Don't Get That College Degree | Hacker News Reader

Don't Get That College Degree

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21 pointsojbyrne42 comments

If Bill can get 8% returns on his money every year, he might wanna start a hedge fund. Or at least borrow as much money at 5% as he can and invest it all.

The stock market generally returns around that amount, though not in a stable manner. (Hence its hard to infinitely borrow stable capital at 5% to fund unstable returns at 8%).

"How can that be? College degrees bring higher income, but at today's cost they can't make up the savings they consume and the debt they add early in the life of a typical student."

That's a very interesting analysis. I've read for a while now that for many young people who pursue college degrees, the economic return of the investment to gain the degree is actually negative. There are some broader societal implications here too, as much of funding for college study is third-party payment funded by taxes on people who never attend college at all. Some economists of education, notably Mark Blaug, point out that public subsidies for college study are massive wealth transfers from the poor to the rich.

All investment in formal education is a net negative, from pre-k onward. Right now my town spends about 11k per student per year, not including extraordinary expenses. Multiply this by 13 years, and it comes out to 143k.

Let's say that instead of investing 11k in each student every year, my town just put 143k in an account for me on the day I was born. From the town's perspective this is feasible given the current tax structure, since we are doing this for each student instead of spending that money on schools.

Furthermore, let's say that my parents had invested the money they spent on pre-k in that account on the day they would have otherwise paid tuition. This means that we are adding, say, 8k per year at age 3 and 4.

Furthermore, let's say that we add 20k to the account for each of the four years between ages 18 and 22.

Then we invest the whole thing in smallcap stocks. Assuming we can get a 10% return per year, then by my chubby-fingered iPhone math this looks like I'd have had ~1.2m in the bank by age 22.

And after no education, what is your 22-year-old self qualified to do?

Who said anything about no education? Also, I'd have started working at age 16, and I didn't even add any of that income into the mix. Even assuming I was making minimum wage for the first five years I'd easily have enough money to retire by age thirty.

How would you gain that education? Keep in mind that without public money, most of our educational infrastructure wouldn't exist - including universities.

Ah, just as grocery stores didn't exist before the taxes that support them. Hm. Wait.

But grocery stores cost money! I don't think Alex can simultaneously claim:

1. A million-odd dollars in savings by the age of 22 by forgoing public education

2. An education by the age of 22

At very least, it requires some justification.

Homeschooling, competitive athletics, community engagement, apprenticeships, mentors, freelancing, boostrapping, public libraries. And maybe a Ph.D. someday just for fun.

Homeschooling isn't free.

Your suggestion is basically school-vouchers with no strings attached. For the kids whose parents want them to get an education, they would use that 11k a year to help pay for it - either private schools, tutors, educational materials and food. (If you, like me, went to a public school, then about a third of your food on the weekdays was heavily subsidized by the school system. Normal lunch at my high school cost $1.55 ten years ago - the food I ate cost more than that.)

This is all pretty naive stuff. "And maybe a PhD someday just for fun." Really? I say revisit some of these ideas because they are pretty contradictory.

I thought you said something about no education: "Let's say that instead of investing 11k in each student every year, my town just put 143k in an account for me...we are doing this for each student instead of spending that money on schools."

Why must we live in a society where you have to go through such a long, expensive, useless process to be "qualified"? Sure, if you're planning for your own life, you have to deal with the realities of the world. But the person you're replying to was clearly talking about changing society.

And I don't think he has critically thought through the consequences to society. Education takes time and money no matter how you allocate it.

What small cap index over 22 years returned 10 percent annually?

I was being conservative, historically it's been 12%.

Over what time frame? Morningstar seems to paint a different picture, at least over the last decade:

http://corporate.morningstar.com/US/asp/popup.aspx?xmlfile=2...

I have read that Newton would not put numerical examples in his writing because he feared people would pick over some small error and use it to claim the whole work was wrong. I think that's what most of the negative comments here are like that - you guys are probably right about different ways to run the numbers, but you are missing the forest for the trees.

The investment in a college degree is so large, and involves speculating on payoffs that are so far in future, at a time when whatever you think you will do as a career will likely change several times, that the pay off has to be an enormous no-brainer. If the college investment pays off if the interest rate is 8% but not if it is 5%, the college loses just by a bird-in-hand rule. The college guy has to beat the non-college guy by something like 10 times no matter what back of the envelope estimates you make.

Some related personal observations:

-- Ten years ago online forums argued about how to get into the best college, no one even raised the question of if college itself is useful. Now articles and discussions like this are commonplace.

-- No one I know really uses anything they learned in college to make money. Even people working in the same field their degree is in, had to learn how to really work in that field on the job after they left college. College was a big time and money consuming initiation ritual.

-- Most the people I know who earned a large amount of money -- not those who inherited it -- either did not attend college at all or did very poorly in it; nad none of them admitts to using any college education to make money.

