Is a college degree a better investment today than 50 years ago?

[daylatedollarshort]

College seems like it will have a very good ROI for our kids so far. Between community college credits, internships, and a public four year school in a major with good job prospects, our oldest should have a college cost payback period of well under a year.

I am not sure why so many families we know took out loans to send their kids to expensive private schools they could not afford for degrees in majors where they could not find work, but unfortunately that does seem to happen. All the data to pick a good ROI school and major is published on the web these days.

 

[daylatedollarshort]

I forget which academic produced it, but I read a paper that compared a plumber to a doctor, with the result of how old they would be when the doctor overtook the plumber. By "overtook", I mean, the doctor spent money for longer in education, so took some time to get that back. I checked the assumptions on the research pretty closely, and I was generally hoping what he said wasn't true, but I didn't see any big flaws in the analysis.

Maybe this was the article you read -

Study This to See Whether Harvard Pays Off: Laurence Kotlikoff - Bloomberg

 

[dallas27]

There is not causation between income and degrees, only correlation. Smarter people make more money, degree or no degree. It just so happens most smart people are funneled into college.


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[brett]

I received much more from my post secondary educational experiences than a higher level of income. And those benefits, for me, were at least equal to or greater than the increased income. It was much more than money and financial return on the education investment dollar.

It changed and broadened my perspective. It provide me with opportunities for personal growth that I might not otherwise have had. I certainly earned more money. Not necessarily because of the education itself but because of the opportunities that it presented. I still had to work very hard and prove my worth every day.

And when I was hiring, degree was often a sign to us that someone could finish what they started. The degree may not have been relevant but if they person had skills, and had proven that they could learn and adapt that was often the 'hire' ticket.

 

[daylatedollarshort]

I forgot to add college tax credits to my post above. Plus in California the income limits are pretty high for grant money which covers full tuition and fees, and this year year families earning under $150K may be eligible for middle class scholarships. Then there's all sorts of other options for students to help reduce or defray costs, like zero or low interest loans, merit scholarships, fulfilling some electives with low cost online courses, AP classes, living at home some or all the years and CLEP tests.

The community colleges have transfer degrees where students following the program are guaranteed their CC classes will all be accepted at the 4 years and if they fulfill the transfer degree requirements, they are guaranteed to graduate in 2 more years at the public four years.

College costs can be quite reasonable here with excellent payback periods. So for sure it can be worth worth it, but it depends on the school and the major.

 

[CaliforniaMan]

I received much more from my post secondary educational experiences than a higher level of income. And those benefits, for me, were at least equal to or greater than the increased income. It was much more than money and financial return on the education investment dollar.

It changed and broadened my perspective. It provide me with opportunities for personal growth that I might not otherwise have had. I certainly earned more money. Not necessarily because of the education itself but because of the opportunities that it presented. I still had to work very hard and prove my worth every day.

And when I was hiring, degree was often a sign to us that someone could finish what they started. The degree may not have been relevant but if they person had skills, and had proven that they could learn and adapt that was often the 'hire' ticket.

+1 It is not all about the money. From my experience people who have finished college in general have a broader outlook on the world and a better perspective on divergent views. It changes the variety of people you can associate with (tolerate?) and gives you more confidence.

In addition very simple tasks for a college student, writing up the results of an experiment, or explaining a sales idea seems to be much easier for those who have been to college and had to write papers before. I have seen non-college people just completely stumped at having to write up even a very simple report.

Now about the money, you get more money the more of a monopoly you have on something that is needed. The barriers to entry. If the barriers to entry are very low, there is no way you will make a good wage ever. If you choose a field for which there is little demand, even if the barriers of entry are high, you will never make a good wage.

Even in non-college areas there are good professions. There is some barrier to entry for plumbers and there will always be a need for them, so they will be able to command a degree of monopoly on their services. For firemen and policemen and women there are similar barriers to entry and consistent need.

For doctors, engineers and those in technical and scientific fields, they all have high barriers to entry and, picking the right field, high demand.

Picking the right degree (especially but not exclusively STEM) at the right price can position you where the barriers of entry are high. Case in point, I would guess that the ratio of college grads to non grads is higher on this forum than in the general population.

College gives you the chance to broaden your perspective on the world, associate with a broader scope of people, enjoy more of life because you understand more, and in addition get the chance at a high barrier of entry field. And heck, it can be fun too!

 

[explanade]

Cost of college has made ROI a big issue. As tuition has outpaced inflation for years, it's become a significant investment.

Parents have always pushed kids towards majors with better job prospects but it seems there's less margin for graduates of areas other than STEM or business of some kind.

When students pick a "money" major, do they and their families approach college more pragmatically, specifically as avenues to enter lucrative careers?

And when they are so bottom-line inclined, are they more likely to miss out on the college experience, the broadening of perspectives?

 

[target2019]

College degree is to individual career as capital investment is to business.
For a very large number of jobs you must have the paper to get in the door for an interview. There are exceptions, though.

 

[Tractor guy]

College degree is to individual career as capital investment is to business.
For a very large number of jobs you must have the paper to get in the door for an interview. There are exceptions, though.

