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College Math is Fuzzy Math
Old 10-26-2019, 09:27 PM   #1
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College Math is Fuzzy Math

Help me square this circle.

We've all heard it. Supposedly college grads earn $1 million or more during their career ABOVE what high school grads earn.

The average college graduate has around $30,000 in student debt.

And now it's being reported that a whopping 40% of grads with student debt are on the road to default by 2023, a few short years from now.

https://www.cnbc.com/2018/08/13/twen...o-default.html

During a 40 year career, an extra $1 million in earnings equates to about $25,000/year more than a high school grad. Even in the early career years, the supposed disparity would be $10k or more....more than enough to handle student loan payments given record low unemployment and record low interest rates.

Does something smell fishy?

Could it be that that supposed $1 million in extra earnings confuses correlation and causation? (People who are destined to earn a lot tend to go to college, but going to college does not lead to earning more?) Or that the opportunity cost of skipping college is worth more if properly invested? Or that the supposed $1 million in earnings is a mean average and includes Jeff Bezos, Warren Buffett and a few other who skew the average a tad? Or that, like with the housing bubble, college is being sold to a generation of hopeful as "the American Dream" when in reality they're being set up for the American nightmare?

Something is not squaring up for me.
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Old 10-26-2019, 09:33 PM   #2
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I would agree. The ones who make the grades to attend college, will have a tendency to be a go-getter. Once they get out of college, the sky is the limit.

Those who look for an easy ride, probably the ones who had an easy ride throughout their life, will be left behind even after college.
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Old 10-26-2019, 09:41 PM   #3
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Just n=1, but a friend’s d-i-l, thankfully just promoted to supervisory role, went to nursing school, which cost about the same as a starter home in their community.
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Old 10-26-2019, 10:00 PM   #4
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I think that 40% default number is all student loans, not just college graduates. About 1/3 of students who attend college don't graduate. I'm sure many of them have student debt, low paying jobs, and probably not real eager to pay back a loan that in their minds wasn't a good investment.
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Old 10-26-2019, 11:13 PM   #5
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HA! You are def onto things. I have always heard this line and always found it suspect. It's hardly a ringing endorsement of a college degree for reasons other simple economics even at $25,000.
The spread between college grad and not is even less when realistically looked at. Take out doctors and lawyers. Too long, tres difficult, and too expensive for most to even attempt but generally associated with outsized wages. Take out those who make large bucks based on their college contacts and not their degree per se. The legacy crowd. Then, yes, throw in Bezos et al and the gap is even narrower.

And The American Dream is simply to sell something. The end. So, yes, this time it's college. It's perennially been houses. Just move the merchandise. Sell coal in Newcastle and ice boxes to Eskimos.
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Old 10-27-2019, 10:26 AM   #6
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I believe the push for "everyone" to go to collage has been detrimental in some ways. Not everyone is college ready, and trade schools can train you for some well paying careers.
I've read that the traditional "trade" jobs can not find enough workers--plumbers, electrician, appliance repair, etc.
I have a family member who did not go to college, yet he is making more money as an arborist in his own company than my husband did the last year he worked.
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Old 10-27-2019, 10:30 AM   #7
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This thread got me interested. I looked up some data on the local university here in Louisville, Kentucky.

After 6 years, 56.6% of entering freshmen had graduated from the 2012 freshman class. Here's the link to the most recent data on expected salaries, and actual salaries. Also lists how many are actually working in the field they got their degree in.

No wonder they have college debt problems.

http://louisville.edu/oapa/public-di...aduate-2016-17

Undergraduate salary survey after graduation;

Salary
We asked those students who would be employed after graduation to provide an estimate of the annual pre-tax salary they would earn. Of the 680 respondents, approximately
26% (177) reported that they would be making a salary under $24,999,  41% (280) making $25,000 - $49,999,
29% (200) making $50,000 - $74,999,
3% (18) making $75,000 - $99,999
1% (5) making $100,000+

Current Employment
When asked about their current employment status, of the 927 who responded, approximately
53% (495) indicated employment at a job related to their degree program/major,
27% (248) employment at a job not related to their degree program/major, 17% who indicated other main employment statuses
[1% (13) unemployed and not seeking employment, 1% (9) military service, 0.8% (8) participating in a national or international service program (i.e. Peace Corps), 0.5% (5) raising a family, and 13.6% (126) who indicated other].
3% (23), unemployed and seeking employment
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Old 10-27-2019, 10:41 AM   #8
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From what I've read, something like 66-70% of college graduates have debt when they get that degree. So that would infer that up to 1/3 of the graduates are actually free and clear.

