
On average, skipping college and investing tuition costs nets a higher return - qwerty2020
http://erikrood.com/Posts/college_roi_.html
======
habitue
I think a lot of people are looking at this as "maybe this article is offering
advice" instead, the way I'm looking at it is this is giving us a rough
quantification of what we all know intuitively: that college is so expensive
it's reaching a natural ceiling.

The way this manifests in reality isn't millions of people all doing a
cost/benefit calculus like this and coming to the rational conclusion they can
skip college. What happens is that slowly, the meme that "Jim went to college
and he doesn't seem better off" seeps into the collective consciousness. More
and more people start running into this evidence, and reconsider mortgaging
the house (figuratively) to send their kids to college, and the upward
pressure on college tuition starts to lessen.

After a while this meme that college is a tradeoff becomes well established,
and it becomes common knowledge that you think hard about it before you send
your kid to college. The underlying reason is something like "You can make a
better return in principle investing in the S&P" but the way it becomes a
force in the real world is by a collective bayesian reasoning process we all
engage in as a society.

~~~
twotwotwo
And college got expensive partly through policy choices. Offering easy loans
tends to make people price insensitive, so tuitions go up and a lot of that
money goes to things like increasingly fancy buildings and making textbook
publishers' shareholders rich. Meanwhile often less is going to state schools
that, with low in-state tuitions, were historically a way up for a lot of
people. (An older friend went to Berkeley a few decades ago for under $1,000.)
There's some comparison to the housing bubble, where policy also supported big
loans.

Don't have all the answers, but less emphasis on loans, competition from
better-supported state and other non-profit schools, and having multiple forms
of post-high-school education and credentialing available could all
potentially help to bring some competition and sanity back to all this.

~~~
learc83
This article from 538 argues that almost 3/4 of the rise in tuition is
accounted for by a drop in state support.

[https://fivethirtyeight.com/features/fancy-dorms-arent-
the-m...](https://fivethirtyeight.com/features/fancy-dorms-arent-the-main-
reason-tuition-is-skyrocketing/)

~~~
wmeredith
I came here to say this. My wife left the private sector four years ago to
work in higher ed. This was a huge epiphany to both of us after she had been
there a while and we could see the big picture from the inside. Sure there are
a couple other factors at play, but it's small potatoes, comparatively. If you
look at the big state schools and the support they receive from the community,
they've systematically had their legs cut out from under them over the last
couple decades. It's horrifying. And the students are paying for it. As are
the teachers.

~~~
kchoudhu
Doesn't explain what's happening in private higher education though.

~~~
rebuilder
If public higher ed. has its capacity and/or quality cut, wouldn't that
increase the demand for private education?

~~~
strommen
The public universities don't cut capacity or quality - they raise costs. And
the private colleges follow suit because they can.

------
krakensden
As a culture, we really need to stop telling 17 year olds to not worry about
money, go to college, and figure something out. There is always someone ready
with a romantic appeal to a classical education, and it is so frustrating for
me.

Wasting four years is a huge cost. Years, decades of debt is a huge cost.
Going to college with no plan about money? The costs are assured.

Plus, the degrees people are actually getting aren't necessarily worth all
that much to the educational romantics. Business administration is what it is.

~~~
staticelf
What about... offering college for free like the rest of the modern world?

Then you would only have to worry about living costs and those loans are
pretty small. I could pay off mine in like 4-5 years if I really wanted to.
Plus, then people still could get an education even if their parents didn't
save up for you.

What about as a society/culture you start telling people that the country
should offer education for free instead of not getting educated?

EDIT: _For the butthurt americans, I don 't mean that your country isn't
modern and I understand that not every country even in europe offer free
education. I just think a modern country should offer free education as they
offer free roads to travel on.

It works great in every country that has it, why do you think the US would
suffer if you started doing the same?_

~~~
vowelless
On the other hand, one should wonder why college is so expensive in the US in
the first place. Even without any subsidies, non-American tuition is a
fraction of the cost of the big universities in the US. Why? Why are book so
expensive here? Why is so much money spent on buildings, stadiums and hiring
football coaches? The highest paid public employee in 39 states in the US is a
college sports coach! [1]

Throwing more money at this problem will hardly combat this issue (it's an
issue in my opinion).

[1] [http://www.businessinsider.com/us-states-highest-paid-
public...](http://www.businessinsider.com/us-states-highest-paid-public-
employee-college-coach-2016-9)

~~~
brohoolio
Sports often generate enough revenue to cover the costs for the top tier
schools. Top ranked universities use sports to build donations from alumni,
brand awareness, etc.

If you want to tackle a good portion of the high cost of higher education
tackle medical costs. It influences the cost of everything in the US. If you
earn $50,000 a year the university is paying another $10,000 - 20,000 for
insurance.

~~~
barrkel
This is of course self-reinforcing. The reason they want lots of donations
from alumni is because it increases profits. But they can only get those
donations if the alumni have very fond memories of college. Thus they need to
spend donated money on making students feel like they're part of something
special, something they'd want to contribute back to. And that increases costs
further.

(I went to a humble college, got a degree that doesn't do much more than tick
boxes on job or visa applications, and enhanced it with self-study to get an
effective education. I feel no obligation to send donations back to my
college.)

~~~
u801e
I have no inclination to donate back to the university I attended since I paid
more than enough in tuition. Also, as an out of state student at the time, the
tuition and fees I paid was used, in part, to subsidize in state student
costs.

------
sillysaurus3
How do you skip college and invest the tuition in the S&P 500?

Ah, you can't: _Of course, lenders won 't give out large loans for an
individual to skip college and dump tuition into the stock market, this is
just a hypothetical scenario._

So this article is unrealistic.

~~~
twic
This is the kicker. Similarly, the stock market outperforms property on the
regular, but banks won't lend you hundreds of thousands of beans to get
involved in the stock market, when they'll fall over themselves to give you a
mortgage.

~~~
eqmvii
Because repossessing property is (statistically speaking) more likely to work
out for the bank than repossessing whatever random stocks an investor decided
were a sure thing. That's why margin accounts aren't available to everyone,
and margin calls kick in to protect the investment firm before total loss.

Housing is volatile, but stocks are significantly more so, and with
significantly more near-total losses over time.

~~~
kelnos
In addition to that, the bank knows what they get back if you default on your
loan: your house. If you want to invest in the market, the bank has no idea
what stocks or funds you'll be investing in, and can't even remotely guess at
what they'll get back if you default.

~~~
aianus
When you borrow money to invest in stocks the stocks are in an account that
the bank can seize when the net value is low enough. It's much much easier to
repossess than an illiquid house.

------
splitrocket
"Probably the most dangerous thing about college education, at least in my own
case, is that it enables my tendency to over-intellectualize stuff, to get
lost in abstract arguments inside my head instead of simply paying attention
to what's going on right in front of me. Paying attention to what's going on
inside me. As I'm sure you guys know by now, it is extremely difficult to stay
alert and attentive instead of getting hypnotized by the constant monologue
inside your own head. Twenty years after my own graduation, I have come 2
gradually to understand that the liberal-arts cliché about “teaching you how
to think” is actually shorthand for a much deeper, more serious idea:
“Learning how to think” really means learning how to exercise some control
over how and what you think. It means being conscious and aware enough to
choose what you pay attention to and to choose how you construct meaning from
experience. Because if you cannot exercise this kind of choice in adult life,
you will be totally hosed. Think of the old cliché about “the mind being an
excellent servant but a terrible master.” This, like many clichés, so lame and
unexciting on the surface, actually expresses a great and terrible truth. It
is not the least bit coincidental that adults who commit suicide with firearms
almost always shoot themselves in the head. And the truth is that most of
these suicides are actually dead long before they pull the trigger. And I
submit that this is what the real, no-bull- value of your liberal-arts
education is supposed to be about: How to keep from going through your
comfortable, prosperous, respectable adult life dead, unconscious, a slave to
your head and to your natural default-setting of being uniquely, completely,
imperially alone, day in and day out."

David Foster Wallace: This is Water
[http://www.metastatic.org/text/This%20is%20Water.pdf](http://www.metastatic.org/text/This%20is%20Water.pdf)

~~~
sillysaurus3
In hindsight much of Wallace's work seems like a plea for help. The paragraph
you quoted might've been how he wishes he could've ended up.

~~~
Baeocystin
FWIW, I agree with you. I loved his essays, but the pain behind them has only
become clearer with time.

------
whyenot
Tuition at a California State University is only $5,472 a year. That is pretty
darn close to free. Many other state schools have low tuition. Nearly 500,000
students in California attend a CSU. Almost twice as many students as attend a
UC school. Yet, in these kind of analyses, these low cost state schools always
seem to get the shaft when in fact they educate a tremendous number of
students at very low cost.

[https://www.nytimes.com/2017/01/18/opinion/sunday/americas-g...](https://www.nytimes.com/2017/01/18/opinion/sunday/americas-
great-working-class-colleges.html)

~~~
IkmoIkmo
There's still opportunity costs to consider. For example, in the Netherlands
tuition is about 2k a year (the rest is subsidised). Education is top-notch
(pretty much all of our universities are top 5% worldwide), although we don't
have any of the top 0.1% institutions that educate a relative handful of
students. (e.g. Harvard with 2k students per year)

But despite cheap tuition fees, the average person would spend 5 years on a 4
year degree. Spending 7 years for a Masters' is not uncommon, i.e. starting at
age 18 and completing your education at age 25.

