
The Great College Hoax - robg
http://www.forbes.com/forbes/2009/0202/060_print.html
======
blankity_blank
What the hell were the couple in example #1 doing with their $200K income? If
they wanted to pay off their debt in 10 years, they'd need about $2800 a
month, assuming the rate was the full 12% the whole time.

I agree with a lot of the article, but a couple of idiots who pissed away the
fruits of their education on too many vacations and fancy cars (obviously not
any real investments, otherwise they could have refinanced their student debt)
don't give a very good example.

~~~
Xichekolas
I was thinking the exact same thing when I read that.

Sadly I know _many_ people that make six figures and complain about things
like student debt and credit card debt. One guy claimed he was _lower middle
class_ (he was making $110k at the time, with only a wife, who didn't work, to
support). If $110k is _lower middle class_ , then I must be in poverty.

It's like the idea that they can lower their living standard slightly to
achieve financial goals just doesn't occur to some people. People that make
good money and manage it poorly garner zero sympathy from me.

~~~
tptacek
I don't know about "lower middle class", but in Manhattan and San Francisco,
$110k is definitely "bachelor-class". You might not be able to comfortably
raise a child, commute from Jersey to Manhattan, and make student loan
payments on $110k/yr.

Then you say, "well then don't live in Manhattan", which is probably true-but-
not-obvious, but also implies you're going to take a wage cut to work
somewhere else. And not everyone is as geographically mobile as a 25 year old
hacker.

~~~
yummyfajitas
You can easily commute from Jersey to Manhattan, make student loan payments
and raise a child on $110k/yr. I did the first two on only $20,000/year
(though I admit, my loans were a lot more sensible than those of the couple
described in this article).

You could also live on $110k manhattan if you are willing to live north of
111th st. A 2br 2bath up there ran $2100/month back during the bubble (less
now).

~~~
tptacek
I was offered a job at Bloomberg in 2003, at a _significantly_ better starting
than $110k/yr, moving from Ann Arbor, MI. I did this math. So, three things:

(1) I'll spare you yet another hypothetical family budget monthly itemization.

(2) I'll concede that it is clearly _possible_ to raise a family in New York
on $110k/yr.

(3) I'll assert again that it is not _comfortable_ to raise a family in New
York on $110k/yr, nor does it appear to be easy.

There are obviously a lot of sacrifices you can make to make the budget work
out, but in a family scenario, not all sacrifices are tenable.

~~~
yummyfajitas
Could you define comfortable? I'm really curious to know what goods and
services are beyond your reach at $110k/year.

I've also done the math and lived it. Commuting from jersey is better, but
even manhattan (north of 111'th st) is quite livable.

~~~
tptacek
$110k is ~$6600/mo net working Manhattan, living in Jersey.

Aggressively assume $2500/mo to rent a house (forget buying). Assume part-time
child care @ $900, commute @ $400, lowball utilities @ $500 (I pay more than
that in Chicago), food @ $1000, car insurance for one car @ $200, and
dependent health care at $150.

At $110k/yr, you're now less than $1000/mo over break-even. Lose an alternator
in the car, you're in the red. Fill 3 cavities, you're in the red. Fly to
Tucson for a funeral, you're in the red.

Can you do it? Yes. But I'm not going to call it easy.

~~~
kragen
How do you spend $1000 a month on food? That's $10 a meal! You can't spend $10
a meal even if you eat half a pound of Safeway steak for breakfast, lunch and
dinner.

At the other end of the spectrum, dry rice is 33¢ a pound, beans and corn are
50¢ a pound, vegetable oil is $1.29 a liter; multivitamins, water and gas are
basically free. The standard corn/beans/rice diet costs about 10¢ per pound of
cooked food, which is a meal for four people, 1% of what you were spending.

~~~
tptacek
$1000 isn't 10/meal/person for a family of 4; it's $8. A meal at McDonalds ---
where allegedly lower-middle class people eat because it's cheap --- is $5-$6
in a major metro area.

