Headline: It's Time to Admit College is Driven by Speculation - Not Investment

[FIREby35]

See the link:

https://www.linkedin.com/pulse/its-time-admit-college-driven-speculation-zachary-slayback

It's from linkd in, so I don't know if it will be difficult to access.

[mr_orange]

Interesting article.  Thanks for sharing.  Posting to follow. 

[AZDude]

It was somewhat interesting, but too many claims are made without facts backing it up. The facts that are used do not really support his argument. The truth is that college is a good investment, if you are in certain fields. The people who spend $100K on basket weaving are the problem, not people who spend $20K on an engineering degree.

[grantmeaname]

See the link:

https://www.linkedin.com/pulse/its-time-admit-college-driven-speculation-zachary-slayback

It's from linkd in, so I don't know if it will be difficult to access.

Do you have any thoughts on the article?

[Left]

who is doing the speculation? the college or the student? sounds like they have unrealistic views of their future careers, without the intermediate steps to lead to it...

[FIREby35]

I have some thoughts.

For one, I believe college prices are driven higher by the extensive use of debt (rather than cash) to pay their prices. People have an amazing way of not being able to gauge value when they make promises to pay rather than trying to figure out actual ways to pay. I think that explains most of the skyrocketing cost of higher education. Just like the skyrocketing costs of vehicles (an F-150 cost how much!!)

I also am a huge believer in the "selection bias" issue raised on the article. I was recruited to play sports at Ivy league/Prestigious academic institutions but didn't have the money. Instead I went to community college. Same issue when I chose the law school. Fancy, expensive school or free, state school? The expensive institutions sell the idea that it is the place that creates the success. I wholeheartedly disagree. Every time I chose the "value" institution and I feel I've had plenty of success. I believe that success is based on who I am, rather than the institutions I attended. Also, a key ingredient in my success has been not having student loans and the consequent freedom to pursue a less traditional path. So, I believe selection bias is real and I wish people would think more about it when making educational decisions.

Of course, the ubiquitous "basketweaving" degree is an issue as well. People "speculate" when they don't make informed decisions on the value of the degree they are actually pursuing. To avoid "speculating" people need to be more explicit in their aims for going to college. Are you going to get a well rounded liberal arts education to be a better person - awesome. Are you going to get a degree that will increase your earning potential - awesome. However, those goals are different. If someone is expecting their education to be an "investment" then they have analyze the cost/benefit. To many people don't do a cost benefit and end up believing they can get any degree at any price and everything will work out. It might work out, but that is "speculation."

So, since you asked my opinion, I think "speculation" applies to a lot of people. I think those people are, generally speaking, the ones who complain about their high debt and low income once they go bust.

[mr_orange]

Awesome post FIREby35.....I couldn't have said it nearly as well. 

[Syonyk]

For one, I believe college prices are driven higher by the extensive use of debt (rather than cash) to pay their prices. People have an amazing way of not being able to gauge value when they make promises to pay rather than trying to figure out actual ways to pay. I think that explains most of the skyrocketing cost of higher education. Just like the skyrocketing costs of vehicles (an F-150 cost how much!!)

And houses in "hot" areas.  Yeah, it's $900k, but that's only $4000/month, and you can build equity!  <-- Literally was told this recently.  No interest in being house poor, sorry... :(

Are you going to get a well rounded liberal arts education to be a better person - awesome. Are you going to get a degree that will increase your earning potential - awesome.

What if you just want to go party hard for as many years as you can without having to have the money to do it?  That's an option as well!

[bacchi]

I also am a huge believer in the "selection bias" issue raised on the article. I was recruited to play sports at Ivy league/Prestigious academic institutions but didn't have the money. Instead I went to community college. Same issue when I chose the law school. Fancy, expensive school or free, state school? The expensive institutions sell the idea that it is the place that creates the success. I wholeheartedly disagree. Every time I chose the "value" institution and I feel I've had plenty of success. I believe that success is based on who I am, rather than the institutions I attended. Also, a key ingredient in my success has been not having student loans and the consequent freedom to pursue a less traditional path. So, I believe selection bias is real and I wish people would think more about it when making educational decisions.