The real cost then isn't tuition, it's opportunity costs. When you can make
15x your tuition-fees a year, but you can't because you're studying full-time,
that's the real cost.

And 7 years at a Dutch GDP of around 45k is an economic production that's
nothing to be scoffed at, exceeding 300k. Of course, a high-school graduate's
income isn't average, but on the other hand considering 'only' 13% of the kids
in our educational system end up doing a Master's degree, examining the kids
who'd otherwise go to university are likely to have above-average earning
potential. All in all, it's not crazy to assume we're looking at a minimum
cost of 100k.

~~~
magnetic
> Education is top-notch (pretty much all of our universities are top 5%
> worldwide)

How is that top 5% computed? Do you have a source?

~~~
IkmoIkmo
I made that up, so feel free to take it with a huge grain of salt. But I've
worked in higher education, wrote my thesis on it and follow it still with a
lot of interest, so the ballpark figure is probably roughly accurate.

I'd like to send you sources but honestly ranking education objectively is
tremendously difficult. There are lots of different rankings that measure
things you may not, at all, consider to be indicative.

For example, most rankings are heavily weighed towards citations and proxies
thereof. e.g. Chomsky is one of the most rated academics ever, so if he moves
from MIT to your university, your rankings blow up. Despite the fact he
doesn't teach any classes, and the number of typical students that actually
benefit from his (previous) research being associated with your university is
close to zero. Particularly the type of students we're talking about: those
who do a 3 or 4 year bachelor, then go to work. Lots of universities have high
rankings because a handful of academic experts in their field are associated
to the institution and put out innovative research, which usually means very
little to the undergrads's education or development. Look into the
methodology, it's usually a bit of a joke. It's the reason universities can
rank from 40 to 140 to 40 within a a span of 3 years, despite no student
having noticed any difference in the quality of their education. In short,
university rankings are more about research than about education, which is
fine, but the problem is they're often used by would-be students when choosing
where they can get the best education. (or rather, which institution looks
best on their resume, I guess). And I'm primarily talking about students who
get a degree and then go back to work, those pursuing academic/research
careers is another story, but it's a minority the article doesn't really focus
on.

But that's just rankings. Even if you had good rankings, just counting the
number of universities worldwide is tricky and runs into different ideas of
what constitutes a university.

But to give you a sense: if you look at the QS or THE rankings which are quite
popular, all universities in the Netherlands rank in the top 300. The US alone
has more than 3000 universities, worldwide there are over 25000.

So in short and all honesty: made up the figure, I do think it's roughly
accurate, I don't think there's great sources/metrics which reliable rank
educational quality worldwide, and the metrics I don't really put much faith
in would at least rank the 13 universities we have within the top 5%.

------
tvural
This reminds me of Robin Hanson's criticism of medical spending - exercise and
diet are much better predictors of health than money spent on healthcare,
meaning that there's a large amount of waste in the system. I suspect
something similar here, the amount of money people spend on education is
uncorrelated from what they get out of it. The other factors, like whether you
went to a top school and what you did in college dominate the ROI. There is a
tendency to treat education as an insurance policy, where all you have to do
is buy in, and you are somehow protected from falling through the cracks in
society. It seems that college as an insurance policy has stopped working if
it ever did work, and it exposes a fact that's somewhat uncomfortable, you
can't just pay these colleges money to have your career set, you have to
figure out what to do yourself.

~~~
ruste
I wonder if it's reasonable to go even further and say there's a negative
correlation between spending and what someone gets out of college. I'd say
that's certainly the case when restricted to certain fields. In this case I
definitely do not think correlation has anything to do with causation though.

------
adpoe
Opinion:

Just like the stock market, college is also an investment. There is risk
involved.

One of the main problems is that this is NOT communicated well. (If it all.)

Too many people take on huge long-shot risks that are unlikely to pay off.

Yes, if you get an English degree and become a professional writer selling
books and screenplays at $1MM a pop -- that's an awesome and incredible gig.
But not many people can get it. The $30k - $150k for that degree is a very
risky investment.

On the other hand, spending $30k for a degree in engineering, CS, physics,
math, etc... is much less risky. And it's a better investment. However--even
in this case--maybe it's not worth the extra $100k for a private college.
Maybe Big State U is good enough, and a safer bet with similar outcomes.

When I first went to college, everyone around me said: "it doesn't matter what
you major in, just get a degree and you'll be fine." They were wrong. It
doesn't work that way anymore (if it ever did).

Communicating this risk/reward tradeoff, and what it means for one's future,
is the source of most college-related money problems.

\--- Personal anecdote: I have a CS degree, but started out in a liberal arts
discipline. So those experiences form my opinions.

~~~
virmundi
You can't discharge college loans if taken from a federal program. Unlike
other ventures where you can pay pennies on the dollar when you bet and lose,
such loans are pursued by the full force of the United States.

~~~
learc83
They also come with income based repayment plans that mean you'll never have
to pay more than 10% of your discretionary income (income above 10% of the
poverty line), and they are cancelled after 20 years of payment.

~~~
virmundi
That is still a reasonable period of time to make them low risk. So we get a
market flooded by cash. And now due the ubiquity of degrees, many are
worthless but necessary. They are becoming the high school degree.

~~~
learc83
The risk doesn't really have anything to do with "a market flooded by cash".

The government distributes loans because legislation forces them to--not
because they are low risk--and the money comes directly from the department of
education not private investments. Private loans are only about 7% of the loan
disbursements.

------
Houshalter
This ignores selection effects. The kinds of people that go to college would
probably earn more _even if they didn 't go to college_. It's confusing
correlation and causation.

Even if college does increase earnings some, there's societal effects. If we
eliminated all college education, employers wouldn't be able to rely on that
as certification. And so you wouldn't have to compete against that if you
chose not to go to college.

------
dsjoerg
This article doesn't explain why we should believe that stockmarket
performance, going forward, will be anything like the S&P's performance from
1993 to now.

It's also not clear why we should believe the Payscale College ROI figures. I
clicked around a bunch and couldn't find any description of their actual
methodology for computing it. In particular, before we can take it seriously
we need to know how well they've done at estimating the true counterfactual
earnings of people who could have gone to University X but did not. And that's
really hard to do! (Without multiple universes handy)

~~~
brians
Well, you could repeat it for all the 24-year periods from 1917 through now. I
wouldn't expect very different results, though accounting for college
deferments will be fun.

~~~
dsjoerg
that's effectively only ~4 observations then (100/24). i wouldn't want to make
a very important life decision based on data from only 4 observations.

with only 4 observations, "common sense" and other forms of first-principles
reasoning are much more important than the 4 data points. also one should
consider data from other countries and other historical eras.

~~~
FalcorTheDog
It's not though. There are ~75 24-year windows you can use between 1913 and
today. I suspect you will find similar results with almost all of those
windows. Obviously past performance is not an indicator of the future, but 75
data points is a pretty decent amount of data.

~~~
FalcorTheDog
Following up, I plugged in the data from here into Excel:
[http://www.multpl.com/s-p-500-historical-prices/table/by-
yea...](http://www.multpl.com/s-p-500-historical-prices/table/by-year)

Some observations:

    
    
      -there are 122 24-year windows in the dataset
      -not a single 24-year period had a negative return
      -the lowest average return for a 24-year window was 0.15% in the window from 1874-1897
      -there have been only two 24-year windows since 1876 with average annualized returns less than 2%
      -every window since 1912 has been at least 3%
      -every window since 1968 has been at least 7.1% (the author's assumption)
      -every window since 1971 has been at least 8%
    

Note that this doesn't take inflation into account, but also does not factor
in the returns from reinvested dividends. Those effects would probably
approximately cancel each other out, but hard to say.

------
iron0012
There is a massive body of existing literature (the kind that's published in
peer reviewed journals) examining the returns to education. A lot of that
research, maybe most of it, suggests that going to college is a very, very
good idea financially.

PLEASE, before you let a blog post dictate your position on this issue--and
certainly before you recommend to an impressionable 17-18 year old that they
not go to college--take the time to properly educate yourself.

~~~
varenc
I'm open to believing you, but would love some references on this!

~~~
iron0012
[https://scholar.google.com/](https://scholar.google.com/)

The magic phrase to locate the literature you're interested in is "returns to
education"

------
thefourthchime
TL;DR; Didn't go to college, at first people thought it was a liability, but
after working my way up people are blown away.

Here is my experience:

Dad got a masters in Math, couldn't get a job, became a Taxi driver and then
took 6mo of community college and got a job writing BASIC in the mid 1980s.

Dad didn't encourage me to go to college, I was a bad student, but taught
myself coding and really liked it. Had a C average in high school.

Got a job at the small company my dad worked at, got paid $7 an hour, then $14
an hour the next year.

Decided I needed to go to college to really make it, put my resume out for
fun. Got an offer for $65k to work at Microsoft via a recruiter. This was in
1998.

Been working since, learning, making contacts. I make $180k with bonuses now
at a Fortune 100 company, I could work into upper management as many have, but
I like coding, hate email, hate meetings. I have a Director title.

When people hear that I don't have a college education they are blown away.

