I have addressed this subject multiple times over the last eleven years. You can forget last year’s version. In the immortal word of Bob Dylan, “The times they are a-changing.”
For decades, college graduates enjoyed higher earnings and greater wealth than individuals who did not graduate from college. This circumstance came to be known as the “college premiums.”
The college income premium is the extra income earned by a family whose head has a college degree over the income earned by an otherwise similar family whose head does not have a college degree. This premium remains positive but has declined for recent graduates.
The college wealth premium, extra net worth, has declined even more noticeably, trending downward faster than the income premium due in part to the high cost of college and the increasing need for student loans. The college wealth premium of a terminal four-year bachelor’s degree is at a historic low.
Though these premiums still exist, according to economic research published by the Federal Reserve Bank of St. Louis, the data suggests that college is failing many recent graduates as a financial investment.
Here is the short version of Forbes’s thoughts on what you should consider if you are thinking about going to college.
- What are your career goals?
- Does the school you are eyeing offer a strong program in your area of interest?
- How much would you need to pay for tuition and other expenses?
- How much student loan debt will you incur?
- What starting salary are you likely to earn?
Do you notice anything missing? I will give you a hint. The latest data on “college outcomes” was reported in the WSJ in April 2024. The study was done by the Burning Glass Institute and the Strada Education Foundation.
When ten high school graduates matriculate:
- Four drop out, most by the end of the first year.
- Three graduate but find themselves underemployed, e.g. making lattes.
- Three graduate and score a well-paying, professional job.
What we can conclude from this study is (1) College is a competition for the relatively limited number of “college” jobs available each year. (2) Supply far exceeds Demand. (3) Academic ability, your major, and your resume matters.
Have you been told, “You can be whatever you want to be?” That is a lie. The abilities of high school graduates vary widely. Your high school GPA is highly predictive. For example, if your GPA is 3.5 or better, you would have, at a minimum, a 72% chance of graduating college. Those are reasonable odds.
W-A-Y too many high school graduates opt for college. Forbes, and many others, overlook one important question, “Am I college material?” If you aren’t college material, college is very unlikely to be worth it.
In the last eleven years, I have made this “Supply versus Demand” argument a thousand times or more. These days, it is difficult making a success out of an investment in college. The bad news is that it is going to get harder.
Artificial Intelligence (AI) is widely considered to be a transformative technology with the potential to trigger the next industrial revolution. The First Industrial Revolution was a massive transformation in how goods were produced, societies were organized, and economies functioned. It began in Britain in the late 18th and spread to other parts of the world through the early to mid-19th century.
Imagine you were a handloom weaver, a member of the artesian elite. They were replaced by mechanized production and new technologies. This displacement led to widespread unemployment and significant social transformation as people had to adapt and find work in new, emerging factory and industrial roles.
Today, there are two degreed candidates for every well-paying, professional job. AI is going to shrink the number of entry-level college jobs.
But wait, there is more. There has been a major shift in the job market. I worked in IT for thirty-six years. I never thought I would live to say, “Getting a Computer Science degree might not be a good idea.”
Top 3 Fastest Growing Industries for New College Grads
2018
1 Technology
2 Financial Services
3 Marketing
2025
1 Construction
2 Utilities
3 Oil, gas, and mining
College is NOT a no-brainer path to a middle class or better financial life. When you graduate from high school, you need to consider your options carefully.
Congratulations, You Have Graduated from High School. Now What?
I wonder how many HS graduates have ever done the calculation to determine what kind of net worth they could end up with if they just invested the money it cost to go to college instead of going and worked a skilled trade job instead? I had chat gpt run a scenario for me comparing an automotive technician(how I started my professional career) career choice vs. An engineering career choice, assuming real salary info from engineers I know( I dropped out of engineering school after 2 yrs) and technicians I employ( top technicians who work for my auto repair company). Assuming the auto tech will invest the engineering tuition amount semi annually while working the 1st 4 yrs (feasibly done by living at home during that time in most cases) the technician comes out ahead at all points in his career. Of course, there are a lot of assumptions here, and a lot of different variables to apply, but its worth a look and applying to one’s own situation when making a decision for sure.