There are _obviously_ meals we can spec here that cost nowhere close to
$8/person. But:

* A plurality of families in America don't cook every night; that doesn't make them clueless crypto-rich people, it makes them normal. If you don't cook, your meal cost goes up.

* A couple contemplating a family life together could reasonably break up over the issue of feeding itself for 5-10 years off bulk dry rice, beans, and corn.

~~~
kragen
Yes, if you eat _every meal at restaurants_ , you can spend $1000 a month on
food. Even if it's McDonald's. That's why only extremely rich people eat every
meal at restaurants.

$1000 isn't $10/meal/person; it's $10/meal.

If a family is concerned about the corn/beans/rice diet, which costs like
US$40/month according to my "other end of the spectrum" figures, then maybe
they could splurge and add some oatmeal, some greens, some fruit and
vegetables, milk, herbs and spices, spaghetti with sauce, peanut butter
sandwiches, ramen, the occasional chicken. That could raise the price to
US$100/month or even higher. But it isn't going to bring it _close_ to
US$1000/month.

~~~
tptacek
At $10/meal total, you're feeding 4 people for $2.50 each. A package of
chicken breasts costs $9.00, kragen.

~~~
kragen
Albertsons.com currently offers a "Beef Chuck Shoulder Steak Boneless USDA
Select Max Pack" of 4 pounds at US$4.49 per pound:
[https://shop.albertsons.com/eCommerceWeb/ProductSearchAction...](https://shop.albertsons.com/eCommerceWeb/ProductSearchAction.do?action=getProductSearchResults&categoryId=2159&categoryName=Beef+Max+Pack+Big+Pack+Big+Savings&searchStr=steak&fromResultsPage=categoryPage&totalMatch=164&productIdCSV=116264%2C104608&flowerCnt=0)

US$2.50 of raw shoulder steak is therefore half a pound of steak; you'll be
grossly obese and get gout by 35 if you eat that every meal. I don't know if
that includes delivery, but it's on their delivery site. On the same site,
boneless chicken breasts cost the same amount but drumsticks are a quarter of
that, and that's before the discount for buying with your Albertson's
Preferred Card, or buying on sale, or buying in bulk at Costco instead of
Albertson's. I can't find any packages of chicken breasts there that cost
$9.00 for a pound.

Where do you _shop_?

~~~
tptacek
You live in Argentina and you don't know how to cook beef?

What can you do with chuck, kragen? You can, if you are among the 4% of people
in the US with the means and expertise, grind it into hamburger or chili meat.
You can, if you are among the 10% with a crock pot, make pot roast.

Otherwise, you can cube it and braise it for a stew, and that's about it. Most
families can't do much with $20 worth of chuck.

A package of chicken breasts --- enough for 4 people (in my house, 3-4
breasts) is between 1.5 and 2 pounds.

I'm not sure your evidence is rebutting my argument.

~~~
kragen
Okay, so as not to be a jackass, I will stipulate:

\- You _can_ spend more than US$1000 a month feeding a family of four on 100%
Safeway (or Albertsons) steak. I was wrong about that. It looks like your bill
could go up to US$2000.

\- I definitely don't know how to cook beef. In fact, I'm mostly vegetarian. I
didn't move to Argentina for the steak. I'm surprised to learn that chuck
steak is inedible without special equipment, except in a stew.

\- Enough pre-deboned chicken breasts to feed four people for a meal also
costs US$10, which is similarly US$1000 a month, if you eat something that
pricey three meals a day.

I still want to know how you spend US$1000 a month on food without factoring
in restaurants. Even approximately? I'm sure you're not eating a 100% meat
diet, are you?

------
fiaz
This article needs to explicitly state:

1) education is valuable

2) education has become too expensive (implicitly stated)

3) the "hoax" is that of how our credit/debt system works, not about the
collegiate system

Already people on this thread are jumping the gun and stating that college
sucks and you don't need it. But this is a subjective view and should be taken
as such. The only fact that I can get from this article is that college is
becoming a financial burden - not that the education obtained is worthless.

There needs to be a way to make education accessible to all. Instead, the cost
of getting an education is becoming yet another factor in further dividing the
wealthy from the debt-laden.

