Just How Hard is University to Overcome
-
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
But is double enough to offset the cost? Double per year, with fewer years, and the cost of college is a loss. Go back and look at the chart... making double what you would make without college is assumed in the numbers already and is a loss.
-
There is another ENORMOUS factor that has been left out. People with higher per year incomes pay much, much higher tax rates. So earning twice as much doesn't give you anywhere near double the buying power. Spreading earnings out over more years lowers the tax burden by quite a bit. So those college graduates not only pay for college up front (or with loans) but also pay with a higher tax penalty for the remaining years.
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
I totally get your point, and understand it. But the numbers you present in the OP only apply to the 5% that can afford to pay for college with cash.
No, they apply the least to those that can pay with cash! A point that you yourself made. The need to take out ANY loans makes my point more, not less.
I've never disagreed that your point - that college in general is the craziest way to waste your money - so let's agree to that right now!
So please - let's stop beating the dead horse of your "point" and instead talk about the value of the rest of the discussion to those that CAN'T pay cash and must take out loans.
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true. They'd much more likely have $10,400 compounded at 8.8% for around 40 years, approx $303,521.29 That's a significant difference.
-
@Dashrender said in Just How Hard is University to Overcome:
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true.
that's where I disagree. they would if they treated the money purely as investments instead of as free money to spend. I'm saying that they WOULD have that much (on average.)
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
I'd like to see your OP chart reworked with only $10,400 instead of $146K and see how far ahead they end up.
You mean if the average cost of college was trimmed by like 93%? If college is free or nearly free, it probably wins. But if college gets cheaper, more people go, and its value drops again. So that can't happen in a bubble.
I'm changing the game on you - you only looked at those who could afford to pay cash for college.. now I'm asking you to compare those who can't pay cash - so we already know if they take a loan, they are screwed even more than the cash folks, so again, we can move past them...
But those who don't go, don't take loans, and still make crap wages, and can only afford $50/week, not $700, what does that person look like.
Maybe you're going to say that those people don't matter to this discussion because if they weren't motivated enough to take out student loans, then they probably aren't going to be motivated enough to get better jobs down the road?
-
So for reference, student loans, for those able to get them (many of us cannot so these are not realistic numbers, many students must use credit cards for this) run from 4.3% to 6.8%. That's the first step.
So if you pay $10K up front, you have over $130K in loans to pay off later.
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
But is double enough to offset the cost? Double per year, with fewer years, and the cost of college is a loss. Go back and look at the chart... making double what you would make without college is assumed in the numbers already and is a loss.
making double is assumed? The lifetime income from HS+ to CS was only $600K, that's nothing. that's not double! $1.8 mil vs $2.4 mil != double income for college people, not even close to double with a Masters.
-
@Dashrender said in Just How Hard is University to Overcome:
Maybe you're going to say that those people don't matter to this discussion because if they weren't motivated enough to take out student loans, then they probably aren't going to be motivated enough to get better jobs down the road?
No, I would say the opposite. Going to college is the laziest thing that most people can do. It's the only socially acceptable way to avoid work, for most people, for that part of their lives. So taking out loans for college that one cannot possibly afford is, in most cases, a level of laziness unsurpassed in nearly any other aspect of life.
-
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
But is double enough to offset the cost? Double per year, with fewer years, and the cost of college is a loss. Go back and look at the chart... making double what you would make without college is assumed in the numbers already and is a loss.
making double is assumed? The lifetime income from HS+ to CS was only $600K, that's nothing. that's not double! $1.8 mil vs $2.4 mil != double income for college people, not even close to double with a Masters.
Double PER WEEK. Yes, lifetime college makes less. So not double in the end.
What gets people about college is that they forget the difference between the ends and the means. The "ends" say that skipping college earns more over the lifetime. The misdirection is getting students to focus on weekly or annual earnings after graduation and to ignore total earnings.
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true.
that's where I disagree. they would if they treated the money purely as investments instead of as free money to spend. I'm saying that they WOULD have that much (on average.)
Again, only the cash paying people could say that !!!!! I'm not talking about them any more. They are not a factor.
