Biden's ten thousand dollar loan forgiveness scheme has once again thrust the value of a
college degree into the center of public debate it's tough to still be paying so much in loans
every year according to the College Board the average out of state costs for a student
attending a four-year college is 149 720 when including tuition books and room and board the
prices are lower for community colleges and hire for private and for-profit colleges but
the out-of-state four-year college is a pretty typical experience for most people taking this
path a hundred and fifty thousand dollars is a lot of money for a young adult to be playing
around with especially when students are taking on debt to fund the expense so my American dream
is pretty simple my American dream is just not living paycheck to paycheck but most don't look
at a college degree as a frivolous purchase it's an investment that will produce stronger returns
over a working career the data still backs us up the cost of a college degree has increased
significantly but just by the Numbers it is still a good investment with a typical College
graduate earning 650 000 more than a typical high school graduate over the course of their career
according to a Pew research study but just because something is a good investment doesn't mean that
there aren't better Investments available so it's time to learn how money Works to find out how good
a college degree is according to the numbers and explore some alternative Investments this
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College a good investment well by the Numbers if you think you would be a typical student then no
the 650 000 in additional income you would earn over a 40-year career from an initial investment
of a hundred and fifty thousand dollars works out to be an annualized Roi of 3.5 percent which
as far as Investments go is [ __ ] investing that hundred fifty thousand dollars into a broad market
equities portfolio would generate returns of 9.3 million dollars over the same 40-year time Horizon
assuming historic market returns you might think it's unfair to assume historic market returns but
by that logic it would also be unfair to assume the historic value of a college degree so we
have to work with the figures we got using this strategy a four-year college degree would need
to cost less than ten thousand dollars for the six hundred and fifty thousand dollars in additional
income to match Market expected returns cheap colleges do exist and going to a local school can
save you a lot of money on accommodations if you are fortunate enough to be able to stay with your
parents parents ten thousand dollars is a stretch but with scholarships and assistance programs it
is possible however passive investing has some other advantages besides the Mad gains setting
aside and forgetting a stock portfolio until you retire literally requires you to do nothing if you
drop out of your college degree decide that you hate the career you chose or develop an
injury or illness that makes you unable to work then your college degree effectively becomes
useless an Investment Portfolio on the other hand doesn't care what you do with your life what what
as long as it stays in the market it should be making you money for all of you canceling your
college applications right now consider this as well the earnings Gap only factors in the price
of attending college it doesn't factor in the four years of earnings you would get by working
a job instead of studying come on dude today's typical high school graduate aged 18 to 24 with
no further education is paid an average of twenty three thousand dollars per year working full-time
according to Pew research that's close to one hundred thousand dollars in foregone earnings in
the four years of college assuming the student does not have a part-time job if they did the
earnings Gap would still be there it just wouldn't be as wide but that's not even the best part A lot
of these statistics are based off of samples from the population of high school graduates and the
population of college graduates as with figures derived from a sample population they are prone to
selection bias people that meet the requirements and make the decision to go to college are on
average more likely to have Ambitions of high earning careers than those who do not go to
college or do not meet their requirements to do so now certainly there are plenty of college students
who are not very ambitious at all and there are people who don't even graduate high school who
hustle like crazy to make money but on average the college crowd are going to be more money
motivated than the dropouts that means if you are a motivated individual that's going to pick
a non-college career path based off earnings potential then you are likely to close the 650
000 earnings gap between high school and college graduates significantly I don't know man that
sounds like a lot of work so why the [ __ ] aren't people doing this if you hadn't guessed
by now there are some problems with just letting your college tuition fund ride in the stock market
for 40 years sometimes gross returns are not the only thing an investor needs to consider a college
degree does offer some advantages in addition to its ability to qualify you for higher paying
jobs it can also qualify you to more comfortable jobs going to college is like a safety net the
TV show Dirty Jobs ran for nine Seasons between 2003 and 2012. and in its 179 episodes a lot of
the featured jobs aren't very good money and very few of them required a college degree if
you want to make money without a college degree there are options available to you especially if
you are willing to work your ass off outdoors in smelly hot dangerous conditions doing hard
labor that will wreck your body before your Investment Portfolio has had time to make you
a millionaire or you could work equally hard in a temperature-controlled office pushing paper around
a desk all day you might think it's hard to put a nominal value on such a subjective difference