~~~
swombat
I think the problem is with those 18% loans (covered by your 3rd point, I
think). What the hell? Who pays that kind of interest rate?

The article states: _A correlation between B.A.s and incomes is not proof of
cause and effect. It may reflect nothing more than the fact that the economy
rewards smart people and smart people are likely to go to college._

I would say that there is likely to be a strong correlation between being
foolish enough to take an 18% student loan and getting a low-paid job later
(taking on that kind of loan shows a staggering lack of common sense).

Seems to me that that's the only problem there. People should not be allowed
to turn that kind of profit on student loans of all things. If there's one
kind of loan that _should_ be government-sponsored, this is it.

For the record, in the UK, student loans come in at about 2.5%.

~~~
fiaz
Your quote from the article highlights yet another fallacy - that if you are
educated you will make more money. This is marketing at its worst.

It's because of this reasoning I'm surrounded by people who studied CS as a
major and learned Java because it was projected to pay well (hint hint about
the age level of developers I'm working with lately). The result is that I fix
the mistakes of people who possess coding skills that I wouldn't even qualify
as AP high school level. My point here is to highlight the idea of choosing an
education that compels you to develop yourself into a "somebody" instead of
being an "anybody".

Education is polish for the mind. It's best used towards developing yourself
as an individual. Unfortunately it has devolved into a tool to charm money out
of the system.

------
kragen
A lot of people in the comments here are talking about the return on
investment of the law-school tuition, but nobody seems to have calculated it.

First, some comparison figures. Warren Buffett expects businesses he buys to
return about 4% on capital. The US stock market during the 20th century
returned about 10% on capital. A bank loaned me money to buy a house in 2000
at a 6.5% interest rate, before the mortgage bubble; presumably it thought
that was a good return on the capital it invested in the loan. But it had some
risk that I would default on the loan, which lowers its expected return on
capital to something a bit below 6.5%.

This Joel Kellum guy spent US$36 000 a year on a law program, presumably for
three years, for a total of US$108 000. Then he got a job that paid him at
least US$100 000 per year, instead of the US$57 500 per year of an average
college graduate. If we assume for the sake of simplicity that he only went to
law school to make money (instead of, say, because of a passion for justice or
the Socratic training in logic that are part of a law-school education) and
that the difference in earnings is solely due to this legal training — rather
than, say, because he was working 80 hours a week, or got very lucky — then
his investment was returning at least US$42 500 per year. That's roughly a
42.500/108 = 39% return on investment.

That's not a full NPV analysis, of course, because it neglects the forgone
income during his law-school years, the earnings difference he can expect over
the years as his lawyer earnings increase at a more rapid pace than an average
worker, and the three-year delay between investing his first tuition dollar
and landing his junior associate position. Still, it's tough to manipulate
those figures to get less than a 20% ROI.

I don't see Joel Kellum gets off complaining about a 39% or even a 20% return
on his investment. Better yet, it wasn't even _his_ investment — he borrowed
most of it at rates that "have ticked as high as 9%"! Any investor would kill
for yearly returns like that, even before you multiply by the leverage. Better
still, in student loans, typically the lender shares in much of the downside
risk — you don't have to make payments until you get a job, for example.

This is the kind of investment around which Forbes is tossing about phrases
such as "consumer fraud" and "trading in half-truths that exaggerate the value
of its product"? What is their _agenda_?

It's also kind of pathetic to see education as merely a means of making more
money; but even if you see it in such narrowly self-centered terms, it's an
extremely good investment.

------
coglethorpe
> a bachelor's degree in history

Strike one.

> took out $60,000 in student loans

Strike two.

College isn't a bad idea. Majoring in subjects that lead to careers with more
job seekers than jobs and taking out student loans is are bad ideas.

~~~
potatolicious
Note that both were on the law school track, and in fact both made it to law
school. If this was their intention all along, taking, say, an engineering
degree would have been pointless - you pay even more in tuition.

Taking out $60,000 in loans to go to _law school_ of all places is not such a
bad idea. Your pay after graduation would certainly make it worthwhile, and
they both are making $100K+ a year.

