The Return on Investment of College: Ideas for Paying Less and Getting More
Last week, we shared our experiences of how we obtained 3 college degrees each without debt. Increasing your education is vital to increasing your earning power to allow you to retire early. However, if you don’t look at the return on investment of your education, it is very easy to bury yourself in a hole with debt making even standard retirement at 65 years old difficult to envision. We felt it was important to not just suggest that you should eliminate debt as an option, but to show you how we did it.
However, our way is certainly not the only way. There are many other strategies we never employed. One very common one is taking your general education credits at a cheaper community college and transferring them to a more expensive university. You could start a business while in college to make money as Jesse Meecham writes about in this post. Here he explains that he started the budgeting software company You Need a Budget when in college to avoid using student loans to finish school. You could work for a university while taking classes to take advantage of free tuition as early retirement blogger, the Mad Fientest, writes in this post about how he got a free ivy league degree. The options are really endless.
In fact, we feel that there are many more interesting stories and ideas than ours and so this week’s post is dedicated to sharing some ideas that we found from other bloggers around the web. We’re also going to start to lay out our plan for paying for our young daughter’s education, despite retiring before she starts elementary school. If any of these ideas are particularly interesting, I’ve included links to each so you can explore them a bit more. However, even if you think a particular idea wouldn’t apply to you, or even if paying for college is nowhere on your radar, there is value in exploring each of them. Each example shows that by thinking outside of the box and choosing a path different from the masses, you can accomplish results drastically different from the average person which opens up unlimited possibilities for your life.
Let’s take a look at this post from a new favorite early retirement blog of mine, gocurrycracker.com. In this post, the author, Jeremy, analyzes how much he and his wife will need to invest to pay their child’s college education costs, and discloses that they have already set aside what they anticipate will be an appropriate amount to invest. So with all of the thought put into funding this child’s education, you may be wondering how close they are to starting college. The child is not born yet! Their approach and philosophy are very similar to our own plan we’re employing with our 2-year-old daughter.
I chose to link this post because it serves to reinforce the point that we repeatedly make. Achieving abnormal financial results is rarely a result of working harder or making great sacrifice. Instead it is about long-term thinking, good comprehensive planning, making your money work for you instead of against you and daring to be different. Contrast the thought process here with that in stories you see daily in mainstream media. An example was this article I recently read about a family ready to send their son off to school with $0 saved. This is from the New York Times and then featured on the MSN home page last week (Mainstream enough?) and titled: A Financial Aid Guide for Families Who Have Saved Nothing. Read both of these links and, beyond paying for college, you will begin to see why people have such variability in financial success or failure, and it has little to do with income. Much as team gocurrycracker managed to retire in their mid 30’s in the middle of America’s “retirement crisis”, I’m pretty sure they’ll figure out how to educate their child despite the “student loan crisis”.
While these ideas and stories above represent thinking outside the box compared to the normal of using student loans to go to college, we’re still talking about paying for conventional degrees from conventional colleges in relatively conventional ways. Unfortunately, for many such as those entering medical, law or engineering professions there is a monopoly with the current university system. However, what if you want to go to school to prepare for a career in computers, business, writing, entertainment, finance or any other career that doesn’t absolutely require a specific college degree? There are already options developing daily and I am extremely optimistic that these will continue to grow and be seen as more legitimate.
While we think that anyone COULD find a way to get a traditional college degree and do it without debt if they made it a priority, we’re not saying everyone SHOULD. It simply isn’t the best option for everyone considering the resources of time and money that may have to be spent. Traditional college degrees continue to make less and less sense to pursue when considering the return on investment as college tuition skyrockets while pay for jobs remains stagnant. This is especially true in fields where you don’t need a specific degree. The internet now makes almost all information available for free or close to it. Let’s finish with two more ideas that build upon these concepts.
Next let’s look at this YouTube video of a TED talk by Scott H. Young.