I also hear the phrase "average debt" of around $25-30K get thrown around, but it's usually "average" as in "mean", which is going to get thrown out of whack by the outliers who rack up huge bills. "Median", which would be a more useful metric, is usually not mentioned. Probably because it's not as sensational of a number, and doesn't fit the rhetoric of "forgive all student debt by any means necessary".
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Old 10-27-2019, 11:06 AM   #9
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Consider that the 40% who do not graduate are in the default figures. In addition this includes folks who go to the for profit schools and while I am not sure how the group being monitored is defined, possibly those who go to trade schools.having not graduated and having significant loans is the worst possibility.
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Old 10-27-2019, 11:11 AM   #10
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60% of college grads these days are women. The real problem is where in the world is your smart, educated daughter going to find a man who is her intellectual equal. Preferably an electrician or plumber who can help her pay off that big student loan.

I knew a young teacher with a Master's Degree. Her husband is an electrician and out earns her by at least 50%. Even adjusting for her additional time off, he still out earns her by a significant amount.

Learning how to build and maintain things is a valuable skill. Show me a plumber and I'll show you a man or woman who makes a good living.
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Old 10-27-2019, 11:34 AM   #11
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Learning how to build and maintain things is a valuable skill. Show me a plumber and I'll show you a man or woman who makes a good living.
+1

Here in my neck of the woods (metro Atlanta), skilled, reliable, honest/trustworthy tradespeople are few and far between. If asked, I would advise almost any young person to consider a "no college required" career in things like HVAC service work, plumbing, and electrical install/repair, except for those kids who are more intellectually and academically suited for fields like medicine, engineering, science, computers, etc. And for those in the latter group, by all means, go to a college where you can get a scholarship or can afford to pay for it without racking up enormous amounts of debt!
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Old 10-27-2019, 12:06 PM   #12
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+1



Here in my neck of the woods (metro Atlanta), skilled, reliable, honest/trustworthy tradespeople are few and far between. If asked, I would advise almost any young person to consider a "no college required" career in things like HVAC service work, plumbing, and electrical install/repair, except for those kids who are more intellectually and academically suited for fields like medicine, engineering, science, computers, etc. And for those in the latter group, by all means, go to a college where you can get a scholarship or can afford to pay for it without racking up enormous amounts of debt!


This is great advice. I think where it likely meets push back in the real world is when you say to a 17 year old, “I think you’d be a great plumber.” Most people have high aspirations, and when they can get a loan (and have no experience what the payback looks like) it’s all too tempting. Personally I think societally we need to curb incentives of handing out huge loans to kids, such as making these loans as easily canceled in bankruptcy as credit card debt. If the lenders aren’t getting paid back and can’t stick their claws into all future earnings, they’re likely to reign in the amount of loans offered which I believe would also curb or reverse tuition price hiking. This student loan thing reminds me a lot of the housing bubble where it all came down to availability of easy credit.
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Old 10-27-2019, 12:16 PM   #13
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I think that 40% default number is all student loans, not just college graduates. About 1/3 of students who attend college don't graduate. I'm sure many of them have student debt, low paying jobs, and probably not real eager to pay back a loan that in their minds wasn't a good investment.


