College_is_no_longer_worth_it
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and in this episode I want to
00:00:03.840 | talk about college and whether or not college is worth it. I go for a daily
00:00:09.360 | walk around my neighborhood now, basically pushing my daughter in a
00:00:12.640 | stroller to try to get some exercise and try to get her to sleep. She never fusses,
00:00:17.080 | she's always good, and I would say about 70% of the time she passes out. Well, the
00:00:22.760 | other day I walked by my 30 year old neighbor. Maybe he's 29. I don't know. He's
00:00:27.240 | been living at home since I first bought my place in 2014. He went the super
00:00:34.720 | senior route and graduated college at age 24 because I think he took a year
00:00:39.360 | off and then he took five years to graduate. He first went to community
00:00:43.480 | college and then he went to UC Davis and he frankly he's not a really nice guy.
00:00:48.960 | Every time I go by him I say, "Hey, how's it going?" He's like, "Hey, what's up?" So I
00:00:53.280 | don't really know who would want to hang out with him or who would want to be his
00:00:56.520 | friend or who would want to even mentor him and it just makes me a little bit
00:01:00.920 | sad. He does have a couple sports cars and a couple motorbikes that rumble in
00:01:05.680 | the neighborhood, probably because he doesn't have to pay rent or a mortgage,
00:01:10.640 | but ever since he graduated I think he's just been holding down a minimum-wage
00:01:15.000 | job and when you're 30 years old you're still living at home, I mean that's tough.
00:01:20.400 | That's got to be tough and especially from my point of view where all I wanted
00:01:23.720 | to do was get the heck out of college and find a job and be on my own. I would
00:01:28.920 | I would totally sleep on sofas if I had to and I did share a studio with a
00:01:34.520 | friend for two years just because I wanted to, I just wanted to be
00:01:38.800 | independent and live alone and so it is my opinion that he does want to launch but he
00:01:45.040 | just can't and I'm not sure if it's because of his attitude, again not too
00:01:49.440 | much of a friendly guy, or it's because of college that delayed him for four
00:01:54.800 | plus years, or whether it's because his parents have provided him such a huge
00:01:58.480 | safety net. I mean if you've got a nice house to live in without rent or mortgage
00:02:02.440 | expense and I don't know your parents can pay for your food and your laundry
00:02:05.960 | and so forth, why bother launching? So that brings me to the point of this
00:02:10.880 | podcast. Is college really worth it? Four or five, maybe six years of your life and
00:02:16.960 | tens of thousands of dollars or maybe hundreds of thousands of your dollars or
00:02:21.400 | your parents dollars? I decided to join my alma mater's convocation online. It's
00:02:26.720 | the first time they've ever done it. I think it's the first time many colleges
00:02:29.520 | have ever done an online convocation and I was just curious to see how it worked
00:02:33.720 | and I also wanted to feel some nostalgia, see some pictures and find some hope
00:02:38.480 | from young folks who are graduating and going on to do bigger and better things
00:02:43.280 | and during the hour convocation, I didn't watch the whole thing but I just kind of
00:02:47.280 | skipped around, I noticed a lot of alumni, distinguished alumni, basically give
00:02:53.000 | students some messages of hope. They would consistently say, "hey you got this,
00:02:58.120 | you deserve this, go out and change the world," you know stuff like that, which is
00:03:03.240 | fine, but I could see in these distinguished alumni's faces that I don't
00:03:10.520 | think they really believed what they were saying. I saw fear, I saw uncertainty,
00:03:16.160 | you know one of the alumni was Mike Tomlin, the head coach of the Pittsburgh
00:03:20.920 | Steelers. This is the College of William & Mary by the way and he was just saying,
00:03:24.760 | "hey I challenge you to go out there and change the world," and I was just thinking
00:03:29.000 | to myself, there's nothing to change right now or it's just impossible to get
00:03:33.080 | a job or to be given an opportunity. So think about college, four years or five
00:03:39.720 | or six, lots and lots of money and it's like gambling with when you're going to
00:03:44.280 | graduate. You could graduate in boom times, which is what happened between
00:03:49.760 | around 2012 to 2019, or you can graduate during tremendous bear markets and
00:03:56.960 | global pandemic catastrophes. I mean what the hell, how unlucky do you have to be
00:04:02.480 | to graduate this year and how unlucky do you have to be to graduate in 2008 and
00:04:07.080 | 2009 and 2010. I mean those are terrible terrible years. I graduated in 1999 so I
00:04:14.040 | had about one and a half good years before things went to crap because the
00:04:20.160 | dot-com bubble burst in March 2000 and then things really didn't get back to
00:04:25.960 | bull markets until around 2003. And then obviously there was the housing bust
00:04:31.320 | 2008, 2009, 2010, 2011 was you know we're getting out of in 2011 but those were
00:04:37.960 | not great years to get a job. And now are you kidding me? 2020, almost 40 million
00:04:44.440 | people unemployed and if we extend the lockdowns to July there's gonna be 50
