On average, skipping college and investing tuition costs nets a higher return • Hacker News Board

Re: On average, skipping college and investing tuition costs nets a higher return

#261

Post by ruste » Mon, Jun 05, 2017, 12:19 AM UTC

brohoolio wrote: post #94

vowelless wrote: post #68

Earlier quoted context omitted.

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 mor…

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.

Actually, I think this is at least part of the reason for increased healthcare costs. The consumer almost never the one paying for healthcare. It might help to lower healthcare costs if there was no longer a tax incentive for employers to use healthcare as a form of payment. If that happens it will make far more sense for employers to let their employees deal with the administrative overhead of finding health coverage and pay them higher wages to make up the difference. Suddenly the employee is much more aware of what their health coverage is costing and now has a much greater interest in it costing less. Without the consumer being the one paying for things costs can on paper get a bit crazy when in reality it costs the company a reasonable amount overall as they've negotiated with the insurer and the insurer has negotiated with the hospital.

Re: On average, skipping college and investing tuition costs nets a higher return

#262

Post by ThrustVectoring » Mon, Jun 05, 2017, 12:19 AM UTC

pmiller2 wrote: post #135

ThrustVectoring wrote: post #81

Earlier quoted context omitted.

College is expensive because debt is cheap because of the expansion of pensions and retirement accounts as a proportion of the economy.

You had me at easy credit, but lost me with the reasoning.

Savers are counter-parties to debtors. Every debtor that consumes real goods and services now in exchange for forgoing later consumption gets paired with a saver that forgoes current consumption in exchange for later. The market has to clear, and the price is the risk-free rate of return. More people interested in saving? The natural effect of this pressure is to drive interest rates and credit standards down until you find enough people interested in borrowing.

Equity is fundamentally in the same boat - it's really the same thing as a loan, except the repayment term is a percentage of the economic output of a business venture. There's even some cool math-y economics about how the value of a firm doesn't change when you change the capital structure, so replacing $100M of equity with a $100M corporate bond just shifts risks from bondholders to shareholders.

Anyhow, the short story is that the West is having fewer children later. This means fewer currently-productive members of society per retiree. So, larger amounts of savings/debt required, which means better terms need to be offered in order for the market to clear.

Re: On average, skipping college and investing tuition costs nets a higher return

#263

Post by andrewmcwatters » Mon, Jun 05, 2017, 12:19 AM UTC

forkandwait wrote: post #168

krakensden wrote: post #46

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 getti…

> Wasting four years is a huge cost. At college I: learned calculus, computer programming, advanced mathematics, urban planning, how to communicate like a grown up, and those are just the big topics. I also took acting classes and learned social skills and made lifelong friends. When I graduated, a professor arranged my first professional job which was an order of magnitude better than any blue collar gig I had ever…

For the great value of your college education, you communicate so rudely in the midst of many readers sharing similar viewpoints. In addition, I'm constantly astounded by the fact that higher academia produces people that say these things.

Re: On average, skipping college and investing tuition costs nets a higher return

#264

Post by tormeh » Mon, Jun 05, 2017, 12:20 AM UTC

Cyph0n wrote: post #224

ecshafer wrote: post #218

Earlier quoted context omitted.

The amount of money that goes towards marketing, administration, and buildings that are far fancier than they need to be is the issue. The professors are a fraction of the costs. Universities spend far more money than they need to on useless extraneous offices and bloat. Get back to focusing on education and the costs will drop.

It's not that simple at all. Regarding buildings and marketing: you have to work hard to attract the absolute top students, especially in a huge education market like the US. Now you may argue that students shouldn't be so superficial, but they are, so universities have to deal with that when competing at the national stage. As for administration, you probably have no idea how complicated it is to keep a university r…

>Regarding buildings and marketing: you have to work hard to attract the absolute top students, especially in a huge education market like the US.

Government paid higher education usually don't care that much about getting top students. They may or may not come. This attitude makes saving on all the extra stuff pretty easy.

Anyway, not all universities can have top students, by definition, so most universities' generous facilities are wasted in an arms race they can't win.

