Why You Shouldn’t Necessarily Go To College (Or Why There Are No Secret Formulas To Success)
I usually try to steer clear of philosophical musings here on Amateur Asset Allocator. I’m not a particularly philosophical guy, after all. In fact, I often shun “pontificating-about-what-we-don’t-understand” philosophy in favor of empirical skepticism (or scientific skepticism if you want to be more mainstreamy about it).
Simply put, I’d rather look at the data and base my conclusions on that. This is the main reason I prefer index funds over more active investments. Still, it’s difficult to ignore generations of conventional wisdom and blaze your own path, even when the data clearly favors such an approach. I suppose that’s part of why I still prefer Vanguard’s index funds even thought hey aren’t always the cheapest in each individual asset class.
I recently came across an article written by Ben over at Money Smart Life titled The Dangers of a Formula-Based Life that really made me think. There are a lot of things a modern person in our society are simply expected to do because they’ve always been done that way. Perhaps such advice was good in the past, maybe it worked great 50 years ago, but does that mean we should still blindly follow it today even though recent data suggests it might not be in our best interests? Or even if it does still “work,” would you be happy living with the result? After all, you only live once.
College Is The Ultimate In Conventional Wisdom, But Should It Be?
Ben touches on a few aspects of this question, but I’m going to focus on one: that of going to college and getting a degree. Let me make it clear at the onset that I am in absolutely no way disputing that, on average, college graduates are more financially successful than non-graduates and have lower rates of unemployment. I’m also not disputing that a college degree is a practical requirement to get ahead in certain industries. I myself went to college and I’m glad I did, so I’m not on any anti-college crusade. That said, I do believe the benefits of attending college are oversold.
How Much Is A College Degree Really Worth?
Everybody has heard the oft-cited claim that a college degree is worth upwards of $1 million over a lifetime. Well, that’s true as far as it goes, but the number is a bit misleading. For starters, the vast majority of that “extra $1 million” comes at the end of a productive career, perhaps 25 or 30 years in the future. By that time, of course, $1 million won’t be worth nearly as much as it is today. A recent study pegged the “true” value of a college degree, adjusted for inflation and subtracting the average cost of actually attending college, at around $300,000. That figure includes the impact of postponing joining the working world for 4 years, as well.
To be sure, an extra $300,000 is nothing to sneeze at, but that’s just the average. If you attended a more costly private university, for example, that number could be even smaller. It also doesn’t appear to control for differences among degree programs. For example, engineers and accountants are going to earn far more money, on average, than English majors. Thus, while an engineer may earn more like $500,000-600,000 extra in today’s dollars, an art history major from a good school may earn only $100,000 more than a high school graduate, or even less (perhaps much less).
While there are likely to be some financial rewards for attending college even for those without in-demand technology or engineering degrees, the rewards are vastly overstated. Gone are the days when you can set yourself up with a white-collar job for life just because you have a bachelors degree. What that degree happens to be in is much more important than it used to be. Does that mean it’s not worth it, financially? Not at all! But you should at least have realistic expectations about your future earning prospects. It seems like most recent college graduates have no idea a degree isn’t a golden ticket.
What About The Whole “Follow Your Dreams” Thing?
If teaching art history is what you want to do with your life, then of course you should get a degree in art history regardless of how poor the future income prospects, and don’t ever let anybody tell you otherwise. Of course you should follow your dreams. It’s just that, for most people, “following your dreams” doesn’t require a college degree. Many people are called to be teachers. That’s great! We need more quality teachers.
But most people don’t have such a well-defined dream.
Dreams like “I want to work for myself” or “I want to be financially independent” or even “I want to help the poor in Africa” are far more common and require far less formal education than becoming an art history major. It may well be that a bachelors or even a doctorate degree is required to help you on your way – you can’t treat the poor without an MD or advocate for poor immigrants without a JD – but there is a sizable minority out there who truly don’t need a college degree to follow their dreams, and I fear those people are being pushed towards school even though it’s not in their best interests. The result is these people get understandably frustrated with the system when their get-a-degree-and-buy-a-house-in-the-suburbs lifestyle doesn’t satisfy them. Many of these people would have been served better if their high school counselors had encouraged them to start a business right out of high school, or perhaps taken on an internship in preparation for a future entrepreneurial endeavors.
Should You Go To College?
The short answer is “yes, you probably should.” But only on average and only if you have a pretty good idea of what you want to do with your life. It used to be that high school graduates who didn’t have any idea what they wanted to do with their life could go to college, get some general liberal arts degree, and find a decent job while they figured things out. It’s getting more difficult to do that, as a generation of young people is coming to discover.
To be honest, I don’t really know how to solve this problem. If you choose to forego college and then your other plans fall through, you won’t have anything to fall back on. On the other hand, if you go to college just because you think you should and can’t find a decent skilled job afterward, you’re no better off than if you hadn’t gone at all (and probably much worse off, having spent all that money for nothing). For the time being, I think most people most of the time are still better off attending college by default. But that is changing rapidly and I don’t know how much longer I’ll be able to recommend that.