Buying Futures: Education vs Saving

A Strange Situation

We, as a country, are completely in love with the idea of going to college.

Millenials go because they are taught that, if they don’t, they will work at a coffee shop. They go, and work at coffee shops anyway. The biggest reason for this is that there is no control connecting available jobs to available degrees. You can get any degree you want, and high schools tell you to pursue something, but don’t engage in the politically fraught task of telling you what to pursue. They are incentivized to send as many of their students to some college, any college, as they can. There are virtually no jobs in philosophy, but the incentive is subject-blind. There are not even as many jobs in law as aspirant grads want to believe, but academia is not comparing grads vs job openings. It would probably be bad for business. There should be virtually no formal students in dozens of the extremely expensive degree programs available now.

A Stranger Reply

“College is about learning and becoming a better person. Degrees with poor job prospects can be the best – it’s not all about money!”

As a person who earned a degree in a field with no prospects (who otherwise enjoyed growing as a person), who desperately and entirely believed in the above statement, let me tell you that it is completely wrong for one reason today: context. The cost is not one you understand until after you’ve paid the entire thing. Student loan numbers are a fantasy difficult to comprehend if you’re not a graduate or a parent. Sure, you may be frustrated by the number of people who attend college to party, and you may find that your lonely quest at self improvement could be done virtually anywhere in the world. Those aren’t the problems, though; not really. It’s also true that college can give structure. That can be tremendous. But why on earth aren’t we questioning the cost? I don’t mean “complaining about the price.” I mean opting completely out when we look at what it will really take to “go improve as a person in a structured environment” – sacrificing much of our subsequent years to pay for it.

Do we improve that much?

Let me tell you something exciting and depressing.

$5,000 dollars invested for a 1-year-old in a simple stock market index fund could reasonably (and almost effortlessly) offer, at that child’s 21st birthday, a down payment on a house, a free wedding, or a free car. $10,000 invested at age 1 would mean roughly the right target to retire on at age 65. That makes an awful, awful lot of sense if you’re a parent and want to give your kid something that won’t take the rest of your years to pay off.

If it’s too late for that, and you’re looking at college right now? If you could make $30,000 a year, living at home, without a college diploma, or go to college for 4 years for /DreamJob/, what’s better? Assume you save just 2/3 from the “job” path. $20,000 a year, for four years, would make you a pile of money that could generate around $7,000 year if regularly invested, or else buy a condo in the midwest (saving you rent payments indefinitely). Alternatively, you could make -$20,000 a year in debt (assuming only tuition debt). -$80,000 over 4 years, losing around $4,800 the first year you get out of college to interest payments, and scaling gradually down (IF your interest was subsidized while in college). It will probably take you more than 10 years of your college job to pay back those loans, assuming you want to start a family or see the world or whatever, since you spent your best saving years spending as much money as you could, instead.

Why on Earth would you accept the college arrangement? You would have an awful lot of free time to improve as a person if you were financially independent at age 30, because you built a money generator from age 18-24 instead of going to college just because you were told you had to. Or, worse, you went and figured out you hated the only profession you were qualified for (and are suddenly overqualified for everything else except… Starbucks).

If it’s too late for your parents to give you $5,000 on your first birthday (instead of $80,000 or more, AFTER all the work of raising you and paying for your tuition too, sheesh), you could use your time at home to build yourself an income permanently. Then you could improve yourself, you know, for the rest of your life. Or you could go to the bars and party. Or you could move out on your own, pay all your own bills, feel like an adult, and work your entire life for someone else. The greatest gift parents can give their children isn’t college, it’s saving, and providing a roof over your head just long enough for you to get out from under it. Isn’t it weird, then, that our college grads are “investing” $80,000+ and moving back home with debt, instead?