Re: On average, skipping college and investing tuition costs nets a higher return

#265

Post by mquander » Mon, Jun 05, 2017, 12:20 AM UTC

habitue wrote: post #200

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 coll…

That doesn't seem necessarily right. College is an investment of limited size that you can more or less make once per lifetime, and the market for it is about the furthest thing from an efficient or free one you could ever think of, with subsidies and regulations and externalities coming from every angle. It's not obvious that it might not persist as an "unreasonably" good or bad investment.

Re: On average, skipping college and investing tuition costs nets a higher return

#266

Post by icantdrive55 » Mon, Jun 05, 2017, 12:20 AM UTC

twotwotwo wrote: post #246

habitue wrote: post #200

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 coll…

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 Berkele…

I don't have an answer either.

I do think they should make student loans bankrupt-able. It's time.

Oh yea, and put a hiring freeze/salary cap on all administrative personnel for any school that accepts federal loans.

The best teachers I had were at community colleges, and usually had summer jobs.

I never figured out what most of the administration did besides irritate the better teachers.

Re: On average, skipping college and investing tuition costs nets a higher return

#267

Post by tedivm » Mon, Jun 05, 2017, 12:21 AM UTC

twotwotwo wrote: post #246

habitue wrote: post #200

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 coll…

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 Berkele…

Government spending on higher education peaked in the mid 70s, dropped in the 80s, and has not kept up with the population increases. The focus on loans, instead of government funding, was basically a new tax on the poor and middle classes in order to fund the Reagan tax cuts for the rich.

Re: On average, skipping college and investing tuition costs nets a higher return

#268

Post by ThrustVectoring » Mon, Jun 05, 2017, 12:22 AM UTC

zabuni wrote: post #210

pmiller2 wrote: post #135

Earlier quoted context omitted.

You had me at easy credit, but lost me with the reasoning.

I would assume because retirement fund managers and pensions like constant safe returns on investment, given they have a to have a constant payout, they go for things like debt, especially tasty non-dischargable student loan debt. Debt is a lot easier to predict than investing in companies.

Investing in companies vs lending money is a pointless distinction here. The total return for the business venture is the same if, for example, a company borrows money to buy back stock. All kinds of the return-on-savings are fungible with each other, and work together to drive down the risk-free rate of return.

Re: On average, skipping college and investing tuition costs nets a higher return

#269

Post by jimbokun » Mon, Jun 05, 2017, 12:24 AM UTC

forkandwait wrote: post #168

krakensden wrote: post #46

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 getti…

> Wasting four years is a huge cost. At college I: learned calculus, computer programming, advanced mathematics, urban planning, how to communicate like a grown up, and those are just the big topics. I also took acting classes and learned social skills and made lifelong friends. When I graduated, a professor arranged my first professional job which was an order of magnitude better than any blue collar gig I had ever…

"I took out 20,000 in loans to go for the last two years after transfering from community college (with no loan for that)."

This is the key.

If your debt was an order of magnitude larger, would the benefit still be worth it? And if you got a degree that led to a $45k / year job instead of $90k?

It's no longer easy to say "going to college" is always a worthwhile investment. It is highly contingent on future earning potential with the degree and how much it costs.

Re: On average, skipping college and investing tuition costs nets a higher return

#270

Post by tedivm » Mon, Jun 05, 2017, 12:24 AM UTC

icantdrive55 wrote: post #266

twotwotwo wrote: post #246

Earlier quoted context omitted.

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 Berkele…

I don't have an answer either. I do think they should make student loans bankrupt-able. It's time. Oh yea, and put a hiring freeze/salary cap on all administrative personnel for any school that accepts federal loans. The best teachers I had were at community colleges, and usually had summer jobs. I never figured out what most of the administration did besides irritate the better teachers.

Administration costs have risen quite a bit, and are even used as political gifts. Mitch Daniels, former governor of Indiana, stacked Purdue's board with his contributors and supports and when he left the governor position they made him president of Purdue. The detachment from the administration of schools and the actual education portion is a big issue.