College – the degree that is supposed to set you for life…
Until it doesn’t and becomes a debt trap. The student loan crises in America is at an all time high with over half of students having some and cumulatively coming to about $1.7 trillion at the time of this article’s writing. To put that in perspective, that amount is about the same as the GDP of the Canadian economy which is the 10th largest economy in the world.
Give a man an education and he will build a new world, but give a man a loan and you can own that man forever.
So, does it still make sense to go to college?
There really are a few ways to look at it, but the method we like to use is finding what the potential return on investment (ROI) is. More than ever, finding a school that balances tuition costs and future potential earnings is critical.
So we went to the University of Illinois, but as out of state students, we paid double the amount in tuition versus in-state students. Looking back, we probably should have gone to our own state schools. From a basically level, the first thing that should we should calculate is the ROI. We absolutely got screwed as tuition was approximately $34,000 per year and another $12,000 for room and board every year. This doesn’t yet add textbooks which cost another $1,000 a year and school administration fees that are about $4,000 a year. So every semester, we would pay $51,000 minimum. Multiply it by 4 years and that is $204,000 total tuition. Think about what the opportunity cost of that time and money is. We can tell you it is quite a lot. With our salary averaging around $65,000, if we were to use all the money we earned just to pay it back, that would take three years. More realistically and quite aggressively still, if we used half our salary every year to pay back the tuition (not factoring in interest on student loans), that would take a little over 6 years. So, we don’t really break even for quite a long time and we also missed out on 4 years of our life where we could have been salaried.
Of course, we are looking at this from a purely financial perspective and do not account for the skills and networking you pick up in college. But, college is getting more expensive and if you are looking to go, finding a good deal is important. The one thing we would definitely change is by going in state to a public school as that is typically half the price.
At the same time, going to trade school and gaining skills in different services can be quite lucrative if that’s up your alley. Everyone promotes college as the new entry level point degree for getting a job but in reality many specialized trades that hone on skills for 2 years can easily make 6 figures out of the gate. Look at technicians, plumbers, etc. These people are needed in our everyday lives and they perform honest work for a good living. We all hear the stories about people in sexy finance and tech jobs raking it in, but not everyone makes it.
So, is college really worth it? Simple answer, probably not.
Think about what you want to do and if you really need college. Maybe you only need a certificate to get into the field or maybe apprenticeships. Certain jobs do certainty require college such as engineering majors and business (certain roles), but make sure to do the math on the ROI that you can potentially get. Additionally, if you decide you want to try getting into certain majors such as high finance (investment banking, private equity, etc.), getting into the Ivy Schools or other highly regarded school matters for certain industries as the network is very tight. But, those schools such as University of Pennsylvania do come at a huge premium and there is no guarantee of landing into the industry.
We know this sounds confusing, but the continued pressure that society puts on getting a college degree is getting out of hand. If have the money to spare and are just want the “college experience”, go ahead and burn the money. There are just many factors to consider as it is not only a huge financial investment (especially for private schools) but also a large time commitment. If you really know what you want to do, figure out what the potential returns are so you can see for yourself if the return on investment is worth it. We can tell you from our experience that we could have definitely gotten a much higher ROI by either going to a cheaper school or certification process, but we can’t change the past so we offer this advice to you.
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