Scott learned a 4 year curriculum of information in computer science from MIT utilizing the free material that they post online as part of their Open Courseware program. His total expense was about $2,000 (to purchase books) and he was able to complete this in one year. I first heard Scott’s story where he expands on how he got this idea, how he managed to actually do it and the opportunities that completing this challenge have given him in this Financial Mentor podcast episode. I will also include this link directly to Scott’s blog for anyone who would want to explore this remarkable idea further.
Finally, I recommend reading this post from the Mr. Money Mustache blog. In this post the CEO of Treehouse, an online education system, is interviewed. He explains how Treehouse aims to provide educational programs in high demand areas in technical fields that will prepare a person to get a job starting at $50,000 in as little as a few months. The Treehouse program allows you to learn as quickly as you want with unlimited content access for only $25-50 month. This means a person dedicated to learning quickly could complete a program in just a few months and for only a couple hundred dollars. Contrast this with the money, time and opportunity cost of obtaining a traditional four-year degree.
I don’t know if Treehouse specifically will be the answer or even a part of the answer for the future of education. However, the innovation of this type of thinking is already becoming more common. The amount of information out there at a very reasonable price with programs like Treehouse or even completely free like MIT’s Open Courseware gives me great confidence that the future of education is changing.
Our plan for paying for our own daughter is multi-facted. We already are saving and investing to be able to pay for our now 2-year-old daughter’s college education. She has had a separate brokerage account dedicated to this purpose since the week she was born. We will save an amount that should be enough to pay for a traditional degree but continue to monitor the changing face of education with new technology developments to allow her to make the best choice. We will also educate and guide her to make decisions that allow her to seek the path she wants while looking at return on investment. This gives us great confidence to be able to retire early without the worries of how we’ll pay for her education, knowing we’ll be able to start her off on the right foot.
*Thanks for reading. If you enjoyed this content, you can find my current writing at Can I Retire Yet?. Enter your email below to join our mailing list and be alerted when new content is published.
Great stuff!
It’s good to have that whole college savings thing taken care of well in advance.
In recent news, Germany made tuition free for all, including Americans.
http://mic.com/articles/101100/this-country-is-now-offering-free-college-education-for-americans
While this isn’t super exciting by itself, it is a step that can and should influence US policy.
Cheers
Jeremy
Thanks for taking the time to comment. I’ll definitely check out the link, sounds interesting.
EE
I propose the counterintuitive notion that as a country we are overeducated. Double the degrees needed, as the Bureau of Labor Statistics has determined employers demand degrees for twice as many jobs as justified based upon skills and knowledge. So a college degree alternative is desperately needed. Associates degree? Vocational schools? Apprenticeships? Something else?
Clearly, sending everyone to college for the traditional Bachelor’s is overkill, at least for employment reasons. And just for the sake of it has become an unaffordable luxury.
I feel like a hypocrite for saying this as my wife and I each have 3 degrees that have been instrumental in our success, but I agree with you 100%. I think we are more the exception than the rule in that almost no one comes from the types of backgrounds that we did and get even one degree let alone 3 each with minimal debt. It is a totally different ballgame to come out with a physical therapy degree facing a starting salary of $50-60k with 0 debt as I did and to be in the same situation with $100-200K debt as so many students that I mentor face. Truly sad to burden kids at that age with that debt, especially when student loans are one of the very few things that can not be forgiven even in bankruptcy.
I started my tech career without a degree, but finished mid career using non-traditional means as it became apparent reemployment would be increasingly difficult otherwise. So cheap and flexible alternatives definitely exist.
I view student loans as another form of predatory lending foisted on naive borrowers. No justification for such high interest rates on a government guaranteed loan. And I can’t understand why parents don’t intervene to prevent kids from racking up too much debt for less than lucrative degrees.
Even for presumably high demand STEM fields ample evidence exists that twice as many degrees are awarded as needed to fill new openings. Rampant guest worker visa abuse like H1-B has a lot to do with that. Stats show half of STEM degree graduates go into another field, mainly due to no jobs or low pay, and of those that do, half exit by the 10 year mark. So a non STEM degree may result in a more stable and rewarding career than commonly supposed.
I honestly haven’t looked into the data as much as you, but I think it is tough for any reasonable person to disagree that these loans are predatory and highly unethical.