Week 42 - What I Need to Know About the Value of a College Degree

We all know the price tag of college increases every year (and really every semester). And every year, parents and students ask themselves if getting that $40k (or even $100k) piece of paper is really worth it. But then again, that statement really depends on how you define the purpose of college.

The Easy College Analysis

Looking at a college education through a more simplified lens, people would normally default to comparing the earning power of people with a college degree to people without one. Unfortunately, this comparison is just too simplistic and doesn't really give you a good conclusion to base your decision on.

But why?

No College Analysis is Actually Easy

Well, let's introduce a smart person term - selection bias. I'll let you use this one at Christmas dinner later this month and you can impress the fam. In short, it's basically the failure of creating a purely random test group, thus making any conclusion of the study inaccurate.

When it comes to these generalized college degree ROI studies, the test groups might not actually be random. To break it down even more, think of it this way.

People who go to college and complete it are generally (please note the blanket statement here) able to compete better in the job market, and specifically be better rewarded. But I know just as many people who didn't go to college and work just as hard, if not harder, than many people I knew in college.

Don't even get me started on how many group projects I worked on where I felt like I was working with brooms. Great people, just not motivated and tried their hardest to figure out how to pass the class with as little work needed as possible.

And it looks like companies are picking up on that too, or at least I really hope so. Just look at the increase in jobs that don't require a degree or programs dedicated to learning specific skills.

What I want to make clear here is that a college education does not then mean you get paid more in your job. Remember, correlation does not mean causation.These people who go to college and do get paid more than those who didn't are more likely to be in that higher paying group because of their inherit abilities of working hard, dedication, and ability to learn, and not so much because they have a piece of paper.

Side note though, if I got an application from someone who never went to college but started their own tech company, created their own app, etc and had to choose between someone who just graduated with a 4-year degree, I feel like the best candidate is obvious.

But the ROI of the college degree is so much more than just money. Did you think about a college degree’s effect on job satisfaction, overall health and happiness, your preferred style of learning, or even marriage quality? The best part - these are all extremely intangible metrics that are hard to effectively measure.

A college education is a foundational fork in the road that many people have to make a decision about in their lifetime. While it's a much easier decision for some, others have their hands tied when making this decision simply because it's not affordable.

A Student Quality Analysis

In George Mason University economics professor Bryan Caplan's (geez, what an intro) latest book The Case Against Education, a college education is really only worth it for good and excellent students, and actually detrimental for bad ones. Instead of looking at the financial benefits and consequences of college education, Caplan looked at the quality of students that decided between a traditional college path or an "alternative" path.

Caplan approached this study by segmenting students into four categories:

1. Excellent students - the ones that completed a Master's degree

2. Good Students - the ones that completed a Bachelor's degree

3. Fair students - the ones that earned a high-school diploma

4. Poor students - the ones that never received a high-school diploma

Caplan then looked at completion and failure rates among these students, as that is a significant factor in the actual ROI of a degree. And these failure rates might be higher than you think.

Take for example the excellent student category. While this segment is essentially guaranteed to graduate high-school, only 65%  will get their bachelors, and of those that go to pursue a masters, only 50% are able to actually achieve it.

On the opposite end, only 60% of the poor student segment will finish high-school in four years, and around 10% of them will end up getting a bachelor's or master's degree.

So We Should All go to College?

Well, it depends.

No one should ever believe that you have to go to college. I would have some serious beef with anyone who says or believes that because I just can't understand how college is the best fit for everyone. Maybe I'm getting too opinionated here, but the purpose of college is to train people for the workforce, right? To give them the necessary skills to aid their communities, families, companies, and the world. If college can't actually do that for you, then find your way of accomplishing that. Maybe it's going to a technical school, maybe it's just going out and doing it, or maybe you just need to learn on the job.

College is a great fit for those students who have the drive and aptitude for it, but should probably be avoided or chosen with caution by those who will most likely not finish it. Practically speaking, you'd just be wasting a ton of money and time.

College is by no means a guaranteed way to get a high paying job and find success in life. Pursue the learning path that fits your style the best, and then augment it as needed. Companies want people that are driven, creative, and passionate about what they do or want to do. There are a lot of ways to show all those qualities without a degree. Just stop and think.

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To get a technical job at any major tech company like Google, Amazon Web Services, IBM or the like, you need to know your shit. But the shift we're seeing now is that a four-year degree doesn't mean as much as it used to. And companies that are hiring high-level technical roles are starting to care more about your learning ability than what school you went to.

Take it straight from Google's previous VP of People Operations, Laszlo Bock, who essentially said that GPAs and test scores aren't a valuable hiring factor. It's all about how they're able to use resources given to them and their ability to implement solutions in the moment.

Even StackOverflow, the most popular developer help forum I know, found in their survey that 20% of self-identified developers didn't have a traditional degree.

And I don't see this number going down any time soon.

With the increase in popularity of coding boot camps, online learning resources (i.e., Udacity, Lynda, Coursera, etc), it's becoming easier for people to learn how to code well without needing to go $100k in debt.

But the reality is still this: people who did get a four-year degree will still out-earn those who didn't over their career by almost 50%. Also, many companies are still unsure how they feel about hiring a developer without a degree, and still see that achievement as a safer way to hire people.

