Comment by byrneseyeview | Hacker News Reader

Comment by byrneseyeview | Hacker News Reader

Parent Full thread

Whoa, there! What discount rate are you using? For the median degree, I get an NPV less cost of $47K. Here are my assumptions:

* Discount rate of 6% (we're talking about an asset with a 40-year lifespan and zero terminal value).

* $25K in annual school costs.

* $25K in annual opportunity costs. (May be conservative for people who are college material but didn't get a degree.)

* Four years to complete the degree. Which is very aggressive.

* $23K earnings differential. (The current average.)

* Forty years of post-degree work.

In this model, you get to breakeven 26 years after you start school. So, to the current high-school senior: assuming the job market in 2036 looks pretty much like it does now, treat these projections as solid.

It gets worse. If you assume a more realistic graduation timeframe of six years, the value is -$18K after 40 years. Of course, you can keep working; you'll hit breakeven after 54 years (at age 72).

See sheet two for my assumptions:

https://spreadsheets.google.com/ccc?key=0AjzB7A88UMCBdGVrUUN...

I think you're overestimating the annual cost of school. I know it doesn't cost $25k/yr for me to go. I pay around $6k/yr for tuition, plus another $1k or so for books. According to College Board [1], that's about $1k less than the average for a student going to a public school, in-state.

Your figure matches about what it costs to go to a private school, but, from my experience, public schools are also more likely to give scholarships [2]. Even still, no one is forced to go to a private school.

[1]: http://www.collegeboard.com/student/pay/add-it-up/4494.html

[2]: I went to a private school my first year. It was around $30k/yr, but I was also given a scholarship that cut that price to around $18k/yr. Most of the people I met on campus also received scholarships of some sort as well.

Yeah, no one whose parents make less than $100k/yr pays more than $20k/yr, even at the pricey private liberal arts schools.

The school I'm at costs ~ $55k per year in the end, and the grants I get bring it down to about $30ish, and my parents make not much more than $100k (by working a full time and a part time job each)

The public schools I applied to that weren't rolling-admission 5th year of highschool types ended up costing the same in the end, because they didn't give need-based aid, and their merit scholarships were not large for people who don't play sports.

Need based aid isn't really targeted towards people who's parents who make more than 100k (more than the national average).

Merit scholarships are easy to achieve, given that you are exceptional. But if you are middle class and not especially proficient, I do agree that you have one of the hardest college experiences in america.

It's unfair to use your public school costs as evidence because they are not comparable to his numbers. Here are the numbers across the board for all college students [1]: Median: $9K Mean: $26K

Also, if we were to put opportunity cost into the calculations (because you could work/work more if not going to school), it would quickly approach the $25K figure.

[1]http://www.collegeboard.com/student/pay/add-it-up/4494.html

We both linked to the same article, so I'm well aware that my tuition costs are not what everyone else will experience.

A median of $9k is still less than half of what the GP used, and my cost of tuition is a lot closer to the average than the $25k the GP used.

Also, if we were to put opportunity cost into the calculations (because you could work/work more if not going to school), it would quickly approach the $25K figure.

Which the GP already did.

Part of the cost is often borne by the government. For the purpose of identifying a bubble, you have to look at that cost, too--because the problem is too much aggregate investment in education, not that it's a bad deal for everyone.

I graduated in 3.5 years and school cost 17k/year. Also, opportunity costs is not 25K because you still have basic cost of living either way and you can work in the summer.

So run those numbers assuming school costs of 15K, opportunity costs of 5k, 23K earnings differential, and student loan costs of 3.5% tax deductable.

PS: A friend of mine worked his way through school making 7.50$ an hour as a cook at without student loans. He worked 80hours a week in the summer and 40 hours a week during school and graduated in 4.5 years. He also lived in a trailer with his wife and child and got an internship his senior year at 13$ an hour it was a major pay raise.

Opportunity cost is what you give up. If you are capable of finishing school in four years, you're capable of averaging a $25K income over that time.

You're right about summer jobs, but the vast majority of summer jobs pay less than 1/4 of what you'd get working the full year (plus you have to do a job search for a three-month job, versus a job-search for a multi-year job). Outside of law school summer associates, I don't know of anyone for whom summer jobs routinely mean a raise.

I like your friend's story! But imagine if, after four years, he had credible evidence that he could work extremely hard, plus tens of thousands of dollars in savings. A good situation to be in if he wants to start a business.

Reply on news.ycombinator.com