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

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

#481

Post by 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).

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

#482

Post by rocho »

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…

I don't think this comparison is sound.

First of all, are you investing the same money in both cases? Even with a smaller annualized ROI you can earn more by investing more at the start.

This brings us to the second point: if you skipped college to just invest in the market, where are you taking the money? I would be very surprised if you managed to obtain a loan of some tens of thousands of dollars by stating that you will invest then. And even if you did, the blog post calculations didn't account for the interest rate that would necessarily have to be included in this case. Let's say you invest your savings then. The majority of teens out of high school has little to no savings, and it's a fact that jobs you can apply to out of high school pay much less than those requiring a degree or more (at least in the first few years).

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

#483

Post by prostoalex »

nikdaheratik wrote: post #272
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 have little to do with it as most of that money is completely separate from the operating budgets of the Public Universities. It does seem to be a good way to attract students for whatever reason. Textbooks are expensive because they have a limited monopoly, but they still aren't a huge expense compared to the per-hour tuition and fees. The issue, IMO, comes down to decades of budget cuts from state legislatur…

> Sports have little to do with it as most of that money is completely separate from the operating budgets of the Public Universities.

The taxpayers still cover the cost of stadium and other facilities at state schools, usually via bond issues.

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

#484

Post by madsbuch »

vilmosi wrote: post #215
madsbuch wrote: post #137

Earlier quoted context omitted.

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

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.

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.

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

#485

Post by prostoalex »

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.

"Nearly every university loses money on sports. Even after private donations and ticket sales, they fill the gap by tapping students paying tuition or state taxpayers."

https://www.usatoday.com/story/news/nation/2013/09/15/athlet...

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

#486

Post by prostoalex »

muninn_ wrote: post #177
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…

While the college coach is often highly paid, keep in mind that the football program usually brings in a boatload of money, and that money goes on to subsidize other NCAA sports and in many cases even returns money back to the university. I'm not a fan of the sports-fetish of college sports, but I do want to make a balanced point for others to consider.

> football program usually brings in a boatload of money

Let's ask some nice people at NCAA to quantify those boatloads.

http://www.businessinsider.com/ncaa-revenue-expense-report-2...

"Of the 120 athletic departments in Division I-A (sorry, the Football Bowl Subdivision) just 22 were self-sufficient last year. That's actually actually an improvement from 2009, when only 14 schools turned a "profit.""

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

#487

Post by slau »

whyenot wrote: post #136

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:/…

I paid about €300 per year for my studies in France.

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

#488

Post by matheweis »

ethbro wrote: post #381
gozur88 wrote: post #327

Earlier quoted context omitted.

College in the US is used by employers as a proxy for intelligence, something that's an outgrowth of laws and court rulings that date back to the '70s. So if you want to put yourself on the path to the C-Suite in a Fortune 500 company or to a partnership in a major law firm, you have to get into one of the very top colleges in the country. That, in turn, means top colleges can charge pretty much whatever they want an…

Above and beyond that, and to crib on one of the grandparent comments re: "Eventually, demand will decrease if prices continue increasing": If the minimum barrier to employment is having a college degree, then people will continue doing whatever they have to in order to get a college degree. The only way you're going to change demand is if decent jobs start being created that don't require a bachelor's degree. And I…

It may not be happening at scale, but it is certainly happening already in tech...

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

#489

Post by [deleted] »

kchoudhu wrote: post #374
wmeredith wrote: post #328

Earlier quoted context omitted.

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 thei…

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

[deleted]

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

#490

Post by Scea91 »

wayn3 wrote: post #475
lazyjones wrote: post #474

- educated people live longer (Harvard study etc. http://www.cbc.ca/news/technology/educated-people-live-longe... ) - 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 de…

they are reflected in the data. as outliers.

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.
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