In my experience as a hiring manager at a megacorp manufacturing company that had well paying union jobs, a college degree is a good investment. When we were hiring for entry level assembly line jobs, we required at least a 2 year associates degree before we'd talk to a person. The 2 year degree wasn't necessarily needed to do the work, but the requirement made it more likely that we'd be talking to people who had a good work ethic and who could learn the skills necessary to do the job. We had plenty of people in the hiring pool so had no need to lower the requirements and talk to people who didn't have degrees.

For anyone who was interested in getting promoted into management, a 4 year degree was an unwritten requirement. I had discussions with several managers about very capable staff who we all agreed were qualified for a promotion when an opening came up. In the end we gave the person the promotion but it was a near thing. We new he could do the work but we were very concerned about what would happen 4-8 years down the road. We didn't want to set this person up to be locked in to a job that he couldn't transfer or get promoted out of. We new that people who didn't know him would be highly reluctant to consider someone without a B.S. for even a lateral move. One of the considerations for a promotion was that we as managers had to feel that the person being promoted had the potential for another promotion as he/she got more experience. The lack of a B.S. was a serious negative when we went through that discussion. Unfortunately, in any big company, things change and we needed to consider the risk that the job he had would be eliminated and make sure that he had the qualifications to do something else if that happened.

 

[daylatedollarshort]

Google has started hiring more people without degrees:

"One of the things we’ve seen from all our data crunching is that G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless — no correlation at all except for brand-new college grads, where there’s a slight correlation. Google famously used to ask everyone for a transcript and G.P.A.’s and test scores, but we don’t anymore, unless you’re just a few years out of school. We found that they don’t predict anything.

What’s interesting is the proportion of people without any college education at Google has increased over time as well. So we have teams where you have 14 percent of the team made up of people who’ve never gone to college."


http://www.nytimes.com/2013/06/20/b...-may-not-be-such-a-big-deal.html?pagewanted=2

 

[BLS53]

What made a college degree worthwhile in the past, was that a relatively small portion of the population had one. If an employer had an entry level position available, and 10 people applied, and only one had a degree, that person got the job. It doesn't work that way anymore. Now, so many people have degrees, the paper is meaningless for any job not requiring a professional certification achieved through academia.

There are some positions that require a degree as a pre-employment screening tool. But all that does is put one in a smaller , but still substantial pool of applicants, where there will be intangibles involved in determining the select few who get hired.

The educational system has preached the college degree thing for so long, that we have many young people believing a degree guarantees success. Too many go in debt, to "follow their dreams", and then are disappointed that the degree produces a $25K a year salary, and $100K of student loans that can't be eliminated through bankruptcy.

 

[sengsational]

Maybe this was the article you read -

Study This to See Whether Harvard Pays Off: Laurence Kotlikoff - Bloomberg

That wasn't it, exactly, but the sentiment was exactly the same...the doc and plumber ended up about the same. I contend, too, that it might be easier for the plumber to start his own business and get way ahead of the doctor.

 

[eta2020]

College (Masters degree even Phd) is excellent investment if you select a right major.

 

[Amethyst]

Plumber's risk of being sued - and thus the burden of malpractice insurance - likely would be much lower than doctor's. (Not saying plumbers don't get sued - I'm sure some do).

Amethyst

That wasn't it, exactly, but the sentiment was exactly the same...the doc and plumber ended up about the same. I contend, too, that it might be easier for the plumber to start his own business and get way ahead of the doctor.

 

[Jay_Gatsby]

That wasn't it, exactly, but the sentiment was exactly the same...the doc and plumber ended up about the same. I contend, too, that it might be easier for the plumber to start his own business and get way ahead of the doctor.

Just goes to show you that the trades are still a very viable option - even if you are "college material". In fact, why not combine both? Business degree + trade school = profit?


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[Badger]

Choosing to go to college and selecting a major based solely on ROI frequently (although not always) results in job dissatisfaction and being unhappy all those work years until retirement. Some folks see this early enough to take their high salaries and start LBYM so they can get out. It's sad that their experience results in work being a four letter word instead of something that can be enjoyable and rewarding.

I enjoyed the academic environment and eventually chose a career path that gave me a great deal of satisfaction and enjoyment even though it did not include a high salary. I was fortunate to realize the need to LBYM, married a lady at 40 with similar values, and invested heavily with our small income. I had a great time getting to FI and now have enough saved to see us both through our retirement years.

A few decades ago at my 20 year high school reunion many of my friends had become doctors, lawyers, engineer, etc. because of parental pressure and the mindset of ROI. I was surprised at how many of them commented on being envious of my lifestyle and my enjoyment of career choice.

My parents were right. I'm glad I listened. If you chase the dollar instead of your love of a career path regardless of college or trade school then you may not enjoy 2/3 of you life. So what's the point?

Cheers!

 

[Jay_Gatsby]

Choosing to go to college and selecting a major based solely on ROI frequently (although not always) results in job dissatisfaction and being unhappy all those work years until retirement. Some folks see this early enough to take their high salaries and start LBYM so they can get out. It's sad that their experience results in work being a four letter word instead of something that can be enjoyable and rewarding.

