College Broke: Musings about a modern education
December 29, 2015



compare 19th 21st

“There’s no way out”, said my friend on the phone. I was willing to excuse the dramatic fatalism because of the admission that followed. Jeff was the smartest of all my friends in high school, in both a bookish and a cultural sense. He scored above 1500 on his SAT, and could keep up in conversations about anything from Middle Eastern history to atonal music. If you were placing bets based on information of the time, he was your lead horse as most likely to succeed. But our conversation made apparent that the road to financial freedom was long for Jeff, thanks to massive student loans, and mediocre job prospects.


As we parted ways for college, excitement pervaded our imaginations. Trivial matters like finances and return on investment receded to the periphery. However, five years came and went, as did the deferment period for student loans owed by the 2013 graduating class. Jeff’s liberal arts degree at a prestigious university did little on its own to yield job offers, and a new reality began to set in. Working a full year making ten dollars an hour at a local media company wasn’t exactly selling out to the man – after all, Jeff never glorified the doctor/lawyer/accountant narrative that so many pursue. Still, ten an hour was ten an hour – not enough to begin servicing over $100,000 in student debt, let alone to move out of his parents’ house.


After reading around and hearing the complaints of many others in my age bracket. I was shocked by how large the balances were that students typically racked up. In 2015, average student debt repayment stood at slightly above $35,000, surging about $2,000 over a single year (according to the Wall Street Journal). However, there are anecdotes abundant of those with more than $150,000, or even $200,000 to pay down in the coming years. With the average starting salary for a bachelor’s degree holder at $45,000, a student might expect a $400 payment out of their paycheck going to student loans (10 year amortized, $35,000 at 7% interest). This is a hefty chunk of a person’s after tax pay – which is about a seventh of the approximately $2,900 per month ($45,000 a year after tax).


The story gets worse for some. There is not a high degree of correlation between starting salary and the cost of education. The decision for most is not like that for buying a business, where owners purchase/sell an investment on the merit of what it will pay out later. College nominal costs (irrespective of financial aid) tend to vary by school, and not by major. Whether one chooses to pursue engineering or humanities, the sticker price may only vary slightly. Humanities and liberal arts majors are often not subsidized the way that some technical programs are (as schools look to attract STEM graduates). The result is financial breaks for students on track for careers in higher paying industries, and further penalties for those on generally lower income paths outside of the science and mathematical disciplines.


This leaves those like my friend Jeff in a predicament – large debt, questionable career prospects, and the resulting deferral of independence. Millions of young men and women are stuck with similar life decisions, and it’s due to a multi-pronged issue. Like the subprime mortgage crisis, people tend to take a strong stance on one side of the issue or another, when in fact multiple parties share some guilt for what occurred. In the mid-2000s, borrowers took out loans on homes that they could clearly not afford, and lenders made the decision to target and lend to these people. The financial crisis brought both parties to their knees, and the media either clung to a story about the thoughtless borrowing of the masses, or the greedy banks juicing clients for fees. In the end, either side could have mitigated the problem by acting more responsibly. Both had to lie in the bed they made (banks and consumers were bailed out in some form or fashion by the taxpayers, and many innocent bystanders were brought down as well).


Today, college has become a less compelling investment, but many feel that they cannot get ahead without a degree. There is also an element of competition, where families feel pressure to conform to norms and outdo friends by sending children off to pricey schools. This demonstrates a sense of complacency among higher education and the general public. Today, tradesmen like plumbers and electricians can earn multiples of those who enter white collar careers. It’s not the rule, but happens more than you might think. Small business owners are also some of the most well compensated individuals in our society. However, the issue goes deeper than a simple comparison like this.


It would be naive to presume that everyone can compete effectively as an entrepreneur, but there is a wholesale lack of creativity in how many are defining their futures. Taking the college path with an end goal of lifetime employment is in my opinion an antiquated ideal. By accepting a job at someone else’s business, you accept their rules, inherit their systems, and execute on someone else’s product or business plan. As a disclaimer, I do work at a large corporation, and while I enjoy my work, there is no more gold watch for the retiree after a long tenure. Employment at a big company can lead to a long and rewarding career, but there’s a problem – too many people are pursuing that path with respect to the number of positions available! This leads to a bias toward new hires who have already achieved industry experience through internships and training. Summarily, the college degree is playing less of a role in what translates to results on the job, but those hiring can still demand college graduates because they are so plentiful – even when the work does not require a degree.


With this combination of developments – the rising cost of college, increased competition for employment, and a further reliance on direct experience by employers, it appears that pursuing a bachelor’s degree to find a great career has become a less efficient use of time and resources. In my experience, corporate job postings mandating a college diploma do not call heavily on the coursework of required and elective classes. Instead, the bachelor’s degree and GPA figure serve as proxies for someone’s willingness and ability to work hard and grasp new material (called signaling in academia). Naturally, some professions rely on coursework from college, like accounting, engineering, and medicine, but most things business-related or administrative can be taught on the job without the need for licensing or immediate certification. This explains why investment banks and consulting firms will hire people with backgrounds ranging from art history to geology. As long as the candidate has shown that they are among the best and brightest, they are presumed to be trainable in the business domain.