-
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true.
that's where I disagree. they would if they treated the money purely as investments instead of as free money to spend. I'm saying that they WOULD have that much (on average.)
Again, only the cash paying people could say that !!!!! I'm not talking about them any more. They are not a factor.
No, never once am I referring solely to people paying cash. I'm only referring to them as the conservative case, never referring to them alone.
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
Without loans, my wife wouldn't have gone to college, and wouldn't be in the "no college" optionless career she's in.
Yes, and she'd likely have more lifetime earnings even so. But that's not important.
Not likely - my wife did work full time all the way from HS through college - but even if she didn't, I'm not sure she would be making more than $35-40K at this point. While it's possible she could be, but I look around and it really seems unlikely. Until her sister graduated from nursing school (at 37), my wife was probably close to double what any of her siblings were making. Now the nurse sister is probably on par.
But is double enough to offset the cost? Double per year, with fewer years, and the cost of college is a loss. Go back and look at the chart... making double what you would make without college is assumed in the numbers already and is a loss.
making double is assumed? The lifetime income from HS+ to CS was only $600K, that's nothing. that's not double! $1.8 mil vs $2.4 mil != double income for college people, not even close to double with a Masters.
Double PER WEEK. Yes, lifetime college makes less. So not double in the end.
What gets people about college is that they forget the difference between the ends and the means. The "ends" say that skipping college earns more over the lifetime. The misdirection is getting students to focus on weekly or annual earnings after graduation and to ignore total earnings.
How can you have double per week, and not double lifetime? you either have to compare pre or post, but you can't flip flop.
If my take home is $1000/wk and yours is $2000/wk, your lifetime will be double mine, and taxes are much higher for you, making a pre tax number look even better for you than for me. So you've lost me on the whole double per week thing.
-
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true.
that's where I disagree. they would if they treated the money purely as investments instead of as free money to spend. I'm saying that they WOULD have that much (on average.)
Again, only the cash paying people could say that !!!!! I'm not talking about them any more. They are not a factor.
Please explain to me how someone who has to take a loan for college gets their hands on $146K by the time they are 22'ish so they can play in the game you've laid out here.
This would be the only way you could be counting everyone and not just the cash paying super minority.
-
@Dashrender said in Just How Hard is University to Overcome:
How can you have double per week, and not double lifetime? you either have to compare pre or post, but you can't flip flop.
Because going to college DRAMATICALLY shortens your working lifetime. You cut off the first 4 or more years of your career. Normally a lot more than that.
You CANNOT double your weekly AND double your lifetime. that couldnt' possible happen. Since the doubling cannot happen unless you went to college.
-
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
How can you have double per week, and not double lifetime? you either have to compare pre or post, but you can't flip flop.
Because going to college DRAMATICALLY shortens your working lifetime. You cut off the first 4 or more years of your career. Normally a lot more than that.
You CANNOT double your weekly AND double your lifetime. that couldnt' possible happen. Since the doubling cannot happen unless you went to college.
OK I see your point there. and since we both hope that the non college people will be making more at the time the college person gets a job, then only after a few years the college person will catch up and eventually pass the non college person.
-
@Dashrender said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
@scottalanmiller said in Just How Hard is University to Overcome:
@Dashrender said in Just How Hard is University to Overcome:
See most people will look at your top chart and go - gee, if only I wasn't stupid and gone to college, I'd have 4.8 Million in the back at retirement - but the reality is that isn't true.
that's where I disagree. they would if they treated the money purely as investments instead of as free money to spend. I'm saying that they WOULD have that much (on average.)
Again, only the cash paying people could say that !!!!! I'm not talking about them any more. They are not a factor.
Please explain to me how someone who has to take a loan for college gets their hands on $146K by the time they are 22'ish so they can play in the game you've laid out here.
This would be the only way you could be counting everyone and not just the cash paying super minority.
You continue to totally miss the math. That's the best case scenario. Anything short of that is worse, not better. If they CAN'T pay it off by 22, then my point is MORE valid, not less. The damage of college increases, not decreases.