~~~
MarkMc
That's a great story - you obviously have a natural talent for coding. But
it's still difficult to assess the counterfactual: Perhaps if you had gone to
college you would now be earning $250k with bonuses at Google?

~~~
thefourthchime
Shit, maybe if would make more as a country singer. I play a little guitar
too.

In seriousness, maybe; but unless I'm a real genius, not likely. The route for
me to make a lot more money is in management or startig my own business, both
I've never had interest in. College is unlikely to change that.

------
cperciva
It's even worse than that: Colleges draw their applicants from a pool who are
likely to earn above-average incomes to begin with.

------
jonathankoren
Only an educated man with a high wage job would come up with this crap. It fit
the old template of, "Only suckers do what's expected. I'm too smart for that.
Here's my plan that conveniently ignores all practicalities."

Putting aside the gatekeeping that prevents non-college educated people into
high wage jobs. Putting aside the unskilled jobs have seen real earnings
decline over the past decades. Putting aside that skilled non-college jobs
actually require post-high-school education. One huge reason why people who
don't go to college don't do this is... (Wait for it...) _They don 't have the
money to invest._

The reason why people graduate from college with a load of debt, is because
they didn't have the money to pay for college. If they had the money to pay
for college, they wouldn't have the debt. This is obvious.

So where are these people going to get the money to invest? A bank? No one is
going to entrust money to a high school grad to invest. For gatekeeping
reasons, if no other. Second, why would a bank make such a loan, since they
have their own investment arm? This makes no sense, and has no public benefit.

We know this doesn't work, because you can simply ask your older fry cook at
McDonald's if they're raking in the dough with their investments.

------
fastaguy88
This article, and the one it cites, have two serious flaws: (1) Their "ROI"
for college is based on some average of high-school earnings. But average
high-school only earnings is the wrong number. We don't care about what 50-65
year-old union employees with a high-school education are getting today, we
care about earnings over the next 20 years for today's high-achool, non-
college, graduate. That number is dropping, as the number of good paying high-
school only jobs decreases. Jobs that a generation ago only required a high-
school education now want college (deservedly or not).

(2) The distribution of ROI is based on numbers of institutions, not numbers
of graduates. There are far more students graduating from large, cheaper,
public schools than Harvard or Princeton, but there are many more small
private schools in the distribution of costs. But ROI is not based on a
distribution of graduates, it is based on a distribution of schools.

While it does not make sense to take out large loans to finance poor-paying
occupations, and it certainly makes more sense to spend less money on college,
these articles are very misleading.

------
GCA10
This is a provocative but deeply misleading calculation. It assumes that our
no-college-S&P-investor is a stoic enough soul to live on truck drivers' wages
for 24 years, so that the stock market can do its magic, before collecting
what genuinely would be a giant windfall.

That's really hard to imagine. Missing out on the more robust income of a
college graduate in your late-20s and early-30s means making sacrifices in
terms of the clothes you wear, the vacations you take, the car you drive, the
type of person who's likely to marry you; your dental care; your children's
schooling, etc., etc.

The temptation to start plucking out money from the S&P honeypot -- in the
name of having a better life -- would be fierce. Nothing wrong with that. But
if that big knot of savings is used to help pay for a better standard of
living at age 25, or 29, or 34, then that means settling for a zero or
negative return for that segment of money going forward. Goodbye to the fabled
7.1%.

Bear in mind, too, that the stock market doesn't deliver 7.1%, year after
year, with the happy predictability of a government bond. If your start year
was 1999 ... and you waited 10 years to see how you were doing, you'd be
looking at about a 30% drop in your portfolio. (You would have caught both the
dot-com mess and the bankster mess.)
[http://www.multpl.com/s-p-500-historical-prices/table/by-
yea...](http://www.multpl.com/s-p-500-historical-prices/table/by-year)

It's easy, with hindsight, to say: "Just wait it out." But at the time, the
pressure to get out of stocks is intense. And the anxiety about having bet
your lifelong well-being on a market index going haywire would be
excruciating.

~~~
throwawayjava
_> ...is a stoic enough soul to live on truck drivers' wages for 24 years_

Truck drivers make decent money. $40k, usually closer to $50k+ if you're
experienced without accidents. Much more importantly, you don't need to be in
an office building in a high rent area every morning. If your spouse also
works, those salaries buy a _REALLY_ nice house in Nowhere, MS/WI/KS!

"Has the nerve and patience" might be a better way of saying it for truck
drivers, at least. The job's downsides are the stress, risk of death/injury,
and the crap hours.

 _> The temptation to start plucking out money from the S&P honeypot -- in the
name of having a better life_

And "temptation for a better life" isn't the only source of risk.

A lot of low-skill but decent-paying jobs are extremely vulnerable to economic
cycles.

"Making the mortgage that was comfortable before the market crash / paying for
medical bills that accrued while my insurance lapsed" can make a life time's
worth of savings disappear in a matter of months.

~~~
tutufan
Possibly true, but I cannot think of a worse occupation to get into right now,
with self-driving trucks on the horizon.

(Also, I have a trucker in the family, and the financials are harder than they
look.)

~~~
throwawayjava
_> but I cannot think of a worse occupation to get into right now, with self-
driving trucks on the horizon_

I don't think this is necessarily true. Fully self-driving trucks are at least
a generation out. I wouldn't seek a huge multi-decade capital investment into
trucking for sure, but individual drivers aren't terribly exposed to such
long-term risks.

And even if SDF gets here sooner than expected, if you work for a company it's
kinda whatever. Getting a CDL is a pretty small up-front investment compared
to most jobs that both pay well and are in demand. As long as you're not an
independent operator (=capital investment), you're not really making a huge
investment aside from your time (for which you're well-compensated after the
first year or so).

 _> (Also, I have a trucker in the family, and the financials are harder than
they look.)_

Certainly for OTR and especially for independent operators. And like I
mentioned, injury/accident/economic downturn are huge threats. Trucking with a
second family income remains a viable path to a middle class lifestyle, but
you're right -- there's a good reason a lot of people choose other paths.

------
Alex3917
Skipping all of school has even higher returns. If you just invested all the
money that would normally go to pay for your K-12 school and college each
year, then by age 25 or so you'd have enough money to retire.

The problem is that even if your parents home school you, they're generally
not allowed to just not pay millage.

~~~
ThrustVectoring
The core problem is that K-12 schooling largely isn't for the benefit of
children, but for the state. That's why the state pays for it and not private
tutoring in child-lead learning. It's awfully convenient to have a populace
indoctrinated into a shared set of cultural norms.

~~~
ajdlinux
It's awfully convenient for a _society_ to have a populace with a shared set
of cultural norms.

------
pfarnsworth
My tuition costs in 1995 were $2500/year for an engineering degree. So given
the numbers the OP used, he would be wrong.

In today's environment, however, I might be inclined to agree. When I went to
school, I could get a minimum wage job for the summer, and pay for tuition and
dorm fees for the year. Education costs are wildly out of whack and something
needs to be done to cut down these costs, because at this rate, I will NOT
send my two kids to college. I'll tell them to open up a business or
something, because it's simply not worth it.

~~~
smt88
You should check the ROI on starting a business. That's one of the most common
ways to lose your entire investment.

If your kids are smart, they'll likely have little trouble going somewhere for
free. Even Norway or Germany would be options.

------
roguecoder
I do notice that this doesn't take into account race and gender. The premium
White and Asian men get from a college degree are higher than for any other
group (citation:
[http://images.dailykos.com/images/125386/large/wage_gap_race...](http://images.dailykos.com/images/125386/large/wage_gap_race_gender_education.jpg?1421852707))
This could be true for some people but not others, in predictable ways.

~~~
trendia
This assumes that all races and genders get advanced degrees in the same
fields, which isn't true.

------
heynk
Definitely an interesting thought experiment. This article assumes 7.1%
annually, and gets that by choosing an arbitrary start and end date of stock
returns. In reality, it seems to be more like ~4%, which makes this conclusion
much different.

[http://www.nytimes.com/interactive/2011/01/02/business/20110...](http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-
graphic.html?_r=0)

~~~
rileymat2
4% is inflation adjusted, it is not clear to me which is correct to compare to
payscale numbers.

------
IanCal
An enormous missing part of this seems to be that you are comparing the
"return" of something that _pays annually_ and a lump sum result at the end of
the 20 years.

You'd need to compare it to an investment where you're also withdrawing the
difference with the higher salary per year. Or, equivalently for this, have
the extra money earned paid into investments each year.

Really, part of what this is doing is comparing invested money to non-invested
money.

Edit - for a quick figure, let's assume you're getting the equivalent of a 4%
annualised return on a $100k investment. That means you're earning $219k over
the 20 years more, for simplicity I'm going to assume that's an even $11k each
year. Our 7% example would be $507k over 24 years, invested all up front.

Instead of $219k, we're actually at $480k.

The two line up once you hit roughly 22 years in the workforce, at 23 you're
slightly ahead. By 40 years of working, investing upfront is $400k behind, at
a little over $2.3M vs ~$1.9M

A way of phrasing the question to ignore working / etc, is which works out
better

$X invested at $Y as a lump sum.

$Z invested each year at $Y.

The question the article appears to ask is the better of

$X invested at $Y as a lump sum.

$Z kept as cash each year.

------
alkonaut
First of all, instead of going all the way to free higher education in one go,
try a better loan system.

Basically since educated youth is a national interest, set up an authority
that lends money to students with _very_ reasonable interest rates and
repayment.

Interest rate can be set at the inflation level plus a small margin, repayment
is set as a fraction of annual income, and the loans should not count against
future credit. Remaining debt at 65 is written off and absorbed by the public.

This is how I funded my education (or rather, the rent/food/books as there was
no tuition).

