After RN's comment a few posts back, I decided to do a back of the envelope calculation on the college investment.
Let's start with the ROI. Here are some stats on average earnings based on education level. There are two statistics - average earnings and average lifetime earnings. Both statistics are troublesome since a lot of details are excluded, but since this is a very rough calculation, let's use the lifetime earnings calculations. A high school degree nets you lifetime earnings of $1.2M and a bachelor's degree nets you lifetime earnings of $2.1M, a $900K difference. I assume this is over around 40 years of working, which correlates reasonably closely with the average annual earnings difference of $22K.
So college clearly boosts earning potential. Now let's look at the investment side of the ROI equation. Here are some college costs statistics. Again, there are a range of costs, but let's take a mid-point number and assume that college costs $25K a year. Add to that the lost earnings, which according to the previous link, should be around $30K a year. For a four-year college, that's a $220K investment.
Let's be a bit silly and assume you could take that whole investment and earn 5% a year on it over 40 years. You would end up with $1.575M, which compares very favorably with the $900K difference quoted above.
There are at least a dozen serious problems with this comparison as calculated above, but even taking those into account, it should be clear that college is not the slam-dunk choice that most people consider it to be.
At a minimum, it is a very bad idea to send your child to a $40K a year college so they can earn a liberal arts degree that will barely boost their income. Financially, at least, it is better for them if you stick that money into an annuity and teach them a real trade.
A few years down the road, I am guessing the plumber with a nice annuity is going to be in much better financial (and possibly mental) health than the Comparative Lit major with the $100K+ in college debt.
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