Surprisingly few people are looking for alternatives to college, and this has allowed companies to demand college degrees without consequence. Graduates are plentiful, and do not command a large premium in the marketplace (though many universities charge premium prices). Because of the prestige and perceived expectations of friends, family, or neighbors, many pack off for college each year when their skills, goals and disposition may be better suited elsewhere. According to the National Student Clearinghouse, only 55 percent of those who matriculate in a college bachelor’s program graduate within six years. Unfortunately, some college experience does not qualify applicants for higher paying jobs requiring a degree. That could mean spending years paying tuition, and foregoing a career, with no degree to show for it. The result is a job that never required college in the first place. This is a widespread and complicated problem, and while this editorial has touched on many separate issues, they all summon a question:


To find a job and work toward financial independence, are there better alternatives to college?


Robert Frost once said, “The best things and best people rise out of their separateness; I’m against a homogenized society because I want the cream to rise.” I find these words to be relevant today in many contexts. If everyone tries to fit a certain mold, it creates a shortage of those taking alternative paths, and puts a premium on different strategies. College is still the best choice for millions of students each year, but others would be better served by devoting four to six years to earning income, saving, and investing in a business/brand. There is now a lower opportunity cost associated with forgoing college, since tuition has climbed higher than ever. Also consider that undergrads choose to defer serious career plans for at least three years.
If running a business sounds risky (it typically is), consider the range of lower risk opportunities such as laundromats, car detailing, multilevel marketing, and other hyper local business models. Professor Bruce Greenwald of Columbia has commented on a reversion of globalization, citing improved technology and the decentralization of markets as cause for a resurgence of local production and distribution. Because of technologies like 3D printing and eCommerce, in conjunction with social developments like the food movement, costs to produce locally are set to drop in the face of data showing relatively flat transportation costs. Under these projections, people will have less economic incentive to travel for business, and will identify more closely with local brands.

Consider that the average lawyer makes about $130,000 in America, and that Wall Street folks take home an average salary of $404,000 (HEAVILY skewed by the top performers). Most college degrees do not lead to careers in these fields, and lawyers must take out a substantial amount of debt to finance law school. However, I know local business owners in my town who exceed both of these salaries. One man started out of high school and saved up to buy a single truck. He now owns a freight and shipping business that has made him a millionaire. Another in town started a construction business and used his earnings to buy a few franchise restaurants. He now makes high six figures each year. Those who learn to operate successfully can make more than a desk job could ever promise – yet more and more people continue flocking to the risk averse path, even as its cost goes up and the benefits pay out for fewer and fewer. Playing it safe can turn out to be dangerous.

The idea of entrepreneurship has developed associations with bootstrapping, high technology, and venture capital funding. However, there are a plethora of businesses that exist today requiring very little in startup capital. Examples include an organic cleaning business, driving for Uber/Lyft (if one owns a car), and a mobile auto detailing company. An operator can expect to earn in excess of $15 per hour with each of these platforms. The only requirement would be a means of transportation like a car and under $1,000 in upfront expenses. What’s more is that they certainly do not require a college degree. It’s striking to see that over fifty percent of grads make $30,000 or less out of school. This equates to $15 per hour and 2,000 hours worked per year. Spending ten percent of a college education to invest in your own business can afford you the same hourly wage of many grads that flock to entry level jobs with mediocre career prospects.

To me, the bar appears to be pretty low when considering other paths. Also consider that the $15 per hour is what an operator might expect to make. This essentially equates to what a person makes if they do the work themselves. However, building a book of referrals, commanding higher prices, and hiring a team all allow an owner to multiply his or her hourly wage. The owner takes on more responsibility and risk, but those who succeed reap the rewards. As people save, they can afford to buy assets that pay out larger sums of money, and this is a key to alternative success. A college education is an asset, but so is a dump truck. With proper credentials, both can be monetized. However, colleges want their money years before the degree is given, and one will not see the full result of their efforts for some time. However, someone may need only weeks or months to capitalize on their upfront investment in a business. I’d argue that while less safe, a smart owner can achieve greater upside in a shorter period by pursuing their own business.