00:04:49.000 | plus million people out of the roughly 160 million working population
00:04:52.880 | unemployed. I mean that's ridiculous, that is crazy and that's tremendous bad luck
00:04:58.360 | because things were so good up until February 2020. So I was thinking I was
00:05:04.240 | thinking how do we mitigate this risk of graduating in a bear market or just in a
00:05:10.440 | crazy year where so many things are going wrong. And the easiest solution
00:05:15.400 | really is to pay less for college and to take less time going to college. So I
00:05:22.200 | have somewhat of analogy because I did my business degree, my MBA part-time from
00:05:27.640 | 2003 to 2006. I got it at UC Berkeley because I thought there was a great
00:05:32.280 | chance that I was gonna be one of the people let go because it's last in first
00:05:35.800 | out back in 2003. So yeah 2003 wasn't that great of a year. I was fearful for
00:05:41.480 | my job that's why I went to business school part-time. And the good thing
00:05:45.560 | about that was I didn't miss a beat in terms of my career. I still got promoted
00:05:49.320 | and I also got the firm to pay for about 80% of the expense. So that was good but
00:05:54.800 | that was a really hellish time when you've got to work 60 plus hours a week
00:05:59.000 | and then spend another 20 hours a week going to business school. So for
00:06:02.560 | undergrad, so for undergrad I just cannot cannot advocate any middle-class person
00:06:10.360 | or lower paying full ticket or even 70% ticket price or even 50% ticket price of
00:06:17.600 | a private school education. You know unless you are already rich and your
00:06:22.160 | parents just have so much money doesn't really matter spending 70,000 to
00:06:26.800 | $100,000 a year. The risk is so much greater because the demand on what you
00:06:32.720 | do after college is so much higher. If you're gonna spend 250 to $400,000 in
00:06:39.640 | today's dollars 2020 going to private university or college in general, you
00:06:45.720 | better land a job that is worthwhile that provides a good income. You better
00:06:52.160 | be an independent person that you know you earn enough to pay for your own rent
00:06:56.280 | for your own vehicle and so forth. Otherwise what is the point? What is the
00:07:01.000 | point of paying so much for college and spending so much time? Conversely you can
00:07:06.680 | go to a public school and save 50 to 70 percent of the expense. So you have lower
00:07:12.600 | expectations of what you're gonna do after college and therefore you can more
00:07:17.720 | easily surpass those expectations because you really have to think about
00:07:22.520 | the cost of college not only in terms of the dollars but in terms of the time and
00:07:26.560 | in terms of what your parents have sacrificed to pay for that degree. So
00:07:32.520 | just do the calculations, be thoughtful if you're a student and think about all
00:07:37.120 | the money your parents had to put away every single year for maybe 10 years
00:07:41.480 | maybe 15 maybe 18 and that means money they did not spend on themselves and
00:07:47.960 | improving their quality of life. Let's say it all goes towards your college
00:07:52.560 | education and you end up graduating with no job or a job that you don't like or a
00:07:58.720 | low-paying job. I mean if you think about that and if you were really really
00:08:03.080 | thoughtful for your parents I think it's really hard to make the decision to pay
00:08:08.080 | a lot of money for college. So the more thoughtful you are the more you dig deep
00:08:13.440 | into the returns of a college education and the more you understand what your
00:08:17.800 | parents have sacrificed I think the less likely you're gonna spend a lot of money
00:08:22.280 | for college. And conversely if you are thoughtless then you might go to a very
00:08:27.840 | expensive college, have your parents pay for everything, end up with not the ideal
00:08:32.840 | job or career or whatever it is that you want to do after college and then just
00:08:39.720 | be kind of lost. You'll be lost, you might be depressed, you might then start
00:08:45.000 | thinking about how much your parents have sacrificed, you might then start
00:08:48.000 | feeling disappointed in yourself. I mean the stakes are so so high because the
00:08:53.880 | economy is so so bad now and it's probably gonna be bad for 2020 and 2021
00:08:59.240 | maybe in 2022 or after the races, fingers crossed. You just don't really know and
00:09:04.800 | it's just a global competitive market right now. And look I know there are a
00:09:09.140 | lot of people who are going to great colleges who've got grants and
00:09:13.120 | scholarships. That's awesome. You should do that. I mean if you're smart enough to
00:09:16.440 | get grants and scholarships and have more than 50% of the college paid at a
00:09:20.400 | private institution you should probably go for it because it'll likely be the
00:09:24.640 | same cost as a in-state school, public school or maybe even less. But I'm
00:09:29.800 | talking about the masses here, the middle class, the people with average
00:09:32.760 | intelligence, people like myself who you know try as hard as possible and we
00:09:36.720 | still can't, we still can't do well on our SAT, we still can't get straight A's.
