Median_income_for_Ivy_League_graduates_and_what_they_do
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai, and in this episode I want to talk about the median income earned by Ivy League graduates and
00:00:07.100 | what they all do or what most of them do after graduating.
00:00:11.940 | I am a parent of a six-year-old and a three-year-old, so I am fascinated with the topic of college right now.
00:00:18.280 | It seems so far away, but it's really not.
00:00:20.880 | 12 years and then my son goes off. Maybe if he does go, right? And I've already calculated worst-case scenario
00:00:28.920 | $3,000 for four years based on an inflation rate of about 5% a year
00:00:33.160 | based on all-in cost of a four-year private university of about
00:00:37.580 | $350,000 a year in 2023. The math doesn't lie. It sounds crazy, but hey
00:00:44.540 | that's why we save and invest for the future as well. So in true Financial Samurai fashion,
00:00:50.280 | I'm trying to figure out whether the means justify the ends and the ends is I guess status, prestige,
00:00:59.000 | but really objectively income and
00:01:01.600 | what they do because I want to figure out whether I
00:01:05.960 | need to push my kids hard over the next 12 to 15 years or let them have fun in grade school.
00:01:14.080 | Enjoy life, you know be like maybe the typical American parent, not the typical Asian parent or the European parent who just pushes their kids
00:01:23.000 | in education so hard.
00:01:25.680 | So what's the point of it all? The point of it all is to earn enough to live a comfortable life and do what you enjoy
00:01:32.760 | doing, doing what you want that provides meaning and purpose. This is what the fire movement is all about.
00:01:39.320 | We've got one life to live. We might as well make the most of it.
00:01:42.900 | So here is the data according to the Department of Education scorecard.
00:01:47.320 | Former Ivy League attendees who received federal aid earn a median of about
00:01:53.720 | 90,500 a decade after starting school or getting that aid. So that could be
00:01:58.800 | anywhere from six years to eight years after graduation, which would put them at around age 28 to 30 years old.
00:02:06.880 | Does 90,500 sound like an impressive income to you as a 28 to
00:02:12.160 | 30, 31 year old? It's okay. It's not bad, but it's not blowing my socks off.
00:02:18.520 | I thought it would be higher because an Ivy League school is a top 20 school and there's around
00:02:24.920 | 4,000 universities in the country. So that's like what top three,
00:02:30.080 | 0.375% top half percent. So if you go to a top half a percent school, you would think logically,
00:02:37.240 | well, I expect a top 1% income for my age group, not a top 25% income, which is what
00:02:45.520 | 9,500 is. Based on data from professors Guvenan, Kaplan, and Song from 2014 and me
00:02:53.100 | inflation adjusting this data, a
00:02:55.800 | top 1% income for the 27 to 31 year old age group is about
00:03:01.680 | $222,000 today in 2023. And for the 32 to 36 year old age group, it's about
00:03:08.640 | $274,000. And if we talk about overall top 1% income threshold,
00:03:15.320 | that's about $500,000 and up. And if we talk about top 0.1% income earners by age,
00:03:22.240 | we're talking in the 27 to 31 year age group,
00:03:26.520 | closer to about
00:03:29.040 | $350,000. And then overall a top 0.1% income, the minimum threshold is a million dollars.
00:03:35.840 | So the gap is huge compared to the median income earned by Ivy League graduates who have federal
00:03:43.600 | student loans. If you want to know which Ivy League University pays the most 10 years after
00:03:49.360 | attendance, then the number one is University of Pennsylvania with a median earnings of
00:03:55.160 | $103,246 with an average annual cost of
00:03:59.680 | $25,046. Number two is Princeton University,
00:04:03.760 | $95,689, average annual cost
00:04:07.960 | $9,836. That's some pretty darn good financial aid.
00:04:12.720 | Number three, Dartmouth at $91,627, average annual cost
00:04:17.520 | $32,410. That's way more expensive than Princeton. Number four, Cornell,
00:04:23.160 | $91,176, median earnings 10 years after attendance, average annual cost
00:04:28.960 | $37,000, even more expensive.
00:04:32.000 | Columbia University, surprisingly only at
00:04:34.800 | $89,871, average annual cost
00:04:39.920 | $89,823, and I say surprising because it's in New York City. Then there's Yale.
