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Cost - Benefit of Higher Education



April 17, 2008 – Comments (9)

I was looking at btown819's blog about student loans

I haven't followed student loans that closely except I know the 4 new teachers where I am have an average of about $50k of student loans each.  I met a few American students last summer and I know they were running $100k of student loan debt.  American universities are more expensive than Canadian universities.  I also saw Sallie Mae offers loans up to $40k per year (choke.)

So, I decided to go with an example where a student borrows $25k/year for 4 years for $100/k of debt.

That much debt makes you eligible to pay it back over 30 years.  Looking at 6% interest that would give payments of $600/month.  A 15 year repayment scedule would be $844/month.

I always chose the highest tax bracket when I look at amount of income that has to be earned to pay an expense.  The reason is that if you have an expense that some one else doesn't have, you have to earn more at the top tax bracket to be able to match disposible income.  On average I'd expect a university graduate would pay 32% taxes between state and federal.   To make that $600/month payment about $10,600 of gross wages/year are required.  To pay it back in 15 years you need $14,900 of gross wages.

So, if you are a dedicated enough person to get through university, what kind of wages would you make the 4 years in school and how much would your earnings have increased?  I found a report that says you'd make about $23k more.

But, how is that potentially changing with all the high paying job layoffs? 

I think I went to school at a very bad time and came out to a very dead economy.  When I went in friends who had graduated said employers lined up to hire you.  Most had a job lined up before they finished university.

I remember getting shortlisted from over 100 applicants to write a 3 hour exam to measure some kind of qualification for a job.  This job had been done for 2 years by university co-op students.  There were 12 people with a B.Sc. like myself and the other 12 had master and doctor degrees.  This job would bore anyone with ability and ambition to death for its repetition, do the same test on these 100 samples today and tomorrow there is another hundred samples waiting.  The test was entirely higher chemistry theory.  I didn't get an interview.  They interviewed the top 7 scoring individuals and I came in 12th.  They probably hired someone with Ph.D. wage expectations.  Indeed, stories in the news around 92 were reporting that it was taking people with a Ph.D an average of 6 years to find an appropriate job after university.

I suspect business degrees are going to come back in line on the pay scale with other degrees because of the enormous layoffs in the financial sector.  Many of those jobs truly were not generating any real foundation in the economy.  They were taking people's hard earned money and givig it to people without a hope of being able to pay it back and taking a huge cut for this neglegence.  They were doing these swap things with municipalities for another snake oil scam to put more money in their pockets and risk investors money and screw tax payers at the same time by putting municipal budgets in dire straights.  An enormous part of the financial sector was just scams to rip people off and profit from raping people's dreams and future.

The financial sector became such a destructive parasite that it was killing hosts, and the rest are being forced into medical treatement.  The medicine cabinet is stocked with parasite medication.

The parasite jobs aren't coming back. 

So, long term what happens to wages in a sector that had the competition I described?  I had another job interview around 2004 and the pay it was offering was less than I made in 91, about 12% less.  Take a modest 3% increase in prices over 13 years, so essentially only 59% of my 91 wages.  It was an lot of work lining up that interview as there still weren't many jobs, or at least jobs that provide an income reasonable for Vancouver.

The value of educations is very supply and demand. Demand is declining...

The spread in wages for higher education versus high school is likely to remain, however, all wages are likely to decline further in buying power.  So, more likely new graduates will find the cost benefit working out poorly in terms of the wages they thought they could get in comparison to what they will likely get.

9 Comments – Post Your Own

#1) On April 17, 2008 at 11:14 PM, abitare (29.72) wrote:


Good post as always.  

I would recommend a job skill where you can work for yourself and work for cash over a $100k college debt.

The internet is changing the value of knowledge. I can answer most questions in minutes thru google.  Why would I pay someone $60k for information learned in college, when google is free? It is becoming a very different world.

Also take a look at: Sinchiruna blog there is a video of the Alt - A loan crisis that is coming to the US,

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#2) On April 17, 2008 at 11:59 PM, StartOfLine (< 20) wrote:

"Demand is declining"

Nope.  Supply is increasing.  That is, the supply of college educated employees. 

Gripe and moan all you want, but the education you have is a value you can't have taken from you.  You and your children will benefit greatly from that no matter what.

Also, I think you got some of your math wrong.  Remember, the interest is tax deductible in this country.  Or did you calculate that in?

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#3) On April 18, 2008 at 12:33 AM, dwot (29.44) wrote:

StartOfLine, I'm not American.  I didn't realise yet another place to encourage debt... I am not sure how you don't see demand declining with the thousands upon thousands of high paying job layoffs, but I concure that supply is also increasing.  No children and I would argue the declining economy played a significant role in that. I had values that I would have a home I could afford before having kids and a husband who changed his mind on having kids.  Yup, value for life in that suggest.

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#4) On April 18, 2008 at 12:55 AM, abitare (29.72) wrote:


Concur on supply of college educated employees, I would prefer skilled trade over $100 debt and degree in Liberal Arts. 

Also there are limits on what a degree is worth.  

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#5) On April 18, 2008 at 4:13 AM, PDTBiotech (83.80) wrote:

Interesting timing for this post.  I literally today just calculated what my education cost me.  I started grad school in late '97, and am just wrapping up a postdoctoral fellowship, so I have 10 years in academia.  Things are somewhat different for grad students in the life sciences, as we earn a (pathetic) stipend and don't have to pay tuition, so many of us come out of grad school with no debt if we don't take it out for a house or some other purchase (I have $0 debt).  I compared my income and an estimate of my hours over the decade since I got my bachelor's degree vs. had I just started as a tech right out of college.

