A Not-So-Smart Investment?
Five Reasons Going to College Might Not Pay Off
As student loan debt grows into a looming financial crisis, it's more important now than ever that we recognize the problems in our current higher education system, and explore other ways for students and employees to invest in growing their skillset.
"Most people tend to look at college as the only tried-and-true path to success," says Iny, author of Leveraged Learning: How the Disruption of Education Helps Lifelong Learners and Experts with Something to Teach (Ideapress Publishing, October 2018, ISBN: 978-1-940-85869-2, $24.95). "They believe it will ensure access to higher-paying jobs and will leave them smarter, wealthier, happier, or otherwise better than they were before. Yet evidence does not bear this out."
Iny isn't saying that college is never the answer. Some career tracks, such as accounting or medicine, require vocation-specific degrees, and for good reason. Furthermore, attending an elite institution, which provides greater cachet and a valuable alumni network, can indeed be a game changer even for those who don't pursue vocation-specific degrees. But for the majority of graduates, it's a terrible investment. Most barely break even, much less see a profit.
In Leveraged Learning, Iny builds a compelling case that higher education is on the verge of disruption. Once the education bubble bursts, America's current higher education path will change dramatically, he predicts: It will be replaced by a lifelong path of continued education that revolves around real, marketable skills and is responsive to how industries change over time. Ultimately, this approach will allow employees to update their skills and stay on the cutting edge of future technological developments that colleges can't predict, let alone prepare for!
All that said, here are five reasons why college is becoming a losing investment:
The degree no longer sets you apart from the crowd. One reason so many parents believe traditional higher education is a sure bet is that for a long time it was. Way back in the early 1900s, only a small percentage of the population had degrees. If you were one of the few, this fact instantly marked you as a premium candidate and signaled ability and fortitude. And even up until a few decades ago, college was significantly less expensive, and a degree carried more sway in the hiring process.
These days having a degree is increasingly the norm, not the exception—which means it no longer sets you apart from other applicants and is no longer a guarantee of employment at all, much less higher wages. Modern graduates face a notoriously tough job market, and many are unable to secure jobs in the field they studied. Even more concerning is that when you factor out vocation-granting degrees and those from elite institutions, degree holders rake in only nominally more total lifetime earnings than those without a degree.1, 2
It's just too expensive for most students. The cost of a college education has ballooned to exorbitant levels and is only going to go higher and higher. Over the past 30 years, college tuition has grown at double the rate of inflation.3 As a result of this sharp increase, most families have no way to afford to send students to college without going into debt.
While students in the past could work their way through school, the modern tuition prices make this nearly impossible. College students in the 1970s could cover their bill with a part-time summer job, working an estimated 182 hours at minimum wage. In contrast, that same student in 2013 would have to work an estimated 991 hours at minimum wage (a full-time job for more than half the year) to pay for their education. Even if they are able to work this much, how could they possibly balance such a rigorous work schedule with the demands of their coursework?4
There's a high opportunity cost to those four (or more) years that most people don't consider. Not only are students and their families spending money and going into debt to finance a degree; they are also subject to the opportunity cost of investing four years into something that ultimately may not pay off very well. In other words, a college student could have spent that time doing a more practical vocational training program, or completing unpaid internships that give real work experience, or doing any number of other things to make themselves more employable.
In fact, just going straight into the workforce with a full-time minimum wage job is estimated to bring $54,000 in earnings over four years.5 This is in contrast to the average college student, who graduates with an average of $30,100 in debt.6
Most degrees do little to make you more valuable as an employee. While students do learn a lot at a college or university, very little of the material they study prepares them for their future job. They almost always require extensive training to be work-ready. Non-vocational degree programs—like liberal arts and even business degrees in the absence of a career track headed for accounting or consulting or investment banking—simply aren't designed to make students valuable in the workplace.
"Using these degrees to filter candidates for an unrelated job is like using your shoe to hammer in a nail," says Iny. "It might work, but it's definitely not the best tool for the job, and employers know it."
A degree is no longer table stakes for getting a job. Parents, educators, and business leaders sometimes refer to a college degree as "table stakes" or "the price of admission" that allows you to make it past the gatekeepers. This mindset is changing, notes Iny. Progressive companies are starting to recognize that students who forgo college in favor of more targeted training can often be more valuable. As a result, they are phasing out unnecessary degree requirements and looking for other ways candidates have honed their skills.
This transformation has already begun. For example, Google has famously announced that they will no longer require applicants to have a degree. Already, as much as 14 percent of employees on some Google teams never attended college.7 What's more, says Iny, many large consulting firms such as PricewaterhouseCoopers and KPMG are looking beyond degrees because data shows they're not predictive of career success or ability to perform in a job.
"These progressive companies aren't the norm yet," admits Iny. "However, they are clear indicators of where the market is moving in a few years and a snapshot of how the landscape will look when today's students start graduating."
"All in all, the cost/benefit ratio of a college education no longer makes sense for most students, and parents need to stop pushing their kids into a system that isn't working for them," says Iny.
"Take the meager returns of modern education, add the soul-crushing debt carried by its graduates, and compound it with the projections that by the end of the next decade college tuition will grow to well over six figures per year,"8 says Iny. "When you do that, you may well agree that the only reasonable response is, Really? Are you freaking kidding me?!"
1. Taking Ivy League out of the equation. Goldman Sachs makes a case against paying for an average higher education in this 2015 CNN article: https://money.cnn.com/2015/12/09/news/economy/college-not-worth-it-goldman/
2. STEM Jobs. The U.S. Department of Commerce stated in their 2017 Job Update that STEM workers earn more on average. Read the report at http://www.esa.doc.gov/sites/default/files/stem-jobs-2017-update.pdf
3. Tuition growing at double the rate of inflation. Ryan Craig continues to flesh out the discrepancy between the cost and use of a degree in chapter 2 of College Disrupted.
4. "991 hours just to cover tuition!" Also from College Disrupted by Ryan Craig.
5. Opportunity cost estimated at another $54,000. Also from College Disrupted by Ryan Craig.
6. 7 in 10 students graduate with an average of $30,100 in debt. This is shown via 2017 statistics on the Complete College website. Learn more at https://completecollege.org/data-dashboard/
7. 14 percent of employees on some Google teams never attended college. As reported by Ryan Craig in chapter 3 of A New U.
8. Tuition rising to $130,000 per year. These projections were noted in a 2018 Forbes article "How to Save for Rising Education Costs and Potentially Get a Tax Deduction." Full article at https://www.forbes.com/sites/kristinmerrick/2018/03/06/how-to-save-for-rising-education-costs-and-potentially-get-a-tax-deduction/
About the Author:
Danny Iny is the author of Leveraged Learning: How the Disruption of Education Helps Lifelong Learners and Experts with Something to Teach. He is a lifelong entrepreneur, best-selling author, and CEO of the online business education company Mirasee. Best known for his value-driven approach to business, his nine published books include Engagement from Scratch!, The Audience Revolution, and two editions of Teach and Grow Rich.
Danny's work is followed by over 100,000 experts and professionals across various outreach channels (email, social media, blog, column on Inc.com, etc.), and over the course of 2015, 2016, and 2017, they've invested over $10 million toward training on the Leveraged Learning opportunity through his books and acclaimed courses, such as the Course Builder's Laboratory.
For more information, please visit www.mirasee.com.