------
jsomers
I'm reminded of (Good) Will Hunting's zing to some jerk in a bar, right after
calling him out (in a pretty spectacular way) for plagiarizing:

"See, the sad thing about a guy like you is in fifty years you're going start
doing some thinking of your own, and you're gonna come up with the fact that
there are two certainties in life. One, don't do that. And two, you dropped a
hundred and fifty grand on a fucking education you coulda got a dollar fifty
in late charges at the public library."

"Yeah, but I will have a degree," he says in return.

It's an open question whether the markets in general (i.e. not just startups,
tech, etc.) will get over the _apparent_ value baked into a college degree /
GPA, and start worrying about what kids can _do_ , what they know, and how
they think.

~~~
Retric
A degree is far from useless.

 _the couple was $194,000 in debt. each landed a six-figure job. interest
accruing at up to 12% a year._

"the pretax median household income in 2007 was $50,233," they where both
making twice that in 1995. Even 12% of 200k = 24k/year should be easy when the
couple is making over 200k/year. OMG, they only get to live off 3 times the
median household income after graduation how they must have suffered.

Granted it would nice to have zero debt, but I suspect their real problems had
little to do with debt.

------
gcheong
I wonder what the effect on the economy would be if parents or the government
gave kids a choice - you can have 4 years of college loans or the amount of 4
years in tuition as seed funding for your start-up.

------
lallysingh
Wow, those numbers really, really suck.

I didn't go to an Ivy, I went to state tech school. My loans were at 4.5% (!)
when I started, and the last one was ~7.5%. My initial tuition was $2500/sem,
ended at $4500.

Note, that's over an 11 year period, covering bachelor's-PhD. Folks covered
undergrad, and I did a lot of research work to cover many semesters of
graduate school. My loans are somewhere around $50k total. Each semester's
loan usually left me with tuition covered and $5k of spending money.

There are some things about not going to MIT/CMU I'll always feel like I've
missed. But there is the other side of the coin :-)

------
tokenadult
"Accepted into the California Western School of Law, a private San Diego
institution, Kellum couldn't swing the $36,000 in annual tuition with
financial aid and part-time work."

That choice of a law school was probably crucial in how the story unfolded.
That's not a law school with a high return on investment in that local job
market.

~~~
dsaewra
Article states that he and his wife landed six figure salaries, but graduated
with 194k in debt. I think more crucial to how the story unfolded is that they
probably didn't live below their means, probably didn't consolidate the loans
to a lower rate (they were paying rates at 9%-12%), and probably didn't pay
the loan off aggressively.

I wouldn't blame going to college, or college choice for poor financial sense.

~~~
swombat
According to the article, the loans were at 18% variable rate... that's
probably most of the problem right there.

~~~
kragen
No, that was somebody else's loan. Kellum's was variable rate that varied _up
to_ 9%; Coultas's was variable rate _up to_ 12%.

------
ensignavenger
There is a lot of false propaganda spread about the 'value of college'. That
being said, there are ways to reduce the expense and increase the return. Just
because a few people make poor college financing decisions, and poor decisions
about which school to attend, doesn't make all colleges a bad deal.

------
vaksel
In this day and age college is worthless. Its pretty much 4 more years of high
school, except this time you are paying $40-160K for it.

The problem is that most college students deceive themselves. They go to
school thinking that all those people who graduate and get $80-100K jobs are
the norm, when they aren't. So they get into debt to pay for school, because
"its an investment" and then when they graduate they find out that instead of
$80-100K, they have to settle for a job paying $30K a year.

So you pretty much put off 4 years of salary, 4 years of raises, 4 years of
building contacts, 4 years of climbing the corporate ladder, all on the
premise that it'll pay off in the long term. But it doesn't.