Had I gone straight to being a tech, I estimate that I'd have made $145k more over the decade, and that's while working 441 less hours.   Measured in terms of dollars made and hours worked, this adds up to about a 2.33-fold difference in quality of life.  The $145k is actually low, as it doesn't include 401k contributions, interest earned, house equity, etc.  Also, grad students either get crappy health insurance (I was lucky enough to have this) or no insurance at all.  So if I take a static snapshot right now, grad school cost me dearly both economically ($145k) and socially (441 hours).

On the other hand, I have a Ph.D., no debt, ivy league street cred, and an expert education in cancer biology (specifically breast cancer) which, with a little luck, I can parlay into a consulting position.  Should I pull this off (first phone interview tomorrow, several more scheduled) I conservatively calculate that I'll catch the phantom technician me some time in 2012, and by 2020 will be up over $350k.  Should I have to settle for a scientist position at a biotech/pharma company this will take a bit longer, but will eventually happen.

So I guess in my racket the bottom line is whether you consider it worth it to take the risk/pain of making less now to make more later.  Amongst my advanced degree colleagues in academia I'm somewhat famous for seriously considering that the people who went straight to teching might actually be smarter than we are.  It probably depends when you ask - today I'd have to say if I could go back I'd seriously have to reconsider going to grad school, but I suspect (hope) that in 10 years I'll be telling the youngsters that it's worth it.

As for supply of Ph.D.'s, I can tell you it's been outgrowing the job market for us to a point where you see people (usually foreigners) doing a second postdoc, which is utterly insane.  The spectrum of jobs Ph.D.'s apply for has expanded exponentially as the oversupply problem has gotten worse.  I have Ph.D. friends on Wall Street (equity research, VC, PE, etc.), in law (patent lawyers, NDA applications, etc.), and consulting (R&D development, drug trial design, target/disease matching, etc.).  Most of them who went into non-research careers both make a lot more money than researchers and tend to be happier; this is doubly so when compared to Ph.D.'s who chose to start their own lab in academia.

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#6) On April 18, 2008 at 4:50 AM, PDTBiotech (83.80) wrote:

Oops - one major typo - the difference was 441 days, not 441 hours.  Big difference.

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#7) On April 18, 2008 at 8:31 AM, dwot (29.44) wrote:

PDTBiotech, I wish you luck with the job market.  With the oversupply you mention the job market simply has to get worse and harder.

I got married so I got tied to living in a place where my qualifications were not in demand but had I been willing to relocate there was good opportunity.  But my husband's job was very good so it made no sense to me to ever suggest we both go look for jobs elsewhere.  He'd have probably ended up taking a pay cut bigger than the difference in what I could have gotten.

Certainly I knew people that carried on and did Ph.Ds when I finished my first degree.  I've only actually talked to two but neither thought what they put into it was worth what they got out of it and one got quite emotional about the inequity in wages.  In Canada the media has talked about "brain drain" where Canada educates them and then they go to the states because the wages here suck. I suspect that era is over.

When I went back to school for my education degree in my late 30s.  The students were half 30 something students who had not found reasonable work for our qualifications and we were essentially retraining.  The one guy was a lawyer.  

On breast cancer, what I know as a chemist is like chemical dissolve like chemicals and carcinogens tend to be fat soluable so it has always seemed to me that carcinogens that enter the body would concentrate in breasts.  Fat in the body isn't that dynamic so toxins stick around longer.  When I've read research on it I'm always asking myself where did you look at the difference in chemical properties of carcinogens. 

It seems to me methodolgy is the same as say for a colon cancer and the colon is simply far more dynamic in that it is rebuilt by the body so the is a much more direct exposure/cause relationship.  The properties of fat tissue mean that it is going to hold on and concentrate carcinogens.  There is a lingering effect for exposure to carcinogens because of the nature of fat.  There is also a compounding effect.  I think carcinogen soluablity a contributing reason to higher cancer rates in overweight people, the fat hangs on to more carcinogens.

I've read the odd thing about a fat person dieting too fast and the fat soluable toxins in the fat causing serious health problems because it is freed up faster than the body can deal with it.

I think this is why there has been so much more in the way of conflicting reports on what is causing breast cancer.  Research design is not properly taking into considerate this basic difference in ability to purge carcinogens. 

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#8) On April 18, 2008 at 8:54 PM, PDTBiotech (83.80) wrote:


There are quite a few studies out there on the role of obesity in breast cancer.  They've come up with some very interesting results, which in general tend to imply that obesity is a significant cause of breast (and several other forms of) cancer.  But there are a lot of wrinkles in the results, and I think they also show just how complicated biology is and how much more we have to learn.  Dig this:

*Before menopause, obese women are actually at a slightly lower risk for developing breast cancer than women of a healthy weight.

*After menopause, obese women have a significantly higher risk for developing breast cancer.  Unless they use menopausal hormones, in which case their risk is the same as non-obese women.

*The earlier a woman has her first child, the lower her risk of getting breast cancer, and vice versa.  Women who have their first child after 35 have a higher risk than women who never have a child, which is the control group for these comparisons.

*Women with lots of abdominal fat have a higher risk of getting breast cancer than women with more fat on their hips, butts, and thighs.

Interesting results, but translating them into animal model experiments are extremely difficult, as a lot of these effects don't seem to happen in mice/rats or simply can't be modeled (how do you make a mouse with big hips vs. a big tummy?).  So we're largely stuck with observations and statistics for now.   We're making steady progress, but we really need some new technologies to start answering some questions that we just can't get to yet.

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#9) On April 18, 2008 at 9:36 PM, dwot (29.44) wrote:

Seeing how cigarette smoke is the number source of carcinogens must of us are exposed to doing a better job of monitoring exposure there would help.

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