00:09:41.160 | That's just the majority. So if you are rich and you are super intelligent or
00:09:46.680 | you're super athletic to get these grants and scholarships, more power to
00:09:50.520 | you. This podcast episode really isn't about that. It's about trying to save the
00:09:55.480 | middle class from making one of the huge mistakes of your life because everybody
00:10:01.120 | says go to college and spend the most amount possible on an education. Yes,
00:10:04.840 | giving your child an education is one of the best gifts you can give but it
00:10:10.400 | shouldn't be at expense so much on your retirement accounts and your livelihood
00:10:15.560 | and your future. And here's another thing, if colleges were more in line with
00:10:22.160 | reality, I wouldn't be so much against going to college and spending big bucks.
00:10:27.640 | But no, colleges continue to charge higher and higher tuition, higher than
00:10:33.480 | the rate of inflation, every single year no matter that the college degree is
00:10:39.840 | continuing to get devalued every single year. And if you cannot find a job after
00:10:43.960 | college, the colleges, you know, they wipe their hands clean. They might feel a
00:10:49.400 | little bit bad but they're waiting for the next set of freshmen to pay them the
00:10:53.360 | big bucks. So if colleges were saying, okay we're going to charge this higher
00:10:58.640 | than inflation tuition every single year but you're guaranteed to get a job in
00:11:03.480 | one of your three fields of desire,
00:11:06.560 | okay then that would make college a more fair proposition. But no, colleges don't
00:11:12.200 | do that. They say here is your convocation, be the best, have the
00:11:16.200 | courage to change the world, you deserve this and then you graduate and you got
00:11:20.280 | nothing? Are you kidding me? Give me my money back. I would say give me my money
00:11:25.280 | back guys or at least give me a discount because after all these promises and all
00:11:29.880 | that literature when you're in high school, you're getting the pamphlet
00:11:32.720 | saying this is the best institution, this is going to set you up for life and if
00:11:36.440 | you don't get that and you're a decent student, you're not getting in trouble,
00:11:39.920 | that's just not fair I don't think. And you look at schools like USC, they
00:11:45.600 | just recently announced that they're going to raise tuition by I think
00:11:49.000 | another three and a half percent for 2020-21. Are you kidding me? I mean after
00:11:53.480 | all that's gone on with the college bribery scandal and given the global
00:11:57.680 | pandemic and given many of their graduating students aren't able to find
00:12:02.760 | a job right now, they're still raising tuition? That makes no sense. That's out
00:12:07.560 | of touch with reality and the only people and the only families who are
00:12:11.880 | going to accept this are the wealthy families. So more and more, college is an
00:12:17.040 | indication, an indicator of wealth. If you can afford four years and that high of a
00:12:23.880 | price, then it already means you're probably kind of already wealthy and I
00:12:28.000 | don't know if that's a good signal now or a bad signal. I think more and more
00:12:31.840 | that's a bad signal because the wealth gap continues to widen. Now the wealthy
00:12:37.120 | are gonna take care of each other, they're gonna scratch each other's back,
00:12:39.720 | that's just the way it is. Just be aware of what type of optics it gives out if
00:12:45.080 | you actually want to blend into society and do your own thing. My one request is
00:12:51.120 | that colleges keep tuition flat this year and next year or lowers tuition for
00:12:57.880 | goodness sake. What about lowering tuition for once? You're seeing practically every
00:13:02.600 | single other industry lower their fees and their commission rates, right? You see
00:13:08.560 | something like real estate used to be 6%, now it's 4% or maybe even less.
00:13:14.000 | Take a look at media. It used to be a monthly or yearly subscription. Well
00:13:18.800 | that's coming back but a lot of media is now free. Blogging is certainly free,
00:13:23.520 | listening to this podcast is certainly free. Things are going towards zero and
00:13:28.080 | I'm not saying everything should be free like some politicians think. However,
00:13:31.720 | to raise prices right now is completely off and it shows, it really really shows
00:13:39.760 | folks that many colleges do not care about aligning incentives, about caring
00:13:47.480 | for their graduates, caring for the students and being aligned with reality.
