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DLester78 (66.96)

Is Higher Education Worth it?



January 24, 2013 – Comments (13)

I am a financial advisor and I meet with people from all walks of life.  I have clients that just got out of Dental/Medical school with 200 to 300k of debt. I meet with nursing students with 65k of debt, and regular MBA's with no debt but have spent 200k on their education.

My daughter is about to be 4 years old in May and I have been putting $300 per month away for her as a college fund.  As I meet with more and more people especially the people that do post graduate/medical/law school education.  The more I question the validity of the current costs associated with higher education.

I first want to say that I do believe in being educated.  I believe that we need to have many more math and engineering graduates in order to compete around the world.  My focus is on when does the degree become less valuable to the student than investing the money and getting a job or starting a business.

I ran some numbers from my software systems at work that I use for financial planning and the costs for schools across the country differ greatly.  Whether you live in-state or out of state has a huge impact as well.  For the sake of our analysis today we are not going to use one of the outrageously expensive schools like Harvard.  Nor are we going to look at the incredibly inexpensive.  I chose a common school that I feel is middle of the road... Ohio State University.

Here are the basic fundamental costs for a person today to attend for one year if they are out of state.

Out of State Tuition:  $24,630

Average Cost of Room and Board: $9,180 (remember this is only while school is in session)

Books and Supplies:  $1,554

Total Years that the Student attends:  4 (if your lucky... Many change majors and end up 5 years)

Total Cost (not including alcohol):  $35,364

Total Cost over 4 years:  $141,456

Total Cost by the time my Daughter finishes school @ 6% (education inflation rate):  $393,002

Age my daughter will be upon completion: 23

$393,002 invested at 7% at age 23 turns into:

Age 45 = $1,741,156.75

Age 50 = $2,442,062.41

Age 55 = $3,425,118.85

Age 60 = $4,803,906.38

Age 65 = $6,737,727.20

These assumptions are contingent upon my daughter not touching the money... But she wouldn't be able to touch her tuition once it was spent anyway.  It also assumes she can get over her life a 7% return on her money.  That is a different argument and I don't think it has any bearing here.  Run your own numbers if you want to use a higher or lower rate of return. 

Personally I think education is great but I will be advocating for community college the first two years and then an inexpensive university for the final two.  The cost for college is becoming stupid.  As I meet with clients I see very few that approach a networth of $2,000,000.  The vast majority of college students totally waste this money and end up working in jobs that don't pay near the amount you would need to replace this money.  Couple that with the fact that many people have debt costs on top of the normal costs of university and you can't imagine the numbers.  They easily can approach an opportunity cost of $10,000,000.

I think you can take an accounting course, a basic personal finance and investing course, a few business classes from your local community college and do very well for yourself in many occupations.  I know that certain professions require advanced schooling. So if you want to be a doctor you may not have a choice.  Most people are not doctors though... they end up at a liberal arts college somewhere with 200k of loans and no ability to get a job to pay for it. 

There needs to be a way to get the costs down otherwise whats the point?  Go to the library and check out a book on any topic and you can get what you need.  My little cousin can program software already and he is 14 years old.  If your going to learn a craft like automotive, a chef, building etc. they have apprenticeship programs available.  Don't spend 250k.  Right now its not worth it.



13 Comments – Post Your Own

#1) On January 24, 2013 at 6:03 PM, Speculatormaster (33.66) wrote:

He he, you think study is expensive in America, but what is really expensive if medical cost, any time that you end in hospital for an emergency means like $9,000 for just some hours. IOWA have that cost. This country need a good Recesion for can progress again in the future, or at least a good deflations of assets.

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#2) On January 24, 2013 at 6:03 PM, miteycasey (28.85) wrote:

The break even mark on having a degree and not is getting closer and closer. The problem is how many people have enough talent to start their own company? How many can make it successful?

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#3) On January 24, 2013 at 6:15 PM, starpark88 (< 20) wrote:

Wouldn't room and board be costs regardless of college, lowering the total cost by a pretty big margin? 

I'd also try to factor in scholarships and subsidies. The better out of state schools often have a large price tag but tuition is heavily subsidized depending on how much the parents make. 

 I don't think that takes away from your main point of using community college for the first two years or sticking to a cheaper in state school, but I don't think the opportunity cost is quite as high.  


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#4) On January 24, 2013 at 6:54 PM, ElCid16 (95.25) wrote:

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#5) On January 24, 2013 at 6:56 PM, ElCid16 (95.25) wrote:

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#6) On January 24, 2013 at 7:52 PM, awallejr (36.64) wrote:

Well you are looking at this from a strict dollars and cents viewpoint.  There is also the benefit of knowledge learned or the ability to engage in a career that a person wants.  Lawyer to champion that cause.  Doctor who wants to just help.  Veternarian who loves helping animals.  And so on.

