The Young Money Club

Introduction

Attending college is supposed to be a no-brainer: Even if you have to take out student loans, the additional earning power it gives you should outweigh the cost.

This has been the accepted logic of most Americans for the last 50 years. But the recent breakdown of this ROI caused by mounting tuition costs and a national student debt crisis, has called into question the true value of college as an investment.

This article is meant to shine light on the pros and cons of college as well as alternatives to the expensive endeavor.

The Benefits

The number one benefit of going to college is the earning power it provides you with.

According to the Bureau of Labor Statistics, the median weekly earnings of someone with a bachelors degree is $1,173, while someone with only a high school diploma can expect to earn $712 per week.

Annually, this comes out to a $22,128 difference on average. Which oddly enough, is about the same as the average annual tuition at an out-of-state, public college($23,890).

This means that while you may be earning more, if you’re paying back student loans, then at least for the first few years out of college your net earnings will be about the same as a high school graduate.

But simply earning more isn’t the only benefit of going to college, it can also be a great place to network and make connections.

In today’s day and age, it’s become increasingly important to have friends in high places if you want to succeed. It’s not completely necessary but it can make moving up in the world a whole lot easier.

Whether it’s a friend putting in a good word for you with their boss, or a relative of a classmate who is high up in a company, the connections you make (or don’t make) can affect the rest of your life.

The last benefit I’ll discuss is probably the most superficial. For some it means everything and others it means nothing.

This would be the title or reputation you gain from getting a degree. Whether it’s a few extra letters in front of your name or an additional qualification on a resume. This can effectively change the way certain people view you.

Obtaining a college degree can make those who value them respect you even more. Sadly, many of the people in the upper levels of society look down on those who don’t have college degrees. (aside from the successful dropouts like Mark Zuckerberg) This may not have any immediate, noticeable effects but may limit your opportunities later on.

The Costs

As most of us know, college can be extremely costly, not just financially but also in terms of time. Four years is a long time to spend doing anything and time is our most valuable asset.

You have to take into account the opportunity cost of going to college. For those of you who have yet to take an accounting class, that means the forgone benefit of the next best options.

In simpler terms, what could you accomplish by not going to college? If you started a career as a real estate agent, you could already have 4 years of experience by the time everyone else is graduating.

This is a major head start and for those with a plan, can be a much better option than college. If you already know what you want to do and college isn’t a necessity, why waste the time?

The next cost is the more obvious one associated with college. That is the INSANE tuition costs that almost every university has. This can be offset with scholarships, financial aid, and living frugally but regardless will most likely cost you an arm and a leg.

The average annual costs range from about $25,000 for an in-state public university to upwards of $50,000 for a private college. This leads the majority of students to take out high interest student loans that can take decades to pay off.

Last year the average student graduated about $40,000 in student loan debt. This doesn’t include those who go on to pursue higher education or specialization which can even run into the 6-figures.

Student loans aren’t something to be taken lightly and can leave you in debt for your entire life if you don’t stay on top of them. The U.S. is currently going through a student debt “crisis” of sorts. With the entire population having about $1.5 trillion in student debt.

It’s estimated that about 40% of those borrowers will default on their student loans by 2023, and currently 1-in-3 are at risk.

Don’t get me wrong, student loans can be perfectly fine and a great tool, but you should be completely aware of all the variables before deciding to take that leap.

Make sure the degree you’re pursuing will enable you to earn enough to offset whatever loans you may need. Not to discourage those in the arts, but paying $30k a year to get a degree in theater will most likely leave you in a large amount of debt and little ability to pay it back.

Alternatives

Many people just assume that the only two options are either going to college or a life of working in low level positions. This is most definitely not the case.

There are plenty of options for those who decide college isn’t for them or who can’t afford it. Some of which can be even more lucrative than a lot of college degrees.

One option is to enroll in a trade school, these are typically much cheaper than universities and can greatly increase your earning potential. Learning a skill like welding, plumbing, or electrical work can allow you to work independently as well as set your own prices and hours.

If trade school isn’t an option or you just don’t like the idea of more school, you may look into an apprenticeship. Certain professions require additional certification but apprenticeship can be a great way to learn new skills or a specific trade.

Another alternative to college is to become a real estate agent. This is one of the better alternatives because of the unlimited earning potential that comes with a commission based job.

If you’re a motivated individual with a knack for sales, you could easily clear 6 or even 7 figures in real estate. A career in real estate also has the possibility for upwards mobility.

You could get your broker’s license and build your own business with agents underneath you or simply work alone and take home bigger commissions.

The last option, which isn’t for everyone, is to go it alone and start your own business. This is a risky endeavor but if you’re young and have the time to put in to make it work, it can be very rewarding.

The statistics show that nearly 50% of businesses fail within their first 5 years of starting. That means the odds aren’t really in your favor but the more prepared and knowledgeable you are about your business, the more likely you are to succeed.

Conclusion

While college can offer a lot to those who attend, it is most definitely not for everyone. For those that NEED college for what they want to do, such as doctors, engineers, etc. cost should be your main concern. There is no way to those career paths without years of higher education.

For those that want to pursue different career paths or simply don’t know what they want to do, college can become less worth it. The worth must be evaluated on a case by case basis. If your dream job doesn’t require a 4-year degree, why waste the time when you could be gaining real experience.

There is no need to go to college and dig yourself into a hole of debt, only to get out not make any money. Similarly, if you’re only going for “the experience” you’re wasting your most precious asset, time.

I’m not saying don’t enjoy it if you do decide to go, only that you don’t need to spend 50 grand to go to a few frat parties.

Regardless of what you decide is right for you, college or otherwise, the important thing is that you keep yourself on good financial ground. If money isn’t an issue for you then your options are open and college won’t harm you regardless of what you choose.

If you aren’t so lucky and would have to take out loans, it’s important that the degree you choose is worth the debt you have take on. Consider offsetting the cost of school by getting a part-time job and living frugally for as long as needed.

Need tips for saving money in college?-How to Save Money in College