-- A handful of the most agressively and purposely stupid people I have ever met have advanced degrees ( medical and legal). I suspect that some part of the culture of those evironments educates people in the stupid direction, not the smart direction, in a kind of "reverse education", encouraging aggressive pronouncements of certainty on uncertain questions, for example.

-- Taking a personal sample of the people I know who have made a lot of money (avoiding those I hear about elsewhere -- just people I personally know, to avoid a media bias but replace it with a personal bias), the way to get rich is to fail out of college after one year of hard drinking, and inherit enough money to buy a small business such as a restaurant or retail franchise and work your ass off for about 15 years, expanding to a chain of those businesses.

-- Most of the people who I know who are going to college now, don't really actively want to go to college. They want to not be at home, and to be around people their age particularly of the opposite sex, and they are passively following the path of least resistence.

All of this sounds bad, but I see a great thing in it: if we as a society really only should be sending about 5 to 10 percent of people to college (perhaps half of them only after a few years in the work force), then we can hugely increase the productivity of our economy very easily. I think, like medical care, we spend a lot on education in this country to get something that is at best only the same as what is available in countries that spend much less.

Depends on the field. According to the American Chemical Society, starting salary for BS Chemical Engineers is 58K in 2007. This is higher that the numbers mentioned in the article, and I suspect the oil biz is a reasonable gig. I think everybody's in agreement that the starting salary for, say, orthopedic surgeons is a little bit higher than this. And Wall Street paid those MBA's quite a lot up until recently.

So, maybe SOME degrees are worth the hassle. Others, less so unless you're really turned on by the subject - I really love history, but I'm not going to try to get degrees in the subject.

As buugs said, don't get one if it's not what you want. Get one if it's what you need...

"Depends on the field" isn't really a good argument, because the counterargument is that the same thing applies for people without college degrees. Some make minimum wage, some make more than the average given in the article. Just as an example corresponding to yours, laborers on oil rigs make really good money straight out of high school. In particular, here in Canada during the oil boom (now not so much) it was quite common for a laborer straight out of high school to make $50 - $80 US an hour in northern Alberta. Admittedly dangerous, dirty, unpleasant work.

I think you're actually proving rather than disproving the argument. According to Google, starting salary is like $47k, and it goes up from there. Way, way more work than engineering, but far, far more interesting places. I suspect many trades are similar - good car mechanics, airconditioner repairmen, ... can make good bucks with good luck.

I think we're all in agreement - figure out what you'd like to do, what it takes to do it and get started. Assuming one's realistic, as no amount of work on my part would make me 10" taller and so able to be a basketball center.

I agree with the other commenter. So your examples are ones without much of a ladder in terms of pay scales and incur serious risk of death. That's wonderful.

Also, the fact that you say "some make more than the average given in the article" really makes me want to say something flippant, but I won't. Politely, I will say: Notice the word average.

I'm a college graduate, so I'm amenable to arguments against the original post's thesis. But "depends on the field" is a logical flaw, because it's assuming that the distribution of results for college graduates is more positive than is represented by the average, while not accounting for the same possibility for non-college graduates.

Also there's a pretty good ladder for some trades, which generally involve something that should be welcome here. Namely starting your own business. Over the course of my career I've met plumbers, cabinet-makers, steel workers, etc, etc. who took the higher pay they made right out of high school (or more often, two year trade school programs) and turned it into their own business. And have earned more than I have, with zero debt, at every step of their career.

ADDITIONAL RANDOM EDIT: Bill Gates...

Don't get a degree if you don't care what you do? What an insight.

Yup. For some reason, I can't see a non-college grad doing research in high-energy particle physics. Importantly though, a whole lot of people aren't doing research in high-energy particle physics. If you're really good at fixing cars and like it, don't go to college to get a degree in psychology.

What's with that anyhow? How did psychology become the degree of choice for uninspired students?

Two things about the numbers in this article don't work for me.

First, Bill makes $23,505 after college? What's his degree, basket-weaving? Shoulda gone into engineering.

Second, Bill and Ernie each save exactly 5% of their income--even though Bill earns much more than Ernie? This is not a basis for a fair comparison, it just means Bill is choosing lifestyle over retirement. I calculate that it would take Ernie about five years of living Bill's lifestyle to pay off his college debts and catch up to Bill's savings. And then he has 25 years of a higher income and hence options Bill doesn't have. Ernie's lack of financial planning does not negate the value of his degree.

In fact, the fact that the article assumes financial illiteracy on the part of both parties is revealing and disturbing. And it reinforces the point that, at least in Ernie's case, he really would have done better to get a degree in something involving some sort of math background.

Its very bad comparison. A couple of problems: the comp is purely of retirement savings, however the college kid is spending more on consumption per year all through his life (not considered), also the assumption of 8% returns is unlikely.