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#7) On January 24, 2013 at 8:43 PM, whereaminow (< 20) wrote:

Put your daughter in front of a computer and see if she likes it.  If so, you just saved yourself a bundle, cuz the IT field doesn't give a darn about her education level.

(Besides, if she really wants to study Plato or all those nonsense class warfare subjects, she can Google them. Problem solved.)

David in Liberty

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#8) On January 24, 2013 at 10:53 PM, Option1307 (30.64) wrote:

Good thoughts, not enough people realize this.


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#9) On January 25, 2013 at 11:19 AM, ikkyu2 (98.17) wrote:

I am 40; my medical degree, acquired at age 26, has probably been a wash all told, if you look at the cash returns and subtract out the opportunity costs (i.e., I got paid more than another job, but if I'd taken another job, I still would have gotten paid something and probably worked a lot fewer hours.)

However, I love my work and cannot imagine not doing it.  These cost analyses are becoming more and more popular and they always neglect to put a value on that. 

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#10) On January 28, 2013 at 3:03 PM, DLester78 (66.96) wrote:

I was not actually debating the value of an education.  I know that education is important. I am merely stating that the cost is insane.  There was a report filed on the news and there are many reports that break down the insane money that college professors make. Here is a link to help you see what I mean.

I don't know how to verify the info in this article but people are focused on corporate america.  Tax dollars and charity contributions fund these incomes.  Just a thought. I am not for government intervention in things but I feel uncomfortable having a state run university pay a finance professor who does research, more than the president of our country.  This is only the most visilble waste.  Consider the cost of a single text book can now surpass $100.  This is what happens without competition.

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#11) On January 29, 2013 at 11:22 PM, ClandPhoenix (77.22) wrote:


Perhaps one should go to college with the intention of teaching at a college. That was always my plan. Write code for 10 or 20 years and teach at night or full time if I get tired of developing. Like you said professors are compensated well for doing relativley little.


@David in Liberty

All due respect I love your blogs but people in the software development field do care about education to a certain degree, pardon the pun. There is a stigma associated with self taught developers. Excellent code monkeys terrible code architects. There are exceptions of course but I currently work with multiple developers who are all self taught with over 10 years experience to their names that could not inherit from their father. Forget design pattern implementation or true object oriented mechanism implementation. Just a bunch of people coding in a functional manner with an object oriented language because writing hello world on your own without experienced well educated instructors seldom leads to higher level thinking.   

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#12) On January 29, 2013 at 11:35 PM, whereaminow (< 20) wrote:


They're not doing it right.

While I agree that self-taught is not fool proof, and usually is an indication of someone who is not going to be much of a gung ho team player, rule follower, let's look at the flip side.  Are there any computer science graduates you have met that can't handle OOP despite several 300 level classes and a supposed mastery hand delivered by Professor so-and-so?  

IT is a broad, broad field.  There are lots of areas to master and coding is just one of them.  The common characteristic to success appears to be an understanding that studying is a lifelong activity to keep up in a fast paced and competitive environment.  That's were I think people like me (completely self, never had a computer class at any level of school) have an advantage over university trained.  We understand that study is just something you do. It's not something you did.

David in Liberty

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#13) On January 31, 2013 at 8:10 PM, devoish (64.87) wrote:


Great post - I love good math.

But I think you slipped a decade or two when you compared Your daughters college costs in the future of 393k to your present day 2,000,000 clients net worth.

(I learned to spot that kind of stuff reading extremist politics)

If you extrapolite the same 2mil net worth of your clients out into the future at the same 6% you get a net worth of almost 6.7 mil, that 'not too many of your clients achieve', not 2mil. So if most of your clients are 65 years old, its a financial wash plus she learned something. If they are younger, she will be ahead with the education.

The alternative future net worth of you clients numbers might not change your conclusion but I think it is a more accurate comparison toward the value of the education.

I also think you need to compound a little over $600/ month at 6% to get to a pretax $393000 by the time she is 23 years old. 

Obviously if she has to go into debt to pay for college, then that would hurt her future net worth pretty severely. But the lower wages of hard honest work without that degree will hurt her too. Unless you can start her off with that $393k to invest she will almost never get anywhere near it on her own. 

Leaving opportunity to the children of rich parents (or the children of paid for european and asian higher education systems) is one choice we can make. For you and at your savings rate I would recommend moving to a country that use taxes to provide all their kids with the opportunity for college if you want to get your daughter a debt free education.

As investors anything we can do to attack salaries is good politics for us, whether teachers, firefighters or tomato pickers, but it does nothing to promote a good salaries for your daughter.

Best wishes,


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