I am sure that many have doubts about the above, and it is true that not everyone has the personality, taste, and disposition of a successful business owner. However, the sacred cow in our society that is the college education has diverted many talented people toward an education platform that a) teaches wonderful material that unfortunately has no relevance to a career, and/or b) trains people how to fit into a business, rather than how to create a business. Most parents would not spend $30,000 to send their child to another country for a year to learn and study a different culture. Yet, they will write a check for the same amount to send them to a school where they may take two classes out of eight that brighten future prospects out of school. The cross pollination and rigor of a college program certainly has its merits, but abstractions such as course credit and accreditation have caused consumers to put these institutions on pedestals, and to assume that no other environment (the internet, boot camp, immersive program) can possibly instill the same education that a university can. If those who buy into the collegial rite of passage do not get over the mass obsession with prestige and credentials, then we may well end up with future generations who not only struggle to change a light bulb, but also place greater emphasis on the value of a piece of paper than the achievement of real results. Businesses must make good products and interact well with customers to survive – they do not survive based on how many Harvard MBAs they keep on payroll.

In the future, we may look forward to the budding platforms of scalable online education, and hybrid programs. Khan academy is one such program, which teaches elementary through college level material in concise lectures online. Open source textbooks also allow people to explore subject matter, and online office hours are even offered by some authors pro bono. Most of these materials are not written by novice hacks, but rather by PhD professors who believe in open learning.

Harvard Extension School is another forerunner in the hybrid education world. Founded over 100 years ago, HES has allowed students to achieve an Ivy League degree and education through remote and on-campus classes. The best part: the degree (the SAME Harvard degree that full-timers are conferred) can cost as little as a quarter of the standard program’s sticker price! This is because online lecturing is scalable and much less costly than the “cottage industry” of in-person lecturing. The program makes online offerings for classes that can effectively convey knowledge remotely, and reserves a minority of programs for on-campus learning that require in-person resources like laboratories. If one does a reality check, they will conclude that plenty of courses can be taught over the internet with conference meetings, live chats, and individual study.

Coursera is another platform for extended education, through which users can view unabridged classes from some of the world’s leading institutions without ever enrolling or paying a dime. These are great for lifelong autodidacts, and those who are true D-I-Yers. is a more practical incarnation of this model, with thousands of courses on hands-on topics, like web design, database management, graphic arts, and Microsoft Excel. These are great career boosters. Ironically, one of my economics courses in college taught us how to crunch data in excel, and it may have been the most practically relevant course I took. Between two Lynda courses, I was able to learn most of the same material pertaining to this program (minus the economic theory).

No discussion of online education would be complete without a nod to Udemy, which is a marketplace where “micro experts” can create their own courses and upload them to the site. Excellent courses are rated highly – with greater chance of discovery by learners. Customers pay an agreed upon price and Udemy simply takes a cut. This is more of an ala carte method, compared to the bundled curricula of colleges, where essential courses must be taken with often unessential, but required courses in order to receive a degree. While well-roundedness will always be valued, the more fluid “take only what you need approach” has the potential to launch millions of careers and save families thousands of dollars. An educated public is important, but so is a society unencumbered by financial trappings.

One final service bridging the skills gap that I admire is the boot camp. Modern companies, specifically in the technology world are waltzing around the idea that one must go to college to achieve a high paying job. They realize that smart people can be trained for an entry level job at their firm in six months or less, whether they attended a four year institution or not. Because of this, some industry veterans have left their careers to train students via programs that promise to deliver all the necessary skills of an entry level software developer/data scientist. They have become an alternate talent pool for companies to recruit from – and the value proposition is simple:

-Charge people a fraction of a college tuition – usually $5,000-$20,000.

-Immerse them in fundamental industry training and projects for a short period – usually no more than six months.

-Help with recruiting and offer follow up support.

The result is cheaper education that focuses on modern industry standards, and funnels students into a career that they seek over a short, no B.S. timeframe. These boot camps will continue to grow, as their practical appeal has led to triple digit growth of the industry, and the attraction of education giants like Kaplan to the space. It’s streamlined, tailored to an individual’s ambitions, and can yield an exceptional ROI. From what I gather, the experience is well liked by students, and they build friendships and networks through these programs.

Technology is powerful and liberating, but it cannot grant purpose or identity. The ideas and platforms mentioned above work best for those who have pondered the questions, “what do I enjoy? What am I good at? What are some ways that I can live a life that I am proud of?” We live in a world of abundant choices – a true blessing. However, choices can be overwhelming, and blinding. We live in a society where many don’t decide what path they will start down until adulthood. Unfortunately, this squanders the good fortune we have, a luxury to explore what direction we are best suited for. Young years that can be used for failure and experimentation are often lived guardedly, as one continues to discover that “finding one almighty passion” is a daunting and counterproductive exercise. Many of the world’s successful people crafted their vision and life’s work by trying things that they did not enjoy, and avoiding them in future decisions. Warren Buffett and his paper route is one example.

So long as parents absentmindedly write college checks, and students worry more about their next semester than their long term goals, life will continue to decide outcomes for a large portion of our population, leading to greater dissatisfaction with life, and a squandering of opportunity. Fortune favors the bold, and those who feel entitled to defer life decisions will lose out to those who determine, prepare for, and actualize their ambitions earlier.

There is an opportunity to avoid the predicament of my friend Jeff, but the solution relies on a state of being as much as it does on the technology of our day.

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