~~~
jrs95
And base the rate off of the major. The lower your expected earnings, the
higher your interest rate. Should help deter some stupidity.

------
ChuckMcM
The analysis has a huge gap in that it looks only a pay differences and not at
employment differences. The pay gap is large (37K vs 71K) [1] and the
unemployment gap is over 2 percentage points [2]. Being unemployed for 6
months wipes out most of the nominal 'gain' by investing your tuition in
equities. (and of course it depends on when you invest etc etc).

[1]
[https://www.bls.gov/emp/ep_table_education_summary.htm](https://www.bls.gov/emp/ep_table_education_summary.htm)

[2]
[https://www.bls.gov/emp/ep_chart_001.htm](https://www.bls.gov/emp/ep_chart_001.htm)

------
bhouston
Some jobs are only accessible with a college degree (dental hygenist, etc.) If
you didn't have a college degree you couldn't get access to those jobs and you
then may have a more competitive job market for those jobs that do not require
a college degree. Thus without college there would be more people in the
bottom pool of job seekers thus increasing competition and likely lowering
wages in that bottom pool, and it will likely raise the wages of those who do
have college education when they are seeking jobs that require that degree.

It sort of seems like we have too many educated people and not enough good
jobs that require that education. That seems like the fundamental problem.

------
whiskers08xmt
I wonder how different the ROI is between college degrees. I could see a large
number of degrees having practically no ROI, compared to just entering the
labor market, while others will be more substantial.

~~~
apatap
The source referenced in the website also provides ROI statistics by major and
job:

[http://www.payscale.com/college-roi/major#](http://www.payscale.com/college-
roi/major#)

[http://www.payscale.com/college-roi/job](http://www.payscale.com/college-
roi/job)

------
soup10
If that isn't evidence for capitalism being a joke I don't know what is. By
all means go to college, get an education, all so vultures can use your brain
to enrich themselves while paying the minimum.

To say nothing of the finance industry which has made an art of skimming off
the top.

------
rsp1984
This whole discussion is very US-centric.

When looking beyond US borders it turns out you can have it both ways: Get a
degree from a very good university without paying tuition fees (or at least
not much).

For example in Germany international students can study basically for free.
It's similar in other EU countries and the universities are typically _much_
better than US state universities. I truly wonder why not more Americans are
taking advantage of this.

------
codecamper
I found that investing in bitcoin has outperformed the average post college
job. (I conducted my research by comparing 20,000 invested in a college in
2010 vs 20,000 invested into bitcoin in 2010.)

~~~
FLUX-YOU
Buying small amounts of many new crypto coins in the hope that some of them
goes big is probably possible as well.

~~~
WrtCdEvrydy
I would not risk this though, the failure rate of most new crypto is close to
80% to 90%. Litecoin and Ethereum are the outliers, not the most common cases.

~~~
bbcbasic
Hence "small", which I took to mean "amount you can afford to lose"

------
cbhl
I wonder how much of this is just a result of US tuition costs being out of
control.

Does this analysis hold for coding bootcamps? What about Canadian colleges
(say, Waterloo, Queens or Toronto)? What about community college? Restricted
to only CS/EE degrees? Becoming a doctor? Does it account for the probability
of dropping out of various college progams?

~~~
randomdata
_> What about Canadian colleges_

In Canada, no meaningful rise in income due to university attainment has
occurred[1]. For young men in particular, increasing rates of university
attainment has shown _lower_ real wages[2]. No need for 7% stock market
returns to try and make up for lost wages as seen in the article. You could
technically put your equivalent student costs into a low-interest savings
account and come out further ahead.

[1]
[http://www.statcan.gc.ca/pub/11-631-x/2016002/c-g06-eng.png](http://www.statcan.gc.ca/pub/11-631-x/2016002/c-g06-eng.png)

[2]
[http://www.statcan.gc.ca/pub/11-631-x/2016002/c-g07-eng.png](http://www.statcan.gc.ca/pub/11-631-x/2016002/c-g07-eng.png)

------
avallark
The cornerstone of this statistical conclusion is that you will invest the
money you will use for college, however the fact is if you try and loan out
the money that you need to go to college for any other purpose, that loan will
be a lot more expensive that what you would get from a student loan. Also, the
chances of you getting that loan is slim.

If you already have that kind of money with you and you are going to invest
you own money for college then these arguments have a little more statistical
weight. However, if you have that kind of money, you are probably already rich
and wealthy at which point, you already have a good business/income and this
delta that you would invest into that business will not yield you
significantly more income than what you already have. At this point, its still
better to go get a college degree.

------
davismwfl
Not saying anyone going to college isn't good (I have a son going to college
now). But frankly is this really surprising?

I have known this for years. I have a college education but NEVER advertise it
because it has absolutely ZERO to do with my career. And I rarely have told
anyone that I graduated. Even straight out of school I relied on my capability
not an education and that capability got me a better job offer at a higher
salary then I could have reasonably expected if I claimed a new grad.

Not saying school is bad or not worthwhile, there are things I wish I would've
taken the time to learn earlier but the reality is at some point it becomes
useless compared to if you can do the job. When I hire, I absolutely never
care about the education except that if you have one I expect certain answers
that if you have experience I wouldn't expect.

------
lazyjones
\- educated people live longer (Harvard study etc.
[http://www.cbc.ca/news/technology/educated-people-live-
longe...](http://www.cbc.ca/news/technology/educated-people-live-longer-
harvard-study-says-1.708657))

\- the S&P is possibly driven by people who went to college and started
companies; if nobody did that, where would it be?

\- average results tell the individual nothing about his/her best choice, so
the headline is a bit detrimental. There are successful UHNW entrepreneurs
both with and without college degrees and plenty of unsuccessful people with
college degrees

\- note that Payscale uses median pay to calculate ROI from colleges; all
extremely successful people with very high incomes are not reflected in the
data.

~~~
wayn3
they are reflected in the data. as outliers.

~~~
Scea91
Does it seem reasonable to you to ignore every $ of income which is over
median? Perhaps capping the income instead and taking the average could be
more informative.

~~~
wayn3
Can you rephrase that? I don't get what you're trying to say.

------
jondubois
Our economic system is currently over-delivering on solutions to simple
problems and not delivering enough when it comes to solutions to difficult
problems.

Instead of shifting their efforts towards solving difficult problems (to add
value), companies today prefer to focus on already-solved simple problems and
to focus on optimizing existing solutions (to capture value from competitors);
what that means is that humans collectively spend more effort merely competing
against each other (zero-sum games) instead of collaborating to create new
value.

If companies don't invest more money into finding solutions to difficult
problems, the skills required to solve those problems will lose value on the
marketplace - And by association, the education required to attain those
skills will also lose value.

------
damm
Unfortunately he might have a good point; but the path he took doesn't really
show it.

It would be more difficult because you should be looking at the cost of
education; the average income of the person who has graduated.

Unfortunately you will need to do something for each skin color because they
discriminate against minorities and other different variations. (Not being
straight; too flamboyant, etc)

discrimination is a very big thing in America; lots of false sense of
entitlement.

No need to call it racism; it's much bigger than that.

> Footnote; I have a form of Autism that makes lenders not want to work with
> me.

Happens in all shapes and forms. If you are a woman or if you are black; if
you go to a Chinese banker you will have better luck as a asian or white
person.

Something we need to work on; it's going to take hundreds of years and we need
to keep at it.

------
dingo_bat
The problem is I don't have that money to invest. I'm going to take a loan,
which is only available for college. So the choice becomes "don't go to
college and earn zero" or "go to college with bank's $ and earn a nice salary
later".

------
dorianm
> Only ~10% of the ~1250 colleges listed on Payscale generate an average ROI
> higher than the 7.1% generated by foregoing college and investing that money

Most of anything is not great by definition :)

It's all really funny when schools like 42 are free (42 is a private
university in France)

------
rphlx
One obvious issue with this post is that it uses historical S&P500 returns
from a period of high performance. To be predictive, it would have been
helpful to also examine expected future returns for the _next_ 10-20 years,
which are generally considered to be lower (based on valuation metrics such as
mkt cap to GDP, P/B, CAPE10, etc). To put a number on that, perhaps 4-6%
nominal, instead of 7%+ from 1993-2017.

It would have been helpful to model tax effects as well. Those generally do
favor investment over labor, but with a positive first derivative (the top US
cap gains tax rates are rising much faster than labor rates, e.g. from 15% to
23.8% from 2012 to 2017).

------
dkarapetyan
Went to community college then went to university for upper division classes.
I'd say it was worthwhile investment and was pretty cheap.

------
rllin
The price of milk and college tuition have diverged. The quality of neither
have increased.

Milk is subsidized on the supply side while college tuition is subsidized on
the demand side.

My biggest gripe with Bernie was his free tuition rant that was scant on
details.