00:04:44.080 | Harvard is at
00:04:46.840 | $84,918, average annual cost of $13,872. And then finally the bottom, Brown University,
00:04:53.440 | $78,943 of median earnings 10 years after attendance, and then average annual cost of
00:05:00.480 | $29,544. So just eyeballing this list, I would think, hmm, going to Harvard, only
00:05:08.080 | $1,872, or Yale at $15,000, or
00:05:11.720 | better yet, Princeton at only $9,836?
00:05:16.120 | Sounds like the best deal to me. Just be aware that the median earnings numbers are for students who took out
00:05:24.040 | federal student aid. So students and families who were able to pay for college without the need for federal financial aid
00:05:29.720 | were not included and probably earn a greater median income
00:05:34.720 | 5, 10, 15 years out because, well, they're wealthier and wealthier people have more connections, and
00:05:40.640 | that's just the way life is in society. I was feeling a little bit
00:05:46.400 | unsatisfied with the data by the college scorecard from the Department of Education.
00:05:51.960 | $90,500, 10 years after attending, just doesn't sound high enough for me or my kids
00:06:01.200 | to push so hard to try to get into a school that rejects
00:06:04.920 | 95% of its applicants. I just start thinking about, wow, we could just really relax over the next 12 to 15 years
00:06:12.880 | while the kids are in grade school. We can travel, we can just enjoy life to the max, instead of feeling all stressed out
00:06:20.400 | about creating a "WonderKid" kind of resume that cures cancer and
00:06:26.280 | eradicates malaria in, you know, Western Africa.
00:06:30.000 | It's just so, it just seems mind-boggling what kids need to do nowadays to get into a top school.
00:06:36.200 | So I looked further and I found more information from US News and World Report and PayScale
00:06:41.800 | that paints a clearer picture about pay differences. They say
00:06:46.000 | early career, which means three years of work experience, the median pay in 2022 was
00:06:51.800 | $86,025 for Ivy League graduates. Not bad.
00:06:56.400 | Compared to $58,643 for those who graduated from other universities.
00:07:01.160 | That's a 47% pay difference, which is significant.
00:07:05.160 | By mid-career, which is defined as 20 years of work experience, median pay in
00:07:11.480 | 2022 was
00:07:14.240 | $161,888 for Ivy League graduates, compared to only
00:07:19.120 | $101,777 for those from other institutions.
00:07:25.120 | So a $60,111 a year difference in gross annual pay, that's 59%.
00:07:31.440 | That's, that's very significant. I think that's massive. So now I'm thinking to myself,
00:07:36.960 | "Okay, $161,888 when the kids are around 40 to 42 years old.
00:07:43.120 | Hmm, don't have to worry about them." And then, if they marry a fellow
00:07:47.600 | Ivy League graduate, then that's
00:07:51.440 | $123,000 a year. And voila! They hit that magical
00:07:56.680 | $300,000 household income figure that I've written about that might be required to live a relatively
00:08:04.080 | middle to upper middle class lifestyle in a big expensive city if you have a couple children.
00:08:09.160 | Just look at the tax rates, look at the budget line items. The numbers don't lie. Given this is a financial podcast,
00:08:16.320 | I think one of the conclusions to make if you were to attend an Ivy League school or a school that's similar,
00:08:22.880 | similarly expensive and similarly ranked, then your goal is to increase your return on investment by
00:08:29.240 | working as long as possible post-graduation. This means
00:08:33.680 | forsaking, for example, the FIRE movement, which talks about retiring as soon as possible
00:08:39.080 | so you can do something else or kick back and relax or take care of your family.
00:08:43.160 | The longer you work, the greater the earnings gap compared to non-Ivy League graduates.
00:08:48.800 | And it seems to me that it just takes time for, I guess,
00:08:53.840 | hard work,
00:08:56.280 | intelligence, top grade scores, whatever it is, to start breaking away from the pack. You know, I think
00:09:02.840 | talent, hard work, kind of rises to the top. It's easier to rise to the top if you give it enough time.
00:09:10.160 | But in the beginning, you know, if you land that job at XYZ company,
00:09:14.000 | they're all gonna pay their graduates the same. And then over time, if you outperform,
00:09:18.400 | then you will get paid commensurately. And
00:09:21.720 | maybe over three decades, if you really outperform, then you can become a C-level executive and make mega millions way beyond
00:09:29.600 | the average or median worker. But you know, lasting 20 years or 30 years in a profession is hard.
00:09:36.360 | Personally, I could only last 13 years in banking before I was burned out.
00:09:40.440 | Sure, I could probably have grinded for another five years to make it 18 years until my 40th birthday.
