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greyenlightenment  investments: META/FBL, TSLA, TQQQ, TECL, MSFT ...  1yr ago (greyenlightenment.com)   2800 thread views

Why the college bubble won’t pop

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Some comments. According to Statista the difference between starting salary of people with high school diploma vs college degree is $30k vs $50k. However I think it would be interesting to see also the whole calculation, college degree has a lot of costs, namely tuition plus all the necessary costs of living such as rent, food, books and so forth accounting to around $35k a year. Additionally there is opportunity cost of not earning any money and delaying one's career by 5 years. If we compare apples with apples of somebody who can work and save all the income because all his needs are taken care of by parents, then we really have a difference of fresh college major out of school compared to high-school graduate with 5 years experience with around $100k minimum already put into real estate or stocks, more realistically it would be $200k or more. This difference is even larger if college education was debt financed to large degree (probably the only possibility for child of poor parents). In such a case instead of having 100k+ assets bringing interest you may end up with 200k+ debt with 5% plus interest rate.

Second elephant in the room is also quality of college and one's major. The most popular degree now in USA is "social science and history", these graduates earn around $42k after graduation compared to computer science graduates with $75k. So it would be worthwhile to actually calculate which majors are actually worth it. Of course there are also gated profession like doctors or architects and so forth where college is by law necessary to get the job in the first place. I think these professions should be automatically removed from any comparisons as they literally hold the students hostage. Of course the problem is that in last couple of decades we experienced runaway credentialism where jobs that used to be "free" now require some degree or certification by state, like for instance even simple hairdresser job. The problem with mass college attendance is the classic problem of people standing up to have better view of the game in stadium. Eventually most people will have to stand to view the game with experience of aches and tiredness, while those incapable of standing will be completely cut out not seeing anything. Of course this does not change the calculus of degree being worth it for every individual.

Third, college already counts with some survivorship bias. You mentioned possibility of college dropouts, which is massive - apparently around one third of people do not finish their degrees and will thus count as high-school graduates. So there is risk involved which should change the calculation for any prospective college student. Also college self-filters people capable of adhering to schedule and so forth. If you are a teen with family or drug/alcohol or crime problems, you will not be able to finish college no matter how subsidized it is but you may be able to finish high school. This to me is not a relevant comparison when calculating the benefit of college for individual. Again to have an honest comparison we should really compare college graduates with high-school graduates who are fully capable of finishing college but who decide to go and work right after high school.

Fourth and a major assumption is that all salary advantages are solely the result of college education. As if nepotism, corruption or even plain old social networks that can find a good job for young Ariston do not exist. There is huge correlation between parental income and college attendance. Children of rich parents have high income is of course no-brainer. I would wager that if one did similar comparison of future income of children flying first class on intercontinental flights we would get similar results - however it would not mean that your average schmuck should have his child fly 1st class to Paris every ear in order to improve their chances of good income when adult.

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