As long as the person didn't get a job at McDonalds, he'll be making more
money after 4 years, than you would as a fresh college grad. And he won't have
the huge debt, like you do. And that goes double for a person who majored in
liberal arts.

~~~
unalone
I'm one of the people who thinks there's some worth to being in a place with
people who all want to learn. College isn't about money. It's about being open
to explore.

I'm in a class about religion, another about creative (physical) design, one
about interactive multimedia, one about advanced PHP work. Each semester I'm
hoping to learn more about things I don't already know much about.

It's not about the degree. I haven't checked to see if I'm on the "prescribed
path" to getting my degree, and I'm avoiding some things I need to graduate
because they don't interest me (secondary language, technical writing). I'm in
college because I want to discover things and I want to have four years to
work on the things that fascinate me.

~~~
vaksel
if you are open to explore, whats stopping you from learning all those things
on your own? If you want to learn, you can get some books from the library or
hit the net and learn it on your own. You don't need to get into debt up to
your eyeballs to achieve that.

You are taking only 12 college credits..do you really think you can't spend 12
hours a week to learn that stuff on your own?

If you are learning on your own, you could have "taken" all your major classes
in 1 year. Gotten a job. And then while working, could learn all that "extra"
in your spare time, while being debt free.

~~~
unalone
I'm taking 16 credits, actually.

Off the top of my head: college gives me people to discuss with, parties to go
to, a place to live on my own, a DC++ hub for me to access pretty much
anything I want to, and a bunch of professors that I can talk to directly and
discuss things with. Plus, it's public school, so if I go the four years I
leave with no debt.

I'm not going to college just for classes. Partly I'm here for the social
environment. I'm also applying to YC, which I'm hoping means I'll get to spend
a year or two doing meaningful stuff, then return to college much wiser and
certain of what I want to do.

The funny thing is, when it comes to my major I'm nearly all covered. I've
been writing for 6 years, designing for 4, I've used Photoshop and Premiere
extensively, and I've worked in teams before. So in classes, I spend most of
my time talking directly to the professor about things, I get my work out of
the way, and the things I _do_ expect to learn won't strictly be my major.
(I'm shoddy at designing with images, for instance.)

------
BigZaphod
The fix is to not go into debt just to go to college. A college education is a
luxury - but it's one that can be had at an affordable cost if you're
ambitious, work your ass off, and take advantage of every grant, job, research
position, etc. you can find. IMO, it's the people who do the leg work to get
into those kinds of programs and reduce the cost of their own education that
ultimately succeed in the end anyway.

~~~
arockwell
It is extremely difficult to get an undergrad education without going into
some debt even if you go to a public instituion. I went to a very cheap state
school in a low cost of living area and even with a full scholarship I barely
escaped without any debt from simply paying for room and board. I held a part-
time job but at $7.50/hr it didn't go that far.

~~~
BigZaphod
Oh, it's hard, no doubt. I wasn't so smart back then and went to a private
school and took out huge loans because my parents told me that was how it was
done. (It's all paid for now, though.) My wife was smarter. She went 5 years
at a state school with zero debt by working crap fast food jobs, lab
assistant, food service, etc. She'd never even owned a car. She had grants and
stuff to help her out. By her last year we were married, so my income made it
possible to pay cash for the final stretch which a lot of her grants wouldn't
cover. So yeah - I'm not saying it's easy - but it can be done.

------
eli
Totally offtopic, but I hate it when people link to the Printer Friendly
version. It's a whole lot harder to read on a widescreen monitor.

If you don't want to see ads on the regular site, install AdBlock like
everyone else.

~~~
robg
Some people, like me, prefer single-page over multi-page.

~~~
unalone
Ugh, but the complete lack of margin was _painful._

~~~
captainobvious
Shrink your browser window, or increase the font size.

~~~
unalone
It's not that. I could read it. But psychologically I need that border. When
text gets on the edge like that, it hurts to read.

------
leonardc
I am appalled that people could think of education as a luxury. In many
Eurpean countries University is free or very cheap. Full educational
opportunites for all a countries citizens, as well as comprehensive
healthcare, are the hallmarks of a civilized society. Good luck, prosperity
and happiness to you all.

------
kragen
Shorter version of my long comment: Forbes is calling college education a
fraud because Joel Kellum only gets a 39% yearly return on his "invested"
tuition, which he borrowed most of at 9% or less. WTF?

------
jmtame
i'm more worried about the other students who come in and think just because
they paid a few of their friends to cheat on tests and they got a "degree" it
is somehow an entitlement to a life of a high-salary job. most students
actually go in with that mindset. "i'll cheat on the tests, i'll slack off,
and get the degree. then i'm deserving of a job, because that's what everyone
says to do."

------
edw519
You had me right up until "bachelor's degree in history".