Very good point. In the original post I said “grads” but should have correctly said “borrowers.”
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Old 10-27-2019, 12:17 PM   #14
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Two examples close to home:

SIL told everyone he graduated from college. Was working in an Assisted Living home and making little money. Found out later he was about a half a year short on credits. My daughter lit a fire under his you know what and "encouraged" him to try and get into electricians apprentice program. Well, he did such a thing and now 7 years into an awesome trade and fit him like a glove. Now a supervisor. Luckily no student debt

Son's company had a major layoff. He and his crew among many others would be gone. He asked me if he should go back to school (has his Associates). I said in no way should you go back unless it's for Nursing School or a specific trade. You have learned more in the world than you ever will in school. Long story short he negotiated taking another region and is able to work without moving.

I won't get into the whole college experience. It's awesome and you do learn a number of things. Nowadays I think it's been watered down and becomes just something to do after high school. If it was me I would have waited a year and/or done community college then transferred to 4 year. Also would have probably done 12 hours per term year round and worked.
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Old 10-27-2019, 02:09 PM   #15
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Just n=1, but a friend’s d-i-l, thankfully just promoted to supervisory role, went to nursing school, which cost about the same as a starter home in their community.
Again, there are cheaper ways to get medical training:

https://en.wikipedia.org/wiki/Health...arship_Program

Had a relative use the above to go to medical school, which enabled them to retire as an O-5 in their early 50s, & is now currently working on a contract basis when they want.
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Old 10-27-2019, 02:39 PM   #16
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There is another paradox in this whole "college graduates get jobs that pay more money" notion. As the number of graduates increases, why would anyone expect a corresponding increase in the number of higher paying jobs? Microeconomics would predict the opposite; as the supply increases, the wages they can command should go down.

Agree on almost all jobs where a person is willing to work with his/her hands. Wiring and plumbing a house cannot be exported to China. Neither can repairing a car or installing a concrete driveway. It is the people that are willing and skilled who will out-earn many college graduates in the future.
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Old 10-27-2019, 02:43 PM   #17
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Median debt of those who borrowed is $17,000.
https://www.pewresearch.org/fact-tan...student-loans/
Add in the 25-30% with no debt and I don't see a nationwide emergency.
I guess with all the worry over student debt that Cancun and Jamaican resorts will be empty this spring.
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Old 10-27-2019, 03:22 PM   #18
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Again, there are cheaper ways to get medical training:

https://en.wikipedia.org/wiki/Health...arship_Program

Had a relative use the above to go to medical school, which enabled them to retire as an O-5 in their early 50s, & is now currently working on a contract basis when they want.
I've told this story before but it is worth repeating. A friend got his way paid through medical school by volunteering to serve 4 years as a doctor in the Navy and another two years serving as a doctor in areas short of doctors. So, he spent four years as a submariner medical officer on a Boomer, then two years on a reservation. With that done, he hung up his shingle.

A lady I know got her Nursing Degree by agreeing to work in the Air Force for four years afterwards.

In both cases I believe they were subject to 'recall' for another 10 years or so if the President decided their services were urgently needed.
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Old 10-27-2019, 05:14 PM   #19
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From what I've read, something like 66-70% of college graduates have debt when they get that degree. So that would infer that up to 1/3 of the graduates are actually free and clear.

I also hear the phrase "average debt" of around $25-30K get thrown around, but it's usually "average" as in "mean", which is going to get thrown out of whack by the outliers who rack up huge bills. "Median", which would be a more useful metric, is usually not mentioned. Probably because it's not as sensational of a number, and doesn't fit the rhetoric of "forgive all student debt by any means necessary".
Well, since the Direct Unsubsidized Federal loan for dependent students (the one everyone can get) totals $27K over four years. I would guess the median for new grads is about $27K!

DS1 just paid his $27K off two-and-a-half years after graduating. He's also keeping the car I gave him till the wheels fall of and thinks it's cool that I ERed at 55. Perhaps I should get him to sign up here
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Old 10-27-2019, 05:31 PM   #20
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Again, there are cheaper ways to get medical training:

https://en.wikipedia.org/wiki/Health...arship_Program

Had a relative use the above to go to medical school, which enabled them to retire as an O-5 in their early 50s, & is now currently working on a contract basis when they want.

The military is looking for thirty-something married women with children?
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