Will one day the cost of a college education outweigh its benefits?

Question

An interesting thought.

Tuition instate TX 200 per hour in state x 18 = 3600.00
Books per semester 750.00
Dorms and living 1500.00 x 6 9000.00

One semester 13,350.00
One year 26,700.00

4 years $ 106,800.00

IN 20 years at a modest 8% tax free return, the would have $497,790.00, or make $24,889.50 a year. Or have a small home and never have to make house payments
How many of you are in your ealy 40's and have a 1/2 million nest egg.

Very good answers. The above costs are a portion of Dads (me) out of pockets expense for my current kids in school. Both of my boys had over $750.00 each in books this semester. Some books were 150 a piece. My kids dont work, as I prefer for them to spend their time on studies. The figures do not include things like auto insurance, automobile expense, health insurance, but do include cell phones groceries, gas, toiletries and fun money.
My scenario is: instead of sending them to school, If I parked the money in an account they could not touch until they were 40 would they be better off.
Side note: I have always done much better than 4% on my returns and average better then 10%. Only time will tell.

Sam, some people have that "it", I was 21 years old when I realized I could never work for anyone. I have had my ups and downs, but I could never accept someone telling me what to do. I do not see that in my kids at this time, although I would like them to blaze their own trails.

Answer 1

One thing a college education could do would be to teach you to make an accounting summary that didnt leave out major expenses and benefits.

By far the larger part of the expenses you list are food and lodging. So, if you don't go to college are you planning to go without food and live in a tree? Your real total college expenses are only around $30,000, not $100,000+

There are not a lot of tax-free returns of 8%. You have to invest the money as a % of your earnings if you are going to put it in a 401 or Roth, etc... you can't just plunk $100,000 down and get 8% tax free forever. It would be more like 4%.

Anyway, where is this $100,000 coming from? If you are a good student they are going to discount your college costs, but otherwise you can borrow the tuition money. You can borrow the money because everyone considers college a good investment, but as everyone knows, the subprime mortgage business - which is where you would be as a 20 year old with no degree - is a risky investment. So noone will loan you $100K to invest if you arent even a college student.

Your earnings during the next 20 years after college would typically be significantly smaller if you were not a college grad, and your nest egg would be more likely to be about $60,000 not $500,000. And any college grad who pays attention to his investments should certainly have more than that at age 40. Since your earnings would be smaller, there would be a tremendous temptation to dip into that nest egg for various expenses, so probably it would have disappeared by age 40.

Answer 2

An interesting calculation, but it's important to note that dorms are often overpriced and students often live in cheaper, off campus situations.
Also, I must question your figure on books. Personally, I've never paid more than $400 per semester.

According to the website I've listed below, those with a bachelors degree earn $51,206 yearly, while those with a high school diploma earn $27,915. Thus, the benefit of a non-technical diploma is an additional $23,291 per year.

Assuming a 40yr career;
40*$23,291 = $931,640 additional that a college graduate might earn. Your investment, over 40 years, would be worth $995,400.
*Of course, it's worth noting that those with a technical bachelor's degree earn much more.

Overall, an interesting calculation and a rare word of encouragement for those that never graduated college.

Answer 3

Well, to answer your question directly, no. You seem to be forgetting that colleges are not exempt from the economic principle of supply and demand. The reason the price of college is going up is because demand has increased, as well as the demand for the best educational experience possible.

Once the price of college has reached a point where people are no longer willing to pay to get the benefits, then the costs will stabilize or come down. The overall cost of college will also equal the perceived benefits.

Answer 4

No! If the current trend in the US continues, you will need the minimum of an associate degree to even make a decent living. Soon, any and all skilled positions will require a degree. There are jobs right now that require degrees that didnt 15 years ago. Many older people are in positions at companies they got by being trained on the job. Today, that same position will require a college education. Oh yea, an associate degree is the G.E.D of the 21st century.

Answer 5

When will people get over this obsession with college? I have a couple of degrees from good schools and they have been virtually worthless.

I think there is very little to be gained financially from going to college. A person who graduates from college and then goes on to a successful career would almost always have a successful career if he did not go on to college.

College graduates do better because they are intelligent and ambitious, not because they have degrees!!!
Also because large institutions require degrees because it is a way to cull out the herd. They have to interview fewer people. But there is very little INHERENT in the experience of college that leads to career success.

Compare it to the NBA. Most NBA players have degrees. Does that mean that a degree leads to basketball success?
No.

What do you need to succeed at a job? Intelligence. Hard work. The ability to get along with people. Credibility.
College is mostly irrelevant to these qualities.

Would I encourage a person to drop out of college? Probably not. Our society is obsessed with schooling and credentials (education is something else. Go get all the education you can. Public libraries are great), so you better get your degree. But I think there should be more alternatives to college. Some other way to get away from home. How about a mandatory national service program?

OK. Who gave me the thumbs down?? Jerk!!

Answer 6

I just got an letter from Publisher's Clearing House, so I should be in good shape. It scares the hell out of me. I have 10 year old twins. I know they will want to go to college. They have 10,000 dollars each in a college fund, but in eight years that won't be enough, even with interest. Is bank robbing an option?

Answer 7

Nice logic...if you don't have any living expenses and you can save 100% of this money. Otherwise, the job you can get with a college education vs. without one usually worth the investment of tuition, books, etc.

Answer 8

My nest egg is not to bad , but I am 50...
Tuition is insane these days and a lot of young people will not get a job they have studied so hard for and paid through their nose...or the parents went bankrupt.....
Now here they are , trying to pay off a huge student loan that will hang over their heads for a long time if not forever.....
Bullshit I say....give everybody a free education,,but only if they pass all 4 years of college with a certain grade average...they have that here in NJ , it is called the "star program"....and if they fail...make them pay.

Answer 9

In terms of money, most likely.
But in terms of knowledge, the benefits will always be there.

Don't forget to factor in life's lessons - probably the most important teachings you will have and mostly they are free even though sometimes your mistakes can cost a bundle.

So in a way you are correct. Stupidity is expensive.

Answer 10

dang, i just got accepted to cornell. im gonna tell my parents that instead of attending an ivy league university that im gonna live at home with them for 4 more years, and they should just put that money into a savings account now.