00:13:51.480 | And that's a problem. I fear that 2020, due to the global pandemic and all these
00:13:56.640 | lockdowns, are going to create a whole new generation of folks like my
00:14:01.320 | neighbor who has been living at home for six years and he's probably gonna live
00:14:05.600 | at home maybe until he's 40 because things are just terrible right now and
00:14:11.400 | students have been tricked out of a fake bill of goods. Now of course it's not all
00:14:17.000 | the college's fault that there's a global pandemic, it's actually not their
00:14:20.520 | fault at all. But for them to keep on raising tuition and not implicitly
00:14:26.000 | guaranteeing some type of work for all that time and money spent is terrible.
00:14:31.400 | And for so many middle-class families who continue to fall for this trap, for
00:14:37.200 | this trap of "Oh college is gonna set my children free" or "Going to college is
00:14:41.640 | gonna set me free" it's just not reality now. Instead I want you guys to think
00:14:47.200 | about doing other things. The best thing you can do is find a mentor. Be an
00:14:51.760 | apprentice to something that you care about. You can find a mentor basically an
00:14:55.860 | any type of field now and I would look towards the online type of business
00:15:00.060 | because online and technology is the future. It's very obvious. If you're a
00:15:04.320 | high school student please think about your risk tolerance and the amount of
00:15:09.160 | guilt that you will have or feel if you graduate from college, spend a lot of
00:15:13.600 | your parents money and end up with nothing. Next do the calculations. Run the
00:15:19.140 | numbers. Is it really worth saving and spending $500,000 for college where your
00:15:25.280 | kid could go the alternative route? A public school, in-state school, a
00:15:29.080 | community college, get an apprenticeship and you can just hand them a $500,000
00:15:34.040 | check or maybe you can hand them a million dollar check if your investments
00:15:37.880 | do well and you've been saving since they were you know zero years old. I'm
00:15:41.560 | sure many folks would say give me the money. Heck if you give me a million
00:15:45.600 | dollars and told me I'd have to skip college and learn something on my own
00:15:49.640 | and invest and buy a house and do all that stuff, hell yeah I would do that and
00:15:54.560 | I think hell yeah a lot of other kids would do that too. So for folks who are
00:15:59.680 | graduating from college or have just graduated you guys gotta hang in there.
00:16:04.040 | You gotta unfortunately accept lower than what you want and do things that are
00:16:11.280 | not ideal. Right now it's just impossible right now people with experience are
00:16:16.440 | just getting blown out left and right and maybe maybe 50% of the jobs aren't
00:16:22.920 | going to come back for a couple years. I'm not so sure that they will ever come
00:16:27.440 | back. Mentally it's important for all of us to prepare for one to two years of
00:16:32.720 | just crap. So if you don't have any experience the two years is a perfect
00:16:37.720 | amount of time to gain as much experience and knowledge as possible so
00:16:41.280 | you can position yourself for when the good times ultimately return. And if you
00:16:46.280 | have the time which I hope most of you do, I would highly highly recommend you
00:16:51.120 | start your own website, try to start your own business, look into all these things
00:16:55.480 | that people are doing online. You know whether it's Shopify, whether it's
00:16:59.840 | starting your own blog, whether it's starting your own brand on all these
00:17:03.660 | random platforms like TikTok, Instagram and so forth. It's worth trying, it's
00:17:08.460 | true it's worth trying to build your brand and plant your flag on the
00:17:13.040 | internet over time because the longer you're around the bigger your brand, the
00:17:17.320 | more people you're gonna attract and you could really make a decent living
00:17:20.840 | without having to depend on anybody else. And I absolutely realize that it's
00:17:25.240 | easier said than done but all these businesses, all these lifestyle
00:17:30.080 | businesses had to start somewhere and if you keep at it for a long enough period
00:17:34.360 | of time good things are gonna happen. And so if I were to rewind time I would have
00:17:38.480 | started Financial Samurai back in college back in 1998 and if it wasn't in
00:17:43.600 | college I would have started as soon as I got my full-time job and done
00:17:47.900 | something on the side. Because even if you just dedicate let's say five hours a
00:17:52.160 | week on the side after ten weeks that's 50 hours you know after a year that's a
00:17:57.880 | lot of time you can spend building something and over time it's just gonna
00:18:02.680 | grow if you keep at it and you will be absolutely surprised. It's a total
00:18:06.960 | different mindset, entrepreneurship and making money with your own two hands
00:18:11.080 | than making money for someone else working for someone else. It's a much
00:18:14.320 | more gratifying feeling trying to create something from nothing and I promise you
00:18:19.120 | I promise you there is so much money out there if you can build your brand online.
00:18:23.520 | So thanks so much for listening and please hang in there keep on learning
00:18:28.560 | keep on fighting and I'll talk to you guys and see you guys around.