Stay in college kids!

The article has a huge flaw in not comparing equal consumption.

The interesting question isn't how much retirement savings you'll have at the end, but how much "net return" you get from the college degree.

I'd like to see a Net Present Value calculation of the two choices instead of some flaky calculation assuming a fixed 5% savings rate.

What happens if the college graduate invests 10%, which wouldn't be too hard? What happens if the non-grad only invests 1% because that's all they can afford? If the college grad invests all of their extra money, how long does it take them to catch up?

"What happens if the non-grad only invests 1% because that's all they can afford?"

The world is basically divided into two categories of people: those who can afford to save 10% of their income and those who are currently accumulating additional debt (I, as a college student, am in the latter group). The odds that your expenses exactly match the amount you need to spend are pretty small. If you find that you have exactly $0 left over at the end of the month- you don't have savings, but you aren't accumulating debt- you're probably just increasing your expenses until they match your income. You can live decently on $10K (after-tax) in this country.

"If the college grad invests all of their extra money, how long does it take them to catch up?"

Not long at all, but people don't. The American national savings rate is negative.

What absolute horseshit. People who go to college as part of a calculated attempt to make a profit aren't the sorts of people who ought to be in college. College is for living with people who share the same interests as you, learning to develop yourself as an adult, and learning under people who know what they're doing.

I don't know if my forthcoming college degree will help me make money, because right now I don't know what I want to make money doing. College is giving me time to try out a dozen different things and meet a few hundred terrific people, so that when I leave I know more about myself and about what I want to do than I did when I came in.

The author lost me with his silly retirement argument on the first page. Note that the college grad starts out making so much more than the high school grad (by the author's figures) that s/he could start adding to that index fund at the time of graduation, while still paying off his student loans and having a higher standard of living than the high school grad. The college grad also could invest sufficient money in the fund each year to quickly surpass the amount of equity the high school grad has and still have a higher standard of living.

The author would have been better off skipping the pseudo-finance.

This seems to ignore the fulfillment of the work. There's always more money to be made if you're willing to be miserable.

I'm not arguing against higher learning but for it -- and against the degree system that stands in its way.

Does anyone have numbers for average earnings for programming jobs with/without degree?

always great to hear your thoughts all over a newspaper article...

Sarcasm?

What an ill-conceived article. On the other hand it could be an interesting cynical ploy. I guess if you could convince enough people that getting a formal education is worthless or "not worth it" then it could actually increase the market value of those who have one. So, if I was being cynical I should probably just say "Thanks!"

But, presuming the intentions are not cynical I found these arguments troubling. Indeed, ironically the one arguing for less education doesn't seem to understand basic elementary math:

"Some students will get a better-than-average deal. They'll get more aid or end up in higher-paying jobs. But far too many will lose money."

What a joke. Of course "some students will get a better-than-average deal." Why don't people understand averages? That's like those numb skulls who say "half of all students read below the average level; what a crisis!"

Also, I'm not impressed with citing Charles Murray. He presents an even more cynical and myopic view. As for the state of universities: sure, many large public universities have some ridiculous courses; I agree with that. However, to quibble with the author's list, History and Philosophy of Dress is not a silly course. There is a lot to be said of a society and it's positions regarding norms of attire. In courses like that the primary subject, in this case "dress," is simply a scarecrow on which to hang a much deeper discussion.

Now examples like "Campus Culture and Drinking," that may be a bridge too far and I know many like it. However, my undergraduate institution, which admittedly was private, had no such "mickey mouse" courses and we had comprehensive exams. People who completed all the course work but could not pass the oral exams failed to complete their degree programs. They FAILED. And these were not dumb people. They didn't fail because they didn't turn something in on time. This is in direct opposition to the author's premise that universities are just so easy.

That makes me angry. That disrespects many brilliant students for whom the author of this drivel could not be worth of shining their shoes. The idea that the curriculum has been dumbed down is just without merit. Are there mickey mouse degree programs? Sure. Now let's stop knocking down strawmen and deal with reality. I'd like to see the author of this article, who apparently has a very fanciful notion of averages, pass any of my colleagues course on advanced algorithms, distributed computing, differential equations, and the like and then tell me about rampant "grade inflation" or falling standards.

As far as the online courseware. That's fine. But I thought education was worthless anyway, right? Anyway, so the answer now is that everyone is going to become autodidacts? Wow, great idea. Autodidactism is fine but let's not be naive with it. So the answer is either be a Ramanujan or go get a job a Super Wal-Mart or something like that, just don't go to college, right?

This article is just full of contradictions. Don't get me started on the "Knowledge Tree Shapes."

Do degree holders earn more or are the kind of people who get degrees the kind of people who tend to earn more?

I'd argue it's both, many employers pay more when hiring people with degrees and certainly the people who end up with a degree tend to be the kind that would end up in higher-paid positions regardless.

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