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Gemini846 (97.08)

ROI on a College Degree. Its Low, surprise surprise!

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December 18, 2008 – Comments (6) | RELATED TICKERS: COCO

I value the time I spent in college. There is something to be said for living on your own for the first time, enjoying a collegiate tradition, sitting around in accademic circles and spouting off ideologies on someone elses borrowed money.

 Financially the ROI of college is poor. The earnings power of my liberal arts degree qualified me (based on my real world experience) for slightly more than my non college peers (about $2-3k per year to be exact). I graduated in the year 2000 when costs were starting thier upward spiral to out of control. I graduated with about 17k worth of student loans and after a brief stint in grad school (paid as I went along thankfully) I owed about 23k. My payments on the 20 year plan at a rock bottom 3.75 rate are $120/mo or roughly $1400 per year eating up half the difference between what college cost and my earnings.

In theory my years in the workforce should compound my gains using my out of college salary as a baseline, but that hasn't happened. The skills that make me money now I learned from professional organizations, and networking. They are not skills I learned in any public school.

Not surprisingly as college costs continue to escalate (my buddy just graduated from COCO owing $300/mo) people have started to look at the ROI of various colleges. Personally I think that the not considered tech schools offer the highest bang for your buck right now. You can complete a practical healthcare or IT degree for a few thousand dollars without all the "well rounded" crap that colleges preach but companies don't really care about anymore (since you don't really learn it in school).

Those degrees offer a person 12-15k more earnings power nearly immediatly and puts them into the workforce reducing the time they spend non productive. Nobody wants to consider the opportunity cost of college as one of the costs, but spend 5 years working at 30k and you'll be 150k richer. Learn to invest that money as a business owner or an investor and you could theoretically not be enslaved by someone else for the rest of your life. If you have teenage kids you owe it to yourself to re-think the college trap.

http://finance.yahoo.com/college-education/article/106319/The-Best-Colleges-for-Making-Money

6 Comments – Post Your Own

#1) On December 18, 2008 at 10:33 AM, devoish (98.87) wrote:

Well done.

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#2) On December 18, 2008 at 11:20 AM, Imperial1964 (97.90) wrote:

The key to college ROI is picking the right degree at the right college.

Going to college because people say you should go, at the college of your choice, and getting a degree in whatever interests you doesn't necessarily make you any wealthier. But sometimes doing the job you like is more important than your pay.

The key to making money is either being able to do something others can't do (e.g. an engineer or a welder) or something others won't do (e.g. a trash collector).  Pay is a function of supply & demand.

You're right that trade schools and junior colleges are often the best bang for the buck.  They are more focused on teaching you practical skills and keeping their cost low.  I went to a junior college and got my associate's degree on the cheap and transferred to a 4-year college.  It probably saved me $3k.

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#3) On December 18, 2008 at 4:25 PM, thegoblinprince (< 20) wrote:

That's funny because I met my current business partner in college.  We started a business and we now make over 6 figures a year.  Of course we did get a "real" degree.  Business.  College is all about connections and with that, many windows and doors open up.

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#4) On December 19, 2008 at 8:37 AM, Gemini846 (97.08) wrote:

It wasn't college that made you successful though it was networking and finding someone to work with.

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#5) On December 23, 2008 at 5:07 PM, khrushchv (< 20) wrote:

I think there is a degree of incomplete reasoning in your post.  Specifically, you're being a bit myopic about the pecuniary value of a "traditional" college degree.  They key point here is whether a college degree also affects the trajectory of your earnings...while the instantaneous salaries associated with a tech. degree are likely to look good, I can imagine that the likelihood that you will go back to school to learn new skills might be quite high...that is to say the skills you learn and use to earn money might obsolesce...then you would be back in school incurring a cost....but I'm making this up as I go along, so it might not be true...I'm also exhibiting the hubris that this would not be a feature of a degree from a traditional school...presumably you get taught "timeless" knowledge at a Uni...I seem to recall a lecture about "learning how to learn"....I wasn't really paying attention ; )

Please don't misunderstand this, I think tech. schools are a great alternative that a lot of people don't take seriously enough...I have seen my fair share of people who probably didn't belong at a traditional college...myself included!

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#6) On December 24, 2008 at 10:45 AM, Gemini846 (97.08) wrote:

College degree expectations from employers and no default loans combined with spiraling costs have pushed a traditional college degree well out of the usefulness to the average person. I understand your argument about traditional earnings "trajdectory" but how many business grads go back for an MBA adding even more debt. At least tech schools are flexible. They aren't for everyone, but I think more people should consider them or at least look at thier local community college.

From the linked article (U of GA):
Out-of-State Degree Cost: (Class of 2005): $54,742
Out-of-State Degree Cost (Class of 1993): $14,450

You're telling me in 12 years they've added $40,000 worth of value to their program? Now consider most people borrow it and are paying interest.

The article unfortunatly uses the Median Income rather than Mean income which would likely be much lower.

I know congress is discussing the possibility of wiping the balance off of all loans that have been paid on for 20 years. If these loans become the type of loans that can be defaulted on you'll see borrowing costs go up and people starting to look at the actual costs of college.

I value my time in college, but I wish I had borrowed less of it and paid more as I went along. Unfortunatly there was nothing built into the system to encourage me to do so. Most college students look at scholarships and loans the same. Considering they get them from the same place the "Financial Aid" office its not a surprise.

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