~~~
swombat
To be perfectly honest, I don't see why that should matter. Studying history
is no less honourable than studying physics. We need both in our world.

A historian obviously isn't going to be making lots of money later in life,
but that doesn't make them worthless. A good education system should allow
historians to come out of poor backgrounds too, not force everyone int
apparently productive degrees. Hard sciences aren't everything in life.

~~~
parenthesis
As I see it, the big difference between 'softer' (history, literature,
philosophy, ...) and 'harder' (math, physics, ...) subjects is that, as an
undergrad, you can 'get by' in softer subjects on very little work, especially
if you are reasonably intelligent, whereas in harder subjects if you're not
working to at least a certain level, you will do really badly.

However, to be a great historian is no less a task that to be a great
physicist. Doing anything well is just as difficult as doing anything else
well.

------
time_management
Shutter the bad and mediocre colleges, law schools, and business programs.
These diploma mills border on fraud. Most people who think they went to
"college" didn't. They were expensively babysat for four years because the job
market couldn't figure out what to do with them (and, alas, still can't). The
upper-middle tier schools (respectable but not distinguished state schools)
shall stay in business but should be half of their current size.

This problem is even more obvious in law school. "California Western School of
Law" is not going to provide access to the level of means that most people
associate with being a lawyer. These are the schools that law students call
TTTs-- third tier toilets-- and the job prospects they provide don't offset
the ridiculous debt one takes in order to attend them. A law program loses
accreditation if less than 50% of its students fail the bar exam. There are
many shitty law schools out there that take on mediocre, doomed students
(like, 140 LSAT) and fail many of them in their first year, in order to
improve their bar pass rate.

I think it's time to go to an "elitist" European-style system where only
qualified students get to go to university and into professional programs, at
least with the public schools. Only 5-15% of the population should be getting
an academic college education, but it should be free (or very low-cost) for
them. No student loans, no parents losing their retirement funds to tuition
payments. The other ~85% can go to a private college if they can afford it, as
in Europe, but it's not viewed as a universal right.

~~~
cschwarm
I'm living in Europe -- Germany to be exact -- but never noticed any "elitist"
European-style system for a University degree. So I digged out some numbers.
This is hard to translate, so my apologies for bad grammer.

In Germany in 2006, 43,4% of people born in a certain year managed to make the
necessary degree to be able go to a higher education system (universities,
etc.). This is quite a difference to the 5-15% you assume to be "usual".

Additionally, the majority of universities here are public schools, with
(recently introduced) fees of about 1000 Euros per year. This is also quite a
difference to your assumption that 85% of students go to a private college.

Additionally, some traditional German qualifications ("Meisterprüfung", for
example) are taught in other school forms, that are considered to be a
university degree elsewhere.

Looking at the other European countries, the numbers are different, of course.
That's party due to the fact that some countries require collage degrees for
certain jobs not necessary elsewehere. In Sweden and Finland, for example,
nurses seem to need one. In Finland, up to 71% of people born in a certain
year seem to start a college education.

For other numbers, please see the fourth table here:
<http://tinyurl.com/dn22rh>. The third column indicates how many percent of
people born in a certain year start a higher degree. For example, it was 32%
in Belgium according to the 2001 OECD study.

~~~
time_management
Wow. Those numbers are higher than I thought. My impression was that the
percentages who go on to academic (not including vocational) university
education was in the teens. This is based on family in Switzerland, but the
data is probably stale at this point (1980s).

I should point out that I'm not against a third or half of Americans getting
some kind of free higher education. I just think it's a waste for them to have
an _academic_ education, when only a minority of jobs require one. Appropriate
vocational training would be better.