------
hutch120
There is something seriously wrong with society when accountants run the
world. Money is a tool, education provides long term wealth and stability.
Providing fuel for people considering skipping collage is very short sighted.

~~~
eeZah7Ux
It's saddening, yet unsurprising, that the whole discussion here on HN is
around wealth and few people mentioned learning minor skills like time
management and writing or partying and making friends.

In other countries, universities are/were usually seen as a way to cultivate
your mind.

Quoting wikipedia on "culture":

The modern term "culture" is based on a term used by the Ancient Roman orator
Cicero in his Tusculanae Disputationes, where he wrote of a cultivation of the
soul or "cultura animi,"[2] using an agricultural metaphor for the development
of a philosophical soul, understood teleologically as the highest possible
ideal for human development.

------
Glyptodon
So... I know the author put a note about it being hypothetical, but I think it
bears repeating: I don't believe that most of us who go/went to college would
have anywhere near the means to invest what tuition costs if we chose not to
attend. Which makes the premise seem only applicable to the wealthy.

I'm far from sold on the necessity of attending college, but
befrickenbejeezus, if somebody can study engineering or computer science, get
decent grades, and come out with a little debt, it's got to beat working
multiple minimum wages jobs for the rest of their life.

------
nfriedly
The down side of this is that most kids are spending money they don't actually
have - the loans are for college only, so investing it isn't an option.

I'm personally very grateful that I was able to graduate without any debt.
Things that helped me included:

* Starting at a community college (2 years @ ~$3k/yr) then switching to a state school (3 years @ ~$10k/yr)

* Grants and scholarships that paid for around 1/3 of my costs

* Money from my parents (~$2k)

* Freelancing at $45/hr+

* Getting married (because the government stopped counting my parents money against me, and so I was eligible for more grant money)

------
AstralStorm
On average, US is the happiest country in the world. /s

Use proper statistics that are geared towards heavy tailed distributions which
income adheres to.

A good start would be a median.

Not too mention pure ROI ignores the fact that on the stock market you lose
everything, investing in education is supposed to result in intangibles like
_gasp_ better education and adaptability to the market. In other words, lower
risk.

2% gain for risk of losing everything in one bad go is a bad deal.

Of course just like bad investments in the market there are also bad
investments in education.

------
wink
Totally different data point: I've studied in Germany (Computer Science) and
it was basically free (had to pay a few bucks for a few semesters, let's say
below 3000 EUR in total) - and I still sometimes wonder if it was worth it.

Why? I've never worked for a company that had the slightest interest in my CS
degree (it's a german diploma, roughly equivalent to a MSc). Maybe at some
point in the future I'll try to work for one where they prefer to tick this
box off - but right now in terms of money it's been useless. All my coworkers
in these companies are paid roughly the same amount, or if not, it's different
factors, but not the degree. I am also not a recent graduate (2010) but
interviews in different companies than the ones I worked on showed a general
lack of interest in formal education, but I guess getting an intro by someone
working there or knowing you from conferences/meetups already helps.

But why am I debating? I lost time studying and working part-time where I
could've worked full-time already. I don't want to question the validity of
this CS degree, but I was working as a programmer already before I started.

------
foolrush
When all you have is Capitalism, everything is a market.

What sort of dark world are we living in where we are discouraging people from
studying areas that don't have a monitary return on investment?

~~~
FLUX-YOU
We don't have a system to give everyone free food, shelter, and clothes. Those
are still paid for and you need to work at some level to get those things.

Our dark world looks dark because none of us have lived through millennia

------
Steeeve
Skip college, invest in stock market.

People love to chart out how great it is to invest in the stock market and how
historically it generates great returns. Nobody seems to remember everyone
around them losing enormous amounts of money whenever the economy tanks.

Where were all those 7.1% earnings going when the banks were getting bailed
out and people were camping on wall street because their houses were
foreclosed? Who pays that 7.1% that everybody wins every year? It must come
from tax dollars if nobody is losing any money in the market. Or maybe so much
money is being generated from all that business that everything is just dandy
and there's more money than there used to be. Or maybe the big investment
firms are just handing it out to everybody who participates in the market.

I don't know and I guess it doesn't matter. I should tell my kids to forget
college and invest instead. They can learn about how it works as they go.
Heck, high school is definitely more advanced than when I went. Maybe they
teach kids how to invest now. It's so easy to make 7.1% every year that I'm
sure the old shop teacher can cover it since they killed the shop program due
to lack of funding. I guess the state didn't know that you just had to put
your money in the market to have it grow 7.1% every year. Someone should let
them know.

~~~
goobynight
You know that 7.1% average doesn't mean 7.1% every year.

Anyone that didn't panic sell during the crash has recovered.

There are ways to handle the risk of a crash. #1 is to not play the high risk-
high reward game if you are near retirement or already in retirement.

You can't handle big swings at that point, since recovery could take 10 years
and you're already 70.

#2 is to have a liquid emergency fund, so you don't have to sell low if you
have a big problem during a crash.

#3 is to not panic sell during the crash...

~~~
Steeeve
> Anyone that didn't panic sell during the crash has recovered.

What does 500 shares of Pets.com sell for these days?

All the people who had pensions heavily invested in Bear Stearns High-Grade
Structured Credit Enhanced Leveraged Fund came out OK after a bit of time?

\--- Investment carries risk at all levels. The longer you play the market,
the more likely it is that you'll get burned at some point. Professional
investors can come up with plans to hedge their risk and avoid calamity. Some
of those plans might even work. People who go straight to work out of high
school are not professional investors.

"Panic selling" is not always a choice, and it's not always even possible. And
no, not everybody who lost a boatload of money during any particular crash
ended up OK because they decided to let their investments coast.

~~~
MagnumOpus
You are building strawmen. The suggestion was to "invest into the stock
market", not to "gamble on the single riskiest stock you can find".

If an amateur invests their money into a passive index fund or even a
diversified equity fund like, say, Fidelity Magellan, they would have done
well over any 20-year span. Nuff said.

~~~
Steeeve
Both of the investments I referenced were solid until they weren't.

My adult life has seen 3 major market crashes and a terrible recession. I've
watched neighborhoods go into foreclosures on 80% of their homes. I've had
friends go unemployed for over a year.

When I see people spread investment advice as if there's no downside, I have
to shake my head. There's money to be made in the market, but it's not without
risk.

The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11
in the dotcom crash.

The S&P 500 declined 57% from its high in the housing crash.

The Dow lost more than 5% in a single day at least 5 times in 2008. The next
time one of the major indexes drops 700 points in a day look around and tell
people "you'll be fine if you don't panic sell. Think about it in 20 year
increments. It'll all average out. You're money is all in an index fund,
right? Those are totally safe. You didn't want to spend anything during this
presidential cycle anyways."

Where was the index fund advice in '98? Where were all the people who had well
balanced / well hedged portfolios in '07-'09? I'll tell you where they
weren't. Every house with brown grass that the banks had foreclosed on and
decided not to keep up.

There was an army of day-traders once upon a time not all that long ago that
blew all kinds of sunshine up people's asses about investments. There's no
reason to. People who have the money to can invest if they want and if they do
they should learn about the risks and ask the people who are giving them
advice how they fared during the crashes. If those advisors don't admit it was
hairy and ridiculously stressful, they are lying through their teeth.

Index fund advice became widespread after '08\. Now Black Rock, State Street,
and Vanguard own majority stock in 440 S&P companies. You aren't invested in
the S&P500 anymore. You are invested in BR/SS/VG management. Who aren't
incentivized towards the interest of any particular firm. What happens as
these funds grow? If investors herd to passively managed funds, what's the
outcome? Faster cycles. The indexes do more securities lending, which makes
them less liquid come crash time. Do investors know that these funds will have
liquidity problems if the market goes belly up? A whole shitload of people are
going to learn the term "halting redemptions" really quickly. Do investors
realize that the growth of passive investment increases anti-competitive
behavior? Which isn't good for the economy and sure as shit isn't good for
small investors.

But by all means, keep shilling the passive investment advice as if you've
been doing it for 40 years. Then complain with the rest of the country that
the funds should have been regulated more and how people should have known not
to give that much power to so few companies in the financial sector.

~~~
lodi
> Both of the investments I referenced were solid until they weren't.

No they weren't, not even close. Investing all your money in one company
(whether Pets.com, McDonald's, or any other) is not, and has never been,
"solid". Also, the words " _leveraged_ _hedge_ fund" should tip you off that
that wasn't a low-risk investment.

> When I see people spread investment advice as if there's no downside...

Seriously? No true scotsman... err investor... would imply that the stock
market is risk-free. Of course there's risk! It's literally the second-most
risky/lucrative investment you can make (next to options trading). But the
argument is that investing passively in a well-diversified index shifts most
of that risk away from total loss--as in your examples--and into more
manageable risks, e.g. waiting for the market to recover.

> The S&P 500 declined 57% from its high in the housing crash.

Sure, and then it grew 232% in five years to restore itself.

> You didn't want to spend anything during this presidential cycle anyways.

That's right, we're talking specifically about long-term savings; money that
you're not planning to use in the next 5, maybe 10 years. If you're buying
pets.com stock with next month's rent money, that's on you. Stock market isn't
for everyone; buy T-bills if you want a safer investment.

And by the way, in the context of this thread, money spent on tuition is also
money that you can't spend in this presidential cycle, or the next! The break-
even on something like med-school could easily take three presidencies or
more.

> The Dow lost more than 5% in a single day at least 5 times in 2008. The next
> time one of the major indexes drops 700 points in a day look around and tell
> people "you'll be fine if you don't panic sell.

This literally happened a few weeks ago. I "lost" 9% in a day on news of a
possible Trump impeachment, proceeded to not panic, and then watched my funds
restore themselves.

You can't use people doing the exact opposite of what they're advised to do as
an example of the advice not working.

> Where was the index fund advice in '98? Where were all the people who had
> well balanced / well hedged portfolios in '07-'09?

I guess it was with all the people that still had green grass on their lawns?
The ones that actually followed the advice?

> There was an army of day-traders once upon a time not all that long ago that
> blew all kinds of sunshine up people's asses about investments.

They're still there, and they're still blowing, but that's not the advice
we're talking about in this thread. We're literally talking about sitting on a
passive index for 24 years.

> But by all means, keep shilling the passive investment advice...

Who are we shilling for? Big Passive Investment? Am I getting commissions off
your money?

\---

By the way, I'm interested to know what you propose I do with, say, an
unexpected year-end bonus. Put it in a bank account earning -2% real interest?