If they went to college, then they had the ability to pay for it. Period. No matter what you state about how unlikely you feel it is, this is simple fact. It has been bought.
If they paid for it with loans, which is the most common option, this just makes everything that much worse. They acquired the money, but did something bad with it... instead of putting it somewhere that will make money, they spent it on something that doesn't earn enough to overcome the cost of itself.
-
@scottalanmiller said in Just How Hard is University to Overcome:
People with higher per year incomes pay much, much higher tax rates.
From $50K to $100K, my effective tax rate went down from ~18% to ~17%. In 2014, where I had tons of W2-G income I was able to knock it down to an effective 15%. My nominal tax bracket is currently at 25% and won't go higher until I make $300K+.
So unless you literally have no deductions, no, it's not "much, much higher". And since you speak about student loans, the interest is deductible even if you don't itemize. So $2500 off your AGI, not bad when you are making $40K.
-
So, let's assume you only pay $10K up front for college. And you take out $136K in loans. Let's assume that the government gives you a student loan at the best possible rate.
Now let's assume that somehow you can pay this off at $500/month starting on day one. That's much higher than you are assuming was possible before.
Average pay off time: 85 years.
Now do you see how much worse it gets?
At that rate, the total cost of college would hit a full half a million for a BS degree.
-
No Scott - you're missing my point. The person who has $10 doesn't go to college, he could get loans, but realizes it's stupid, so he goes to work for walgreens, making $10/hr and is able to pay for life and save $50/wk. This is joe average.
He did the smart thing and DIDN'T take a loan, instead he just decided to make a go of it with no college. So we know that income wise, he's only $600K behind the college graduate, and during that 4 years that the college person was in college, he was able to save $10K, that's all! He didn't save $146K, he only saved $10K, because that's all he could afford. So he invested that, and over 40 years at 8.8% he turned that $10K into $303K, so now his deficit is only $300K compared to the college life time earner.
Now one has to ask themselves - maybe, even with the interest rate of Student Loans, the screw off time of 4 years would have been worth it and hell, financially he might be in the exact same place, $300K below the cash paying college grad (when you consider paying off the loan and interest).
-
@Dashrender said in Just How Hard is University to Overcome:
No Scott - you're missing my point. The person who has $10 doesn't go to college, he could get loans, but realizes it's stupid, so he goes to work for walgreens, making $10/hr and is able to pay for life and save $50/wk. This is joe average.
He did the smart thing and DIDN'T take a loan, instead he just decided to make a go of it with no college. So we know that income wise, he's only $600K behind the college graduate, and during that 4 years that the college person was in college, he was able to save $10K, that's all! He didn't save $146K, he only saved $10K, because that's all he could afford. So he invested that, and over 40 years at 8.8% he turned that $10K into $303K, so now his deficit is only $300K compared to the college life time earner.
Now one has to ask themselves - maybe, even with the interest rate of Student Loans, the screw off time of 4 years would have been worth it and hell, financially he might be in the exact same place, $300K below the cash paying college grad (when you consider paying off the loan and interest).
Ah, you are comparing someone from the "can't go to college" pool to someone in the "can go to college" pool. That's the mistake. The point is about making a decision, not about showing that the rich remain rich and the poor remain poor.
Sure, there are cases where someone can get a loan that couldn't not afford college to begin with, but to use that you are cherry picking and ignoring the "average" costs and earnings. The point being that "averages" tell us the "average" value. It is not to say that there are not special cases, but that, on average, college is a bad bet.
For every case where you can show value of the degree (when there is a decision to be made) you can show nine that are big losses. That's why the average numbers are nice... we know the average investment amount spent and the average return received. We don't need to cherry pick or look for cases like this, because they don't matter. They are red herrings. We know that averages allow for outliers, no one disputes that.
The problem with your example case is that that person has to pay of bigger loans. The more that they have to borrow, the harder it is to pay back. So that's why I showed how devastating a student loan would be on average. In the case of $500/mo paying down on a average cost loan with the lowest rates, zero penalties, with $10K paid up front, it's a literally impossible number to sustain.