I enjoyed the academic environment and eventually chose a career path that gave me a great deal of satisfaction and enjoyment even though it did not include a high salary. I was fortunate to realize the need to LBYM, married a lady at 40 with similar values, and invested heavily with our small income. I had a great time getting to FI and now have enough saved to see us both through our retirement years.

A few decades ago at my 20 year high school reunion many of my friends had become doctors, lawyers, engineer, etc. because of parental pressure and the mindset of ROI. I was surprised at how many of them commented on being envious of my lifestyle and my enjoyment of career choice.

My parents were right. I'm glad I listened. If you chase the dollar instead of your love of a career path regardless of college or trade school then you may not enjoy 2/3 of you life. So what's the point?

Cheers!

Fair enough. But most people don't know what they want to do with their lives until they go through many years of doing things they dislike. Trial and error seems to be the rule rather than the exception. So can you blame people for chasing money? If they LBYM (and this is a big IF) then they will have the financial resources to follow their passion. Unfortunately, high paying careers are jealous mistresses, so there is little time for self discovery. Add in a spouse and kids, and you have a recipe for golden handcuffs.

I suppose in life, everything is a trade off. The key is knowing what you're trading.


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[daylatedollarshort]

Looking for a school and major with a good ROI does not mean doing something you hate for the highest paying major. Getting an AA degree or certificate in a trade can have an excellent ROI, as in the plumber example above.

It does mean not taking out 200K in loans to get a PhD in a major you love without looking at the Job Outlook handbook, only to find when you graduate the salaries are low, the competition is fierce and job openings few and far between. So instead of working in your major you find yourself over-qualified for minimum wage jobs, and end up moving back in with your parents wondering how in the world you can ever pay back all those loans that are usually non-dischargable in bankruptcy, piling up interest and late fees as times goes on and you still haven't found work.

The problem is with the inflation adjusted cost of many four year colleges being so high these days compared to the sixties or seventies, there are less and less majors and schools with a good ROI on the cost for students who have to go into debt or self fund to cover the costs.

 

[eta2020]

Career is like a marriage, you will not know what you got until few years elapsed. (in terms of liking what you do or not liking it) Some people luck out some not.

Now if you pick useless degree you can be pretty much guaranteed poor financial outcome....

 

[razztazz]

Now if you pick useless degree you can be pretty much guaranteed poor financial outcome....

Nope. Only if you insist on pursuing a "career" in that degree field. More than one way to skin a cat.

 

[CaliforniaMan]

Just goes to show you that the trades are still a very viable option - even if you are "college material". In fact, why not combine both? Business degree + trade school = profit?

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+1
My mom, who got a masters degree in the late 1930s, very unusual for women at that time, was big on me going to college. It fact it was just assumed that I would go, not if. But, my mother also wanted me to learn a trade, just in case. She was as happy that I was able to make money painting houses as she was when I too later got my masters degree. Having marketable skills that help people solve problems is always a good idea.

 

[haha]

The community colleges have transfer degrees where students following the program are guaranteed their CC classes will all be accepted at the 4 years and if they fulfill the transfer degree requirements, they are guaranteed to graduate in 2 more years at the public four years.

Are they guaranteed acceptable at any UC campus including Berkeley and UCLA? Or just somewhere, whether it be a UC campus or Cal State?

I assume that admission is a separate process, so if you are admitted to Berkeley and your CC course performance is, OK, then those CC credits transfer. Is this correct?

Ha

 

[Amethyst]

Your mom must've been really smart. And not just because of her degree...

Amethyst

+1
My mom, who got a masters degree in the late 1930s, very unusual for women at that time, was big on me going to college. It fact it was just assumed that I would go, not if. But, my mother also wanted me to learn a trade, just in case. She was as happy that I was able to make money painting houses as she was when I too later got my masters degree. Having marketable skills that help people solve problems is always a good idea.

 

[rodi]

Are they guaranteed acceptable at any UC campus including Berkeley and UCLA? Or just somewhere, whether it be a UC campus or Cal State?

I assume that admission is a separate process, so if you are admitted to Berkeley and your CC course performance is, OK, then those CC credits transfer. Is this correct?

Ha

I'm not sure the exact guarantees but I've had 2 friends get their kids into UCSD (pretty darn competitive school for stem degrees) via the community college transfer program.

That said you have to be meticulous in your choice of classes at the CC. A few mistakes and I know it can cause problems. One former coworker's daughter was on the hairy edge. She's now graduated from UCSD in Biology and will be starting her PhD program in Sept.

 

[haha]

I'm not sure the exact guarantees but I've had 2 friends get their kids into UCSD (pretty darn competitive school for stem degrees) via the community college transfer program.

That said you have to be meticulous in your choice of classes at the CC. A few mistakes and I know it can cause problems. One former coworker's daughter was on the hairy edge. She's now graduated from UCSD in Biology and will be starting her PhD program in Sept.

Thank you.

Ha