00:09:46.000 | But you know, I was working 60 hours a week, lots of pressure, a lot of illnesses, sciatica, chronic back pain,
00:09:53.800 | allergies,
00:09:55.880 | plantar fasciitis, TMJ, all these chronic illnesses that have now disappeared
00:10:01.240 | a while ago, about six months after I left my day job in 2012.
00:10:05.640 | They were just crushing me. And so for the health and maybe for my life expectancy,
00:10:10.800 | it was important that I leave to find something else to do. When we first start working, we all think, "Wow, I love this job."
00:10:17.920 | Well, maybe a lot of us think that. "I love this job.
00:10:20.360 | I can do this for my entire career." And then 10 years of doing the same thing,
00:10:24.200 | hmm, you might change your mind. And then 20 years after doing the same thing, well,
00:10:29.200 | I most certainly believe you would want to do something new.
00:10:33.240 | Now that we know what the median earnings is for Ivy League graduates three years, ten years, twenty years out of college are,
00:10:40.640 | we got to understand, what do they do for work? Can you guess what industries they go into? I can guess, but I didn't realize
00:10:49.040 | these industries were so dominant. Because if you think about it, think about the high school
00:10:55.720 | applications and the essays you write about changing the world, helping humanity,
00:11:00.840 | volunteering. It doesn't talk a lot about making a lot of money, right?
00:11:04.280 | It talks about making society better and being a good citizen and a good person while having top grades and
00:11:11.360 | standardized test scores, which looks like are going away more and more. So what does the data show? Well,
00:11:19.000 | based on data for Harvard's class of 2022,
00:11:22.320 | roughly 57% go into finance,
00:11:26.480 | consulting, or technology. In other words, the majority of Harvard graduates chase money, status, and prestige,
00:11:33.400 | which is quite different from what they wrote in their college application essays. So this is
00:11:39.520 | careerism. Careerism, as they talk about, where it's a guaranteed higher return on
00:11:45.520 | the investment they made going to college for four years and the price they pay for college. All right, well, to get specific,
00:11:53.160 | 53% of respondents will begin consulting jobs. We're talking about the likes of McKinsey, Bain, BCG.
00:11:59.060 | 18% will go to finance jobs. We're talking about Goldman Sachs, Morgan Stanley, JPMorgan Chase, and
00:12:06.080 | 17% will go to technology jobs, such as Google,
00:12:11.000 | Facebook, and Apple. Beyond the big three sectors, 9% will pursue academia or research. All right, right on. That's great.
00:12:20.360 | 6% engineering. 6% health.
00:12:23.440 | 4% arts and entertainment. All right.
00:12:26.880 | 4% public service. And 3% government or politics.
00:12:32.080 | If you go over to the show notes and click over to my post, you'll see this great graph by where Harvard graduates go by
00:12:39.640 | sector. And all the way to the right, tiny little bar charts, you see law, interestingly, only at around
00:12:47.320 | 1.6%.
00:12:50.040 | Education at 0.4% and then sports 0.3%.
00:12:54.280 | Going into professional sports is not a surprise, but how few Harvard graduates go into law is a surprise.
00:13:01.400 | Maybe that's because it's they go to law school and that's that's not included.
00:13:06.000 | But whatever the case may be, it doesn't seem like big law is very popular. Whereas I would say 15-20 years ago,
00:13:13.160 | I thought going into big law was very popular. You get paid
00:13:17.960 | $15,000 after law school, but then you got to go to law school, right, for three years and that costs big bucks.
00:13:22.400 | I do see a couple other categories quite interesting and that's
00:13:26.120 | entrepreneurship. About
00:13:29.000 | 2.4% go into entrepreneurship. Good for them. I love that field. And then about
00:13:35.440 | 2.1% go into publishing and media. I also love that field. But the data sure
00:13:40.840 | highlights how the security and high pay of consulting, finance, and technology are what
00:13:47.520 | the vast majority of Harvard graduates are interested in. Now, I don't know if they're interested exactly in doing those things,
00:13:54.200 | but they are interested in the money part of it because these fields pay the most. We're talking
00:13:59.560 | $120,000 to $200,000 right out of college all in.
00:14:04.480 | Really comfortable living for a 23 year old. But I think this is where there's kind of
00:14:12.480 | dissatisfaction five, ten, fifteen years out if you keep on doing these jobs.
00:14:17.440 | Because again, if you look at what the students were thinking about doing in high school and what they were
00:14:23.560 | studying in college, because these are liberal arts colleges, you study humanities, also sciences, engineering, you study everything.