~~~
Steeeve
> Seriously? No true scotsman... err investor... would imply that the stock
> market is risk-free.

...

> But the argument is that investing passively in a well-diversified index
> shifts most of that risk away from total loss--as in your examples--and into
> more manageable risks, e.g. waiting for the market to recover.

So you're saying that the only risk is that you might have to wait a few years
to see your money again. That's plain and simply not true. The risk is that
you can lose all of your money. It's spelled out in every prospectus, just
like it spells out that things like turnover costs are not accounted for in
any marketing you've received.

> By the way, I'm interested to know what you propose I do with, say, an
> unexpected year-end bonus. Put it in a bank account earning -2% real
> interest?

My advice is don't put money in places you don't understand. When people give
you the impression that there's no downside to a particular investment they
don't understand it either. If all you understand is that a savings account
won't lose money, then put it in a savings account, but remember that FDIC is
limited insurance.

~~~
lodi
> The risk is that you can lose all of your money. It's spelled out in every
> prospectus...

If you buy equity in a single company, you could lose all of your money if
they go bankrupt. Likewise, if you buy stock in 500 companies, they could all
go bankrupt and you could lose all of your money, but the chances of that kind
of "total loss" happening become astronomically low as your portfolio becomes
more and more diversified.

So yes, there's technically a chance of losing all of your money even when
buying well-diversified index funds, and therefore this risk is listed in all
the relevant legal documents. But I'm not losing any sleep over this
particular category of risk.

> When people give you the impression that there's no downside to a particular
> investment they don't understand it either.

Of course there's a downside; the fundamental property of all investments is
that risk is intrinsically proportional to reward. As a somewhat-rewarding
investment strategy, it's therefore somewhat-risky. Being "locked out" of your
money for a presidential cycle is one of the major downsides that we've both
identified in this strategy.

------
prirun
In 2007, the Fed balance sheet was $858B. From
[http://www.investopedia.com/articles/economics/10/understand...](http://www.investopedia.com/articles/economics/10/understanding-
the-fed-balance-sheet.asp):

"The Fed had assets worth $858 billion on its book in the week ended on Aug 1,
2007 just before the start of the financial crisis"

From [http://www.investopedia.com/insights/how-will-fed-reduce-
bal...](http://www.investopedia.com/insights/how-will-fed-reduce-balance-
sheet/), the Fed now has $4.5 TRILLION in assets. IOW, they have injected
$3.6T into the economy by pushing buttons on computers to buy shit from banks
so banks wouldn't have to keep them on their books and take risks.

These extra dollars have created inflation IMO, including higher college
tuition. Just to get an idea of scale, M1, the US money supply, is $3.4T as of
Apr 2017:
[https://www.federalreserve.gov/releases/h6/current/default.h...](https://www.federalreserve.gov/releases/h6/current/default.htm)

~~~
zzzzzzzza
Have created infaltion IMO? Have you looked at the rate of inflation in the US
since 2007? For the most part, well under 2%, which is the Fed's mandate and a
healthy level of inflation.

------
intrasight
I think the key phrase is "on average". If everyone invested in index funds
instead researching and investing in individual companies, there would be no
market to index. Likewise if everyone did the "average" thing with college -
perhaps skipping it and banking the funds (in an index fund), there would be
no higher education, and no new companies to bring to market.

The only thing worse than anecdotes when making a decision is averages.

------
cletus
The real problem here is the culture of telling people how amazing they are
without them actually having achieved anything, which is really the basis for
the negative views people have about millenials.

For example, the hordes of people who chase their dreams of becoming famous by
acting, singing or, worst of all, just for being famous (aka the Kardashians).
The dark side of all this pops up as many of these people get spit out. Some
turn to drugs (I saw a show about meth usage in Hollywood and there were an
awful lot of addicts of people who moved to LA to pursue their dream).

Not weighing up the cost of college is a big one. It's not that college has to
have a positive ROI. There's something to be said for quality of life and the
actual experience but still, we're asking 18 year olds to be realistic of how
they'll pay for this eventually and that's a lot to ask of an 18 year old who
has been told their entire life to follow their dreams and how amazing they
are.

It's fair enough for something like this post to try and quantify the true
cost of college but don't that having more money and working as a truck driver
is not necessarily a better outcome for that person.

~~~
Rainymood
>The real problem here is the culture of telling people how amazing they are
without them actually having achieved anything, which is really the basis for
the negative views people have about millenials.

But at what point can you laud someone for something? When have you really
"achieved" something? There is (most likely) always someone smarter, faster,
better, or more well-accomplished than you.

------
brians
Its making some assumptions that don't seem right, accounting for people
having safety nets, minimum livable standards, and (for ages 16-66) more
sweat-equity to invest tomorrow. If all that money's going into the stock
market, compounding, how do you eat? Don't you put some of your higher salary
on graduating into the market too?

How long will the no-college person spend unemployed, and will they bounce off
bankruptcy?

------
nibstwo
This is what I did. It worked well (for me). I would recommend it to someone
like me. If you are smart and hard working, University or no University you
will eventually be reasonably successful in the right circumstances. If you
want to do something abstract, like invent or do business, it probably makes
more sense to skip University. If you want to do something more professional
or conventional, like engineering or medicine, you probably have to do
University. For the most part, the implicated disparity is actually priced
into jobs. Part of doctors income implicates paying off tons of debt and
opportunity cost. Likewise, through compounding, hard work and networking, you
can end up with the same net worth by other means. The key is to approach it
in a self aware way. People rarely make any decisions on a purely rational
basis, why start with University? University is easily reversible. Spend less
time worrying about what major you take or college you attend. Spend more time
worrying about being self aware, choosing a life partner and taking care of
your physical and mental health.

------
carrja99
Today this is true more than ever with easy access to tutorials, training
videos, etc. What people really need post-high school is a mentor who either
is willing to take them under their wing or give them guidance on how to
pursue their career.

For me, I feel if I had discovered the many mailing lists and irc channels
that learned through in high school instead of college I could have saved five
years of my time.

------
moultano
No mention of discount rate? I don't think wages appreciate competitively with
the stock market, so time preference strongly biases this.

------
madsbuch
In Denmark the cost of a masters degree is negative 45487.64 USD (That is, you
get paid). And so it should be (at least!) in all countries.

~~~
vilmosi
I doubt it's negative. You can make that money working at McDonald's in
Denmark in 3 years.

I still think college is worth it long term, but it's not really a negative
cost, it's an investment.

~~~
madsbuch
Well, the cost for the student is negative. :-) A danish student get paid
roughly 600£ a month, and there is not tuition. Classical European.

~~~
vilmosi
There's a cost of opportunity that you're not taking into consideration. Also,
that money doesn't usually include food and rent, meaning you definitely lose
money in the short term.

~~~
madsbuch
Well, many danish students live completely of this grant, including rent and
food.

But you are right about the cost of opportunity. But I think, in general, that
it is much more important to optimize personal well-being than income. My
impression is that most Danish students rather want to be at uni than the
alternatives.

------
3stripe
I'd like to hear Mr. Money Mustache's take on this.

~~~
toomuchtodo
Forget MMM, Jack Bogle and Warren Buffett are the ones to ask, and I'm pretty
sure they'd agree.

(Warren Buffett needs no intro, Jack Bogle founded Vanguard Investments)

EDIT: Autocorrect fail. Fixed. Thanks!

~~~
nether
Peeve of mine: spelling his name wrong. It's Buffett.

------
ada1981
Consider an undergraduate program where ~150 people each contributed say
$50,000 each to collectively buy a large parcel of land and create their own
eco-regenerative village. That would be $7.5 MM dollars.

Over the course of a few years they would build micro-homes, permaculture
farms, invent, build, hack, create art, take free online courses, host
traveling scholars, incubate start-up ideas, etc. They'd be a self-sustaining
techno-tribal commune.

After 4 years, they'd have the skills to live sustainably, work together, and
would have basic food, shelter and community needs taken care of _for the rest
of their lives_ , and they would be free to invent, create art, do activist
work, help other students boot up similar learning communities, travel among
other similar villages the world over, etc.