The Economist rankings also support the selection bias theory.

the economic value of a university is equal to the gap between how much money its students subsequently earn, and how much they might have made had they studied elsewhere.

http://www.economist.com/blogs/graphicdetail/2015/10/value-university

It's not that Yale trains students to be successful; it's that the graduates are already set up for success before they even get to college.

[Left]

think about it more, why are all the college is bad investments talk mostly from the past decade since crash? if they are calling it an investment, shouldnt it be a long term thing? the majority after a few decades seem to do fine... there is a survivorship bias though... but still... not enough time to tell if it is just the millennials whining about it

for people who ER, doubt it makes as much difference because of the short career for it to compound on

[Travis]

think about it more, why are all the college is bad investments talk mostly from the past decade since crash? if they are calling it an investment, shouldnt it be a long term thing? the majority after a few decades seem to do fine... there is a survivorship bias though... but still... not enough time to tell if it is just the millennials whining about it

for people who ER, doubt it makes as much difference because of the short career for it to compound on

I'm not sure when it started/stopped, but there seemed to be some unwritten rule that on graduation day there would a job waiting for you with a salary more or less equal to your student loan debt and if there isn't/wasn't then it's a sign the economy is in the shitter and the system screwed you over.  I'm not sure if this was just a popular culture expectation taken too far or if that was the reality for some boom period in the 1990s.

My personal view on college has always been that we have so many opportunities to attend higher education in the US that it is rarely a market-driven decision.  If I want to rack up $50k in debt when there is no economic justification for my degree choice then I can do that.  There is no system in place to discourage me from blowing money on a losing proposition.  On occasion you'll see magazine articles showing which career choices are not worth the debt, but they're once a year snapshots rather than deep analysis that should be mandatory reading for all high school seniors.  On the other hand, there isn't always a direct correlation between degree choice and career path.  I have friends who have liberal arts degrees and found entry-level positions which raised them up to pretty awesome careers (philosophy major now working corporate HR).  The catch is they made sure not to get into obscene debt for such an uncertain start.

[Left]

But you say it like it isn't true... 30k is average debt... so getting a 30k is fairly easy, just $15/hour really.

[Travis]

From personal experience, I remember some classmates who basically complained "I just graduated, where is my $60k/year job?"  Both had around $50k in debt.  One had an English degree and the other an some kind of science degree.  That salary expectation was common in my graduating class.  I should have rephrased my comment to reflect they expected to be able to wipe out their debt right away with money to spare.

[FIPurpose]

I remember after graduating (Computer Science), several of us discussed what offers we had received and what salary we can expect from certain companies and regions. It was an awesome group to be that open about things. I believe most of us got around 60-70k right out.

[BlueMR2]

It was somewhat interesting, but too many claims are made without facts backing it up. The facts that are used do not really support his argument. The truth is that college is a good investment, if you are in certain fields. The people who spend $100K on basket weaving are the problem, not people who spend $20K on an engineering degree.

The speculation part is the field...  With as rapidly as technology advances, it's hard to say with certainty which expensive degree will be completely worthless in just a couple years.  Some obviously appear to be poor choices of course, but we've been surprised a number of times already, and the pace of change is accelerating.

Personally, I think multi-year college with specific degree at the end is not suitable for the masses.  If you're already a richie-rich and want to waste away your hours and money in school, fine.  If you're trying to get a good paying job, you're probably best off going through one of the mills (like those nurse schools or coding camps).  They get you just enough to get going out the door.  Then 5-10 years down the road, you'll need to retrain anyways, so then do another half to full year stint somewhere.  Rinse, repeat...

[nobodyspecial]

With as rapidly as technology advances, it's hard to say with certainty which expensive degree will be completely worthless in just a couple years.

And sometimes just bad luck.
You can hardly call students in Norway that chose to start a 4 year oilfield geology degree 5 years ago foolish wastrels!
Or those that did computer science in 1998 and graduated into the dot-com crash

[Left]

yes but the ones who kept skills up did well once market recovered....

hm, if people who graduated in the crash are so spiteful of college... are they also not investing in the market because it crashed? that seems... like a really bad idea, they cut themselves off of investing for future money, AND give up on their college education by not keeping up what they learned?

plus they arent thrifty like the depression era folks, so they are spendy but have little to carry themselves once they are unable to work? well, hoping they vote for social welfare... they will be relying on it once they cant work