So what does that mean for all those out there who still want to go this alternate route?

Well, be prepared to work your ass off because you need to prove that you are just as good as someone with a degree, or better. While that four-year degree is still considered to provide better overall ROI than a non-degree professional, if you hone your skillset, you can easily show more value than any schmuck with an expensive piece of paper that got an A in volleyball.

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Similar to the author of this post, I am also biased against a college degree (you might have picked up on that by now). But this by no means says that I believe a college degree is bad or not worth it. Many people need a college degree to learn about very specific or complex topics, while others are able to learn in the age-old trial by fire method.

To Go To College

But when it comes to deciding about going to college or even staying in it, you'll want to rely on the numbers. This might be a little hard to hear, but take it with a grain of salt: you're not that special.

While you are unique and have your own awesome gifts and talents, you are most likely not the next Steve Jobs, Mark Zuckerberg, Bill Gates, etc. that went on to be some of the most successful people in the world without college degrees.

So thinking that you don't need a college degree because these other people achieved success without one is just plain idiotic.

When you look at the big picture and your future, college is probably more in your favor than against it. Simply put:

• College graduates tend to earn more over their lifetime than those who never finished.

• College graduates find jobs more often than those who never finished.

Another blanket statement incoming: college degree = higher salary + increased chance of getting a job.

Be warned, this is just in general and is by no means a guaranteed way to have a higher salary or increase your chance of getting a job. In the end, it boils down to your work ethic, ability to solve problems, and goals in life. Typically, people who finished college and did well have figured out those problems (or are at least figuring them out).

To Not Go To College

Saying no one should go to college is just as bad as saying everyone should go to college.

The thing about college is that it's a standardized institution. And while many colleges are touting the individualized learning track, let's be realistic here. College works for most people, but everyone has their own style of learning. While that generally works in a classroom setting, it's not a universally effective strategy.

One of the biggest deterrents, especially for parents?

$$$

College has been increasing in price year over year. Just look at the 1.48 trillion debt and the average loan amount of 2017 graduates. So before anyone goes to college, they really need to think about how they're going to afford it.

But what else do you need to be aware of besides cost of attendance?

Colleges are a breeding ground for controversies, especially political ones. Just be ready to deal with a lot of salt, regardless of what side you're on. People get heated at college very easily, so just take a few deep breaths and try to take the high road.

For all the futurists here, this one should be pretty obvious too - the time it takes to complete a college degree. Generally, most people take four years to graduate. And as someone who is in the technology field, almost everything I learned was already outdated. Industries move faster than ever before, so don't rely on college to give you up-to-date information. The only way to do that is to work in that field. Don't expect a college education to keep you in the know.

And finally, I can't express this enough and you've probably heard it many times before, but the professor can make or break the class. If your professor sucks, then you're wasting your money because you're most likely just scrolling through Facebook each class. If a professor is actually passionate about their subject then they can make you passionate too. Make sure you do some research before registering.

If you go through four years of terrible professors, first of all I'm sorry but you did that to yourself, and second of all, you just wasted so much time and money. Don't make that mistake.

Taking an Alternate Route

What is the purpose of college?

In my opinion, and I feel like this is pretty widely shared, is that it's supposed to prepare you for the workforce, both in technical skill and human interaction. While I think it did a terrible job of doing that in my case, I at least hope it worked for some people.

So while college is supposed to and does provide that training, it is definitely not the only way. For example, if you want to know how to work in the real world, work in the real world. Countries and companies need to rely on skilled workers. But if you wanted to sharpen your skill set without going to college, you have the opportunity to look at apprenticeships, boot camps, or just finding areas to fill in the skill gap.

There are more resources than ever that you can leverage to become a highly skilled worker without needing to go to college. The only thing stopping you is yourself.

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Long story short, people who go on to get their bachelor's degrees earn more over their lifetime and have better job prospects. This shouldn't be too surprising to anyone.

But what I wanted to figure out here was the decrease in value of a college degree, if at all. While I am personally biased against it, I also got my bachelor's degree, so my opinion doesn't count since it would be coming from a place of privilege.

To put some cold, hard cash on the line - if you decide not to pursue a college degree, then you're more than likely throwing away $17.5k a year compared to your peers who do go on to get theirs. Or, over your lifetime, that could be a loss of over $1 million.

This isn't to try to scare you into getting a college degree though. While getting you four-year degree is statistically the safer way to get a job and make a decent income, it is by no means a guarantee.

With the rising number of online learning resources, bootcamps, apprenticeships, and companies looking for skilled employees (regardless of having a four-year degree), the chances of doing well in life without pursuing that piece of paper seems to be getting better.

Sure, I still believe that the skills you (are supposed to) learn in college are necessary for the workforce, but if you join it early on without a degree, then I'd say that's more valuable than anything you could learn in a classroom.

In the end, college is a choice. If you don't think you're just another number, have passion about a specific topic, and are willing to dedicate yourself to learning through experience, then college might not be the best place for you.

But if you want to take a more traditional route, learn well in the classroom, or just want to learn about stuff that shouldn't be self-taught, then college makes sense too.

Just know that both are valid options.

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