00:14:30.240 | But if the concentration is almost 60% into consulting, finance, and technology,
00:14:35.120 | then there will be plenty of students who didn't foresee these
00:14:41.400 | sectors as careers, as what they plan to do for their one and only life. And so you'll see that. I saw that myself.
00:14:48.560 | I mean, first personally, I studied economics because I liked economics and I wanted to do something with stocks,
00:14:55.440 | equities, investment banking, because I traded stocks in college. I thought it was fascinating.
00:15:00.040 | But even after 13 years, I was like, this is no longer fascinating.
00:15:04.040 | It's actually really hard work and there must be something else to life than just trying to make
00:15:08.240 | money from the stock market or trying to make hedge funds and institutional money managers money
00:15:13.720 | so they can perform well for their clients. I mean, it's fine, but it's not like, oh, life passion to make more money.
00:15:20.320 | Nah, I don't think so at all. You got to make enough money to feel secure,
00:15:25.960 | to cover your basic living expenses, to be able to take some vacations every now and then.
00:15:31.840 | But helping people, doing something purposeful,
00:15:35.920 | receiving positive feedback from people is what really will move you and make you feel alive.
00:15:41.480 | The one thing that keeps me going like Popeye's spinach,
00:15:44.760 | recording and writing on Financial Samurai is really nice reader and listener feedback.
00:15:50.960 | I got this email from Arjun out of the blue. He said, Sam, been reading your Buy This, Not That book.
00:15:55.800 | It's phenomenal. Love your clear writing, data-driven approach. I've written pages of notes.
00:16:01.520 | Just wanted to send a note to share my gratitude. Your work has made such a difference in my life. My deepest appreciation.
00:16:08.480 | Thank you from a fan. You know, I felt amazing after reading that. I got at 746 a.m. on Monday, April 24th.
00:16:15.600 | Thank you, Arjun. Thank you for taking the time to reach out. That means a lot.
00:16:19.880 | And now I've got energy for the next week to record, to write, to respond to comments, to respond to emails.
00:16:26.680 | This type of feedback feels great, way better than when I was working in finance where I would get positive feedback
00:16:33.000 | maybe once a year, but it was really more like what have you done for me lately?
00:16:36.680 | Come on, work harder, do this and that. So please, if you want to feel great about what you do,
00:16:43.120 | find something you love to do. Find what the world needs.
00:16:47.200 | Find what you're good at and find what you can be paid for. This inner section of these four things
00:16:55.200 | is called the Ikigai. We talked about it before. Ikigai will help drive you towards a more fulfilling life.
00:17:02.360 | You may be one of the fortunate few who after 20 years loves to continue to do consulting,
00:17:09.480 | finance and technology. After 20 years, you will certainly be paid handsomely and keep on doing that.
00:17:17.240 | That's awesome that you love to do what you love to do.
00:17:20.440 | And if you have time on the side to do other things, hobbies, help the community, go for that as well.
00:17:27.720 | And for those of you who are in these occupations you don't truly enjoy, that you don't feel, you know,
00:17:34.160 | tugs at your heart every single day or every single week, well, figure out how much money is enough for you to then walk away.
00:17:41.880 | Calculate that net worth target amount. Calculate that passive income investment amount. And once you get there, okay,
00:17:50.240 | take a step back and see is that enough? Maybe work one more year because one more year will give you more time to plan
00:17:57.400 | to take that leap of faith.
00:17:59.320 | But then do take that leap of faith because worst case if things don't turn out like you had imagined,
00:18:05.880 | you can always go back to work in two or three years. In conclusion,
00:18:10.120 | making 90,500 ten years out to
00:18:14.760 | 161,000 20 years out is a very comfortable middle-class lifestyle.
00:18:21.280 | Maybe upper middle class and it's probably gonna go higher given inflation.
00:18:25.160 | But it's not enough to stress so hard about killing yourself in grade school to get the best scores possible,
00:18:32.800 | test scores and grades to get into one of these colleges, which has way too much demand to accept more than
00:18:42.200 | 3 to 7 percent of its applicants. There are plenty of other great universities.
00:18:48.240 | You would call them, I don't know, Ivy League adjacent.
00:18:50.960 | There's probably top 50 schools that, top of 75 schools, 100 schools that'll enable you to get that career that you want.
00:18:58.120 | So don't put all your eggs in one basket.
00:19:00.360 | Don't