~~~
umeshunni
So, how do these people learn the skills to build houses, physics and math
skills that are required to 'invent', basic electrical and computer science
skills to know how to program and so on?

~~~
ada1981
We have a group of mentors that will work with the initial group and then the
graduates will help the others.

Self-directed learning is nothing new, sudsval.org has been doing it for
decades with k-12 students and many people are self-taught to expert level at
any number of things.

The community will determine what they need to learn and will be empowered
with support in those efforts.

There will also be a collective wiki knowledge base that students can add too,
including their own courses and projects so others can benefit from them.

Everything is open source and available to anyone who'd like to contribute or
learn.

------
jxub
I paid 35EUR for first year of CS here in Spain. Next ones will cost me
~1500EUR (no scholarship assumed). Pretty good deal even then though, to what
adds up low cost of living.

Maybe get out of the US: Germany, Italy, France, Poland, Spain. Sometimes, the
grass may be greener and costs/ROI better.

------
anovikov
Good; it will result in only the people who are actually likely to make some
benefit from the education to get one, not everyone who has money or wishes to
get deeply in debt.

College education is not for everyone, it doesn't pay for the simple and
stupid reason that you can't buy yourself better brains, or better personality
traits. If lower fraction of people go to college, ROI will increase as these
will be people better suited to benefit from education, it will also make
prices fall due to natural law of supply and demand.

It is sad to see a ton of young people wasting best years of their lives for
something which is of no benefit for them anyway. I did it too.

------
luckydude
"On average". That includes a bunch of degrees that, while perfectly fine,
aren't going to generate a lot of money for _most_ people. An english degree,
in the hands of the right person, could make boatloads. For most people, it
won't. The ROI for $200K+ english degree is awful.

On the other hand, a CS degree, robotics, genetics, biology (medical), any of
those, again, in the hands of the right person, will far outpace the S&P, it
has for me.

But I can't say it enough, the person needs to be

    
    
        a) motivated
        b) reasonably intelligent
        c) lucky
    

If that sort of person gets a degree and a masters or a PhD, I think the ROI
can be better.

------
bcheung
One of the other things that will start entering the social consciousness is
that a lot of the information (lectures, books) is available online for free.

This is especially true for computer science / programming.

Unless you need hands on access to equipment or to physically interact with
people for your chosen field of study, the college format is a very
inefficient means learning.

The "Cone of Learning" states the best way to learn is (in order):

    
    
      - Teach others
    
      - Practice doing
    
      - Discussion
    
      - Demonstration
    
      - Audiovisual
    
      - Reading
    
      - Lecture
    

What does college do the most of? The last 2.

~~~
mywittyname
I remember doing all but the first in college.

------
kebman
Seems he gently skipped over the fact that getting a job is supposed to be
easier if you have college. Thus he would have to take into consideration all
those people who can't get a job without it, or who would have to accept sub-
par employment with low pay.

Suppose also that you will only do well in College, and thus be elligible for
those well-paying jobs afterwards, if you already did very good at primary
school. If we suppose that only pupils with high grades from primary school
can "make it" with College, then that would also be another point that I think
the article explored only weakly.

------
nikdaheratik
As someone who grew up from a poor background, I don't believe I was ever
given the option of "investing" tuition costs. I did however get both academic
and need-based scholarships to go to college. There really wasn't much cost-
benefit analysis involved there.

Also, there's the larger question of whether good entry level jobs and
investment opportunities are available at the same level if everyone were to
start to put money into stocks, or whatever, at the same level they do for
higher education. There is undoubtedly a ceiling on investment just as there
is one for increased income for higher education.

------
alexchantavy
College and academia as a whole is meant for higher learning and knowledge -
not necessarily to allow people to make more money. That many higher paying
jobs require skills associated with a college education is a side effect.

~~~
sillysaurus3
If only the world was like this. I wish it were.

Sadly you need at least $5k/yr to be able to participate in your higher
learning and knowledge, and this excludes a majority of people from broken
backgrounds.

------
somberi
One of my nephews graduated from one of the Top-5 US universities with a B.S
Degree in Computer science, last week. It costed him ~250K USD for the entire
course (living expenses, all included). He got an offer from one of the Top-3
tech companies in the Valley and the salary he will be making, makes it
possible for him to pay back the entire university expenses in 2-3 years.

This is just a small sliver, and I understand this is no way representative of
university education. But in this small sliver, it seems like University
education is amazing in the value it offers, purely in a dollar sense.

------
mncolinlee
We should have a system more like what Thomas Paine advocated. The system he
described sounds like Social Security, except it's not limited to retirees. He
suggested that everyone 21 years old was due a "natural inheritance" for
having been dispossessed of land and property which would offer a chance to
succeed. Likewise, America should have scholarships available for anyone
willing to work hard and learn. If college were free, ROI would be very high
indeed.

[https://www.ssa.gov/history/tpaine3.html](https://www.ssa.gov/history/tpaine3.html)

------
hutch120
There is something seriously wrong with society when accountants run the
world. Money is a tool, education provides long term wealth and stability.
Providing fuel for people considering skipping collage is short sighted.

------
pyrale
This article neglects the fact that people don't get money to gamble.

Student loans are, along with home loans and a select few others, the only
financial leveraging tools available regardless of one's background.

------
wwarner
Maybe college is too expensive -- maybe it's expensive because there is a very
high demand for well educated people. In other words, in my field, computer
science, you will meet very few immigrants without a hard won master's degree
or better. They are paying premium prices for these degrees, and they are
getting the jobs that come with them. You can't simultaneously argue that the
job market is being divided by STEM knowledge and that learning about STEM is
a waste of time.

~~~
tyrw
This is a different phenomenon, as advanced degrees are much more likely to
land you a visa. Hence the disproportionate representation.

------
theprop
This is a huge, spirited discussion. There was a very similar discussion with
many of the same points when child labor was outlawed and education was made
mandatory a bit over 100 years ago.

All the points against college education made here...they just as easily apply
to that case as well. So we should stop funding public schools, invest it in
the S&P 500 and start letting 12 year olds maximize lifetime income by
beginning professional life early?

------
nodesocket
Except that college is more about becoming an adult, making friends, some
partying, meeting co-eds, and learning how to learn. The social benefits
should not be downplayed.

------
seasonalgrit
if the subtext here is that university tuition is much higher than it should
be, i agree. but the point of going to college isn't merely to achieve a
monetary ROI.

------
jtcond13
These calculations seem fishy, for reasons stated above and others (e.g. why
20-year ROI? why exclude graduate degree holders?).

However, it is true that rising education costs are eating much of the ROI of
attendance and lack of transparency has made it harder to see where that
crossover point is.

But in a world in which the equity and college wage premiums are headed in the
directions that they're headed, I would not give this advice to an intelligent
18-year-old.

------
ascendingPig
Another entry in the already-saturated genre of people who went to college but
squandered the educational opportunity telling the rest of us that college is
a waste.

------
dragonwriter
> On average, skipping college and investing tuition costs nets a higher
> return

Yeah, but you can't get grants or subsidized loans to invest, and, anyhow,
people go to college because of what it does for their choice of _kind_ of
work, not just for financial returns (well, and for non-career reasons, but
that is a whole different issue.)

------
udkl
The post make a good observation but shouldn't be taken as advice.

For one, the majority of people will take out a loan to fund their studies.
They do not have cash laying around to invest.

Second, a very minority of the population, especially when young, has the
patience and rigor it takes to be invested through the tantrums of the market
over a long period.

Third, past performance is not a guarantee of future returns.

------
wedesoft
Education should be free to begin with. An educated population ensures
productivity and progress. Money is just a means to allocate resources. If the
productivity is down because the workforce is not skilled enough to compete,
that money is going to be as valuable as the paper it is printed on.

------
knicholes
Purely financially I can see how this applies to many people. There are other
ways going to college benefits one's life "financially"that aren't directly
visible, like improved health care and possibly a job that doesn't wear down
your body so quickly (to save on medical expenses later).

------
mowenz
Isn't it possible to create ultra low-cost, bootcamp-style, world-class degree
programs in STEM fields?

Self-study on your own an outline provided, then take a highly competitive
entrance exam to get into the bootcamp. Finish and get your world class
degree.

It sounds like the type of non-profit I should invest in if I were a 1%'er.

------
gozur88
For a few years now I've been thinking as a high school graduate you'd learn
far more by taking your college money and starting a business or two.
Assuming, of course, you didn't want to do something highly technical like
medicine, law, or, you know, advanced materials construction.

------
sopooneo
I have always assumed that going to college is not necessarily the ideal
financial path for any particular individual, but rather that an educated
populace is better for everyone. In other words, it is a collective good that
"we" have a "liberal" education.

And I stand by by that assumption.

------
Aqueous
Unfortunately I suspect this ends up being similar to the "paradox of thrift"
[1]. It might make sense for one person to do this, but if people did it en
masse, it would be catastrophic for our economy and therefore for each of us
individually.

[1] I learned about the paradox of thrift in college.

------
waspear
Some experiences in college is priceless.

~~~
smt88
Yes. College teaches learning skills, social skills, and time management.
Sometimes it teaches skepticism, open-mindedness, and intellectual humility.

Also, societal knowledge is underrated. People need to know how dictatorships
start, how to vet facts, etc. Populist dictators rely on both ignorance of
history and economic desperation.

------
gbersac
If you don't want to invest a lot of money in tuition and want to learn
programation, I went to the 42 school which is free and it made me an
excellent programmer : [https://www.42.us.org/](https://www.42.us.org/)

~~~
cyrjulien
Similarly to school 42, there is Holberton that has no upfront tuition.
[https://www.holbertonschool.com](https://www.holbertonschool.com)

------
anothercomment
Funny, as I have sometimes thought of going to college as a kind of
counterargument to the efficient market hypothesis. Since going to college or
not is an investment decision, it seemed that going to college is obviously
the better decision. Except, apparently it isn't.

------
ggh5
Problem: college tuition is too damn high.

Solution: universal, free or heavily subsidized access to quality higher
education.

So, Americans, number 1 war economy and slaughterous rulers over our blood and
minds, what exactly is your major political malfunction preventing this?

~~~
jrs95
Well, it's partially probably because Republicans aren't going to want to vote
to subsidize the Democratic Party.

------
swsieber
I'm surprise nobody had mentioned tulips.

[http://slatestarcodex.com/2015/06/06/against-tulip-
subsidies...](http://slatestarcodex.com/2015/06/06/against-tulip-subsidies/)

~~~
gwern
Or [http://slatestarcodex.com/2014/05/23/ssc-gives-a-
graduation-...](http://slatestarcodex.com/2014/05/23/ssc-gives-a-graduation-
speech/) where Scott points out that the same question applies to lower
education as well: we spend something like _$100,000_ on lower education per
pupil (pre-school, kindergarten, 5 grades elementary, 3 grades middle, 4
grades high school = 14 years at ~$7k/year/pupil on the low end), which would
be even higher if invested and compounded for ~18 years, but when you compare
to unschooled or homeschooled kids the benefit of making six figures of
expenses plus stealing everyone's childhoods is... hard to see.

------
solomatov
The problem is that keeping this investment and not spending it on useless
things like new car, fancy apartment, designer clothing, etc, requires very
large willpower. So, psychologically, it makes sense to get an education, and
find some job.

------
hasenj
University degrees are absolutely necessary for medicine, law, and STEM
fields.

For everything else, going to University makes no sense at all IMO.

Yes, philosophy and linguistics are interesting subjects, but not worth
spending tens of thousands of dollars to major in.

------
AdamN
I went to grad school in the middle of a startup. Probably cost me a million
dollars. I learned so much, met great people, and met my future wife. I
wouldn't have made a different decision any day of the week.

------
elmar
The true value of a college education is intangible.

[https://getyarn.io/yarn-
clip/f7f7e126-8aac-40bc-9478-70b6bea...](https://getyarn.io/yarn-
clip/f7f7e126-8aac-40bc-9478-70b6beab3902)

~~~
jmcgough
I know people who're 100k in debt who wouldn't agree with that.

------
musikele
I would suggest to US citizens to come in EU, study in the best colleges
(there are some that are just great and cheap) and come back. I expect the
exepence to be half. At that point the ROI should be greater

~~~
AstralStorm
Or better yet, stay and enjoy the more stable job market.

------
Animats
Only about half of new college graduates are getting jobs that require a
college education. We've passed "peak school".

On the other hand, not going to college sucks even worse.

------
xux
So where can I borrow $250,000 for me to invest in the stock market?

------
bpodgursky
If this was actually true, there would be no private college loan lenders --
they would all prefer to invest their money in the S&P 500 than in college
students.

~~~
thesagan
I think the risk/return profiles are very different between those two types of
financial instruments. And the goals and incentives for lenders [generally]
aren't the same for young, individual investors, anyhow.

------
apapli
I'd rather see a median figure than an average.

A single ultra successful person's income will make up for a full suburb of
people who are struggling using averages.

------
totony
I just graduated college and I tell all my friends not to go to higher
education since 2 years, I dont think any of them listened to me...

------
mbrodersen
However moving to Germany for a few years and getting a free top quality
University degree is even better. And yes it is free for non-German students.

------
leoplct
As you have considered the cost of financing for your tuition you should
consider the cost of financing for invest in the stock market.

------
pjmorris
Shouldn't the analysis account for the value of S&P 500 companies managed and
operated by people without college degrees?

------
shmerl
That assumes people have saved costs to invest. In practice, people can avoid
accumulated debts, not saved costs.

------
vladletter
Maybe we could finally take the problem at its origin and make tuition free
for people. Education is a right.

------
RoutinePlayer
Would love to hear from non Americans on this, especially folks from countries
where public colleges are free.

------
matthewhall
Yeah but... Lots of Americans don't have the money too pay for college until
after they graduate.

------
5706906c06c
What about entering the workforce, make enough to cover cost of living, and
then go back to college?

~~~
ThrustVectoring
If you're in the workforce and making enough to save for college at a decent
clip, why go back to college?

It's even worse after joining the workforce, since the opportunity cost of not
working is higher. Plus you're older, so there's less time to make back the
investment.

~~~
5706906c06c
I don't suppose working and going to college is relevant to this topic? That
was the basis of my first question.

------
RandyRanderson
I've long suspected this and am gland someone did the calc.

I'd love to see the breakdown by major!

------
diefunction
however, people are actually losing money in the stock market (Not everyone
will buy s&p 500 and hold for many years).

------
randyrand
The previous title was better. Why was it changed?

------
Mc_Big_G
...and a terrible job for 40+ years

------
ld00d
a) College isn't a vocational school. b) It should be free.

------
gravypod
I'm a Junior in college and I initially thought college wasn't worth it by the
numbers. I was going here because.. well... I had no idea what to do. I've now
come around.

College is absolutely useless unless you find every possible way to waste
every other student's money on things you want to do. The education you'll get
is going to be sub-par (unless you're going to a big-5), the professors are
short tempered and provide poor service, and you're going to have to learn a
hole bunch of things you honestly don't give a crap about.

At my college you need to take Calculus 2 to be able to take Linear
Algebra..... If you follow the standard course layout you'll probably be
taking Lin on your Senior year. This is after 2 courses in discrete math where
you apply Lin!

It's a joke. It's a fares. We all know it's BS. But it's worth it if you take
advantage of every single service.

    
    
        1. Use your college email to get software
        2. Use your college email to get hardware (starving artist discount)
        3. Take advantage of internal funding to do research you want to do.
        4. Start clubs in your subject area. (My college provides $700/semester for each club!)
        5. Talk to, and get to know, all of your good profs
        6. Talk to, and get to know, researchers
        7. Take advantage of student discounts (Amazon Prime, etc).
        8. Your school will likely give you a laptop discount
        9. Find the IT gift shop (trash room). Free hardware!
       10. Find a job on campus if you otherwise have nothing to do.
    
    

So far, in my 2 full years of school, I've presented research findings at an
international conference, funded my own research from an internal grant
solicitation, obtained piles and piles of cheap software and hardware, I'm
attempting to upgrade my Thinkpad to one of the new x260/x270s via a school
program, and my next project is to start a Retro-Computer Club at NJIT.

I'm starting this club because I don't have $700/semester to spend on old
hardware nor do I have the space to store old hardware in my shoebox
apartment. You know who does? My school! Hopefully by my senior year I'll have
created a mini-museum for the rest of the students. I'll have to brush off my
old OS kernel I started and re-read my copy of Operating Systems
Implementation and Design.

Unfortunately not every student can do all of these things. With my school's
tuition being 20k/year I'm easily milking 5 to 10k/year back out of the
university. If everyone did this then the money pot would run dry.

If you're not going to use everything you're paying for, you're getting ripped
off. Classes aren't worth 5k/year, let alone whatever you're being charged.

------
killin_dan
Obvious epiphany to be had here is that you cannot use the government to
subsidize your investment in S&P. At least not legally, and to my knowledge.

At college, you can live a pretty comfortable life. You get a place to live,
food to eat, work to do, material to learn, friends to talk to, supervisory
staff to help you with hard problems, etc.

I hate to say it, because I think US higher education costs are absolutely
ridiculous, but I still think that higher education is more rewarding than
working a salaried job for a couple years to dump some money into S&P. I'd
even go so far as to argue that people who have graduated a college or
university are more likely to be prepared to safely, responsibly handle
problems that occur in the real world moreso than someone who just happens to
have a lot of money from S&P. I know that's a bit vague, but I think my point
is clear enough that having wealth is not a replacement for having a
satisfactory, stimulating wealth of knowledge and a sense of purpose for one's
life. Not to knock people in finance, I love finance, but it's not for
everybody and if the whole next generation of college students just decided to
structure their whole lives based on how much money they're LIKELY (ie, not
necessarily guaranteed) to make, then it'll be a boring generation that the
next one has to learn from.

Student loan debt regulations need a rethink. How can we: a) not lose money
from paying for kids' school

b) not fuck kids over, incurring hundreds of thousands of dollars of debt for
admittedly mediocre education (compared to some euro schools, or asian
schools)

c) keep new system automated enough to reduce politician's potential for
corruption by manipulating the money

and d) provide some sort of transition schedule to move current students
(paying traditional loans off) to new system, without fucking over
agencies/firms that are rightfully owed

???

We owe our kids better solution than this

------
ryan-allen
Is it just me or isn't this absolutely disgraceful?

------
vacri
Yes, if you invest your tuition and _never touch it_ for a quarter of a
century, you'll have mildly more money than if you went to college. In the
meantime you'll be doing... what... to put food in your mouth and improve your
lifestyle? Civil engineering interests you? Oh well, here are some schlub jobs
for you to do to wait out your quarter-century maturation.

And as we can't help but hear, so many students are complaining about their
student loans. For these people, what is the P&L statement going to look like
after not touching their tuition for 24 years? It's not usually a winning
strategy to borrow money for long-term investment...