unless you went and got yourself a finance degree in which case you will be qualified to assign your
own multiple and conduct your own calculations accordingly being the richest person in the
graveyard is pointless and to many a college degree is just as much an investment in being
able to dedicate their lives to work they enjoy as much as it is an investment to make more money
lifestyle during your working career must also be considered purely based on finances as well
an Investment Portfolio returning 10 annualized Returns makes money like this almost no nothing
for the first three decades and then huge wealth being generated in the last 10 years either of
these return patterns are fine if all you want to do in life is safe for retirement but if you
want to travel buy a house raise a family or generally live life then you are going to need
a more consistent stream of income like a higher monthly paycheck the pure investment strategy also
wouldn't work for everybody the stock market only provides returns when smart hard-working
people innovate to make the companies they work for more profitable Innovation can come from
anywhere but it does largely come from people who are well educated if everybody just front loaded
their life savings into the market and kicked back for the next 40 years then there would
be nobody left to generate any returns still that doesn't matter for you as long as enough
suckers still buy into the college career dream you could still make the plan work for yourself
all right then let's do it now you just need to find a hundred and fifty thousand dollars holy
crap raising this money to go to college is easy the federal government and a long list of private
companies give out loans to students every year to fund their tuition and expenses while studying
because student loans are extremely difficult to discharge through bankruptcy the organizations
lending the money feel comfortable giving tens of thousands of dollars to an 18 year old kid the
federal government unfortunately does not give out six-figure loans to people that want to front load
their retirement savings so automatically that cuts out the 68 percent of students that were
going to make this payment by taking on a loan another seven percent of students get through
college thanks to scholarships that eliminate the cost of tuition unfortunately scholarship
money cannot be yoloed into the stock market the remaining 25 percent would have to convince their
parents that their investment strategy was a better use of their college fund than you know
actually going to college probably a tough sell to Mom and Dad who have been saving that money
away for 18 years also if you do decide to go to college you might learn enough about statistics
to recognize the mistake I made a few minutes ago okay okay you got me I assume that because
you were watching this video on how to extract the most money possible out of your working and
investing career that you are strongly motivated by how much money you could make by going or not
going to college that assumption wasn't a mistake but what was is what I said about selection bias
if you have a heavily Money Motivated individual without a college degree you shouldn't be compared
to the average person with a college degree you should be compared to someone with a college
degree who is also heavily Money Motivated the top 10 percent of high school graduates easily
out earns the average college graduate but the gap between the top 10 percent from both
of these categories is even wider than a 650 000 Pew research figure that we have been basing this
study around there are lots of college degrees that lead to jobs with low earnings potentials
and a lot of people don't mind that because they just want to build a career around something like
teaching or the Performing Arts is College a good investment it can be and it's potentially
the best investment available to a lot of young people not because it makes them better and
more valuable workers but because it gives them access to incredible leverage to through big loans
without the possibility of a margin call obviously this video is not to be taken too seriously but I
actually think this can be a great way for young students to think about their career options if
college is an investment then you should treat it like an investment if you are investing one
thousand dollars in a stock on Robinhood then you would look at the data assess the industry that
the company operates in what does the future of the industry look like how expensive is
the stock what are its earnings is the stock overhyped will the company still be around in
20 years time or will it be made redundant by new technology is there a cheaper way to get exposure
to the same industry people put a lot of time and effort into making decisions when they see their
money is on the line but pick a college degree based on what school has the prettiest grounds
or the best football team college is a five or six figure investment and it should be treated
as seriously as any other investment of the same size and a big part of making good Investments is
assessing the Alternatives sometimes it's okay to admit that a college tuition fund would be better
spent as a deposit on first home or even invested into the market where it has decades to compound
into a fortune oh but I probably should have mentioned to you that you would probably screw
it up anyway because you would likely get nowhere near historic market returns even though it's the
simplest thing to do to find out why go and watch my video on why you suck at investing thanks again
to stamps.com for making it possible to keep on learning how money Works you're one student loan
which you won't have to start paying or even look at until you graduate covers your housing
and most of your groceries so you won't need to learn how to budget for these fundamental human
Necessities until you graduate can't get a job and your parents start charging you for both no