes at Yale, JFK Jr. at Brown.

These are all people who will be included in the statistics of successful graduates, but let’s not put the cart before the horse. The elite colleges picked these people because of their accomplishments 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 any of these people never attended college, they would be fine.

The idea that exceptionally bright or accomplished students don’t need to go to college is backed by the Uncollege movement. Billionaire Peter Thiel offers a scholarship for bright students NOT to go to college. The idea is, give a smart kid some money and some time to pursue their passion, and they’ll probably come up with something better than being a cog in the student loan machine. It’s not like they can’t catch up on their college courses later.

Students Who Don’t Graduate

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).

Though some studies shoes that some college credit is associated with slightly higher wages (~$6,000 more) and slightly higher employment,

You might point to outliers like Bill Gates or Mark Zuckerberg as dropouts who come from the wealthy classes, but that doesn’t disprove my point. Gates and Zuckerberg did not benefit from student loans or a college degree.

I mean maybe they met someone who helped them with their work while at college, but that’s luck – not college. Don’t go to college because you hope to maybe meet someone who will change your future. People who go to college, people who teach at college – they live in the non-college world as well and you can meet them there. It’s a very expensive proposition to spend tens or hundreds of thousands for the chance of meeting people when you can meet them over the interwebs or in real life outside of college. 

Students With a Lopsided Student Loan-to-Salary Ratio

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%. 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 they have don’t require a bachelor’s degree. Of course, there is something to be said for if you have a college degree, you’re probably taking that janitorial job away from someone without one. However, it’s also possible that someone without a college degree was doing a great job as a janitor and would keep you from  that job.
  • In 2012, 44% of borrowers in 2007-08 took an undesirable job or 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.
  • Approximately 37% of college graduates obtain graduate degrees. Granted, one can only go to graduate school after obtaining a bachelor’s degree but I want to figure out the value of a college degree, not a graduate degree. Doctors and lawyers and MBAs are going to lift the median earnings for college graduates. Furthermore, many people go to graduate school because they did not think their college degree was sufficiently competitive in the marketplace.
So let’s say with 44% of borrowers taking undesirable or out of field jobs, 40% of borrowers are set to default and 43% under- or unemployed, 37% went to graduate school, in part, because of the lack of opportunities from college. I have no way of knowing where these statistics overlap but let’s say on the low-end and for ease, that there is near 100% overlap of these data points and 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).

The Students Who Benefit from College

What about that last 650,000?

So I’m going to say that this is the group of people who didn’t take out too much debt and found employment requiring a college degree at ok-paying jobs. I’m not saying these people have dream jobs or are happy. I’m not saying they’re rolling in the dough. I’m just saying they have jobs and they paid a medium amount for the luxury of having them. Yay success!
Remember that approximately 4.4M enroll in college and only 650,000 of them are doing “well” even after taking out loans. That’s 15%. You have to ask yourself, are you going to be in that 15% (and do you want to be)? Would you bet hundreds of thousands of dollars for an investment that means steady employment 15% of the time and potential disaster 85% of the time? 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.”

Times, They are A-Changing

When we are talking about successful college graduates, we are looking at  studies and estimates from college students who graduated decades ago. So while it’s likely true that in 1976, college graduates performed better than high school graduates, what was true for them is not necessarily true for students today. And if you look at the metrics today, you can see that the cost of college is so high and the value of a degree so low, that the investment is riskier than ever before.

Currently, 33% of adults aged 25 and older have a college degree. A decade ago, it was 28%. In 2000, it was 16%. It has been an continuous upward trend starting from 1940, when only 5% of adults held a bachelor’s degree. Currently, 13% of adults have a graduate degree, up from 8.6% in 2000.

So you can see, decades ago, having a college degree was quite rare and it would certainly help you stand out from the crowd. You were competing for jobs with people who didn’t have college degrees and that degree really meant something. Nowadays you are competing for jobs with people who have college and graduate degrees. And college tuitions have gone up precipitously, more than doubling over 30 years. Consequently, the college degree has lost a lot of value by becoming so common and the high tuition cost makes it a risky endeavor.

Should you to go to college?

Chart: Who Benefits From 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.

Though it made total sense for me to go to college 20 years ago, it might not make sense for 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 any evidence that college is a good investment today.

I know you’re going to say – going to college is still better than not going to college because you have a higher median salary. Given the costs of college, that’s just not true. And if you’re one of those people – upper class or upper middle class, bright and hard-working – 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.

I think if you can afford to go to a top college without accruing a lot of debt, it will likely be a good 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
  • 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 the first two years and/or taking classes at the community college in high school or over the summers
  • 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
  • Graduating early

Conclusion- Why 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.

Author: Lisa

A Washington, DC attorney discusses the financial struggles facing women lawyers.

9 thoughts on “Why College Is Often Not Worth the Cost”

  1. I had three exceptional bright kids, and while they do have wealthy parents, college was still free to all three due to their academic prowess. In their case it paid off as it did for me. But I think the biggest key decision isn’t college vs. not college, it is selecting a high paying vocational major like engineering, IT, medical vs. something that ill prepares you for a good career. Liberal arts degrees have gone way down in value while STEM degrees have continued to provide payback.

    1. IF 1) you want to be an engineer/IT/Med; 2) you are good at it; 3) you could not get your job without a college degree; 4) you end up liking your job(s) and are healthy enough to work them; and 5) you have reasonable or no debt, then college pays off. But that’s a lot of if’s.

      My point still stands though. You point out three bright hardworking wealthy kids did well after going to college. You can take this as evidence that college works, but I still suspect college is more a merit badge than a stepping stone and bright hardworking wealthy kids wouldn’t go hungry without it.

      And I’d like to point out that I’m a bright kid with a liberal arts degree, and I turned out….ok. =P

  2. most of the very top colleges now have a no student loan component to financial aid. there is a long list but they are all highly competitive to gain admission. if i had a kid, which i don’t, i would encourage them to apply to those schools. if you end up at a top liberal arts school like williams with no student loans your chances are pretty good. all that being said i think a lot of students will take an unnecessary loan just to have a more comfortable 4 years.

  3. Very interesting post! I agree, college is great but it’s definitely not for everyone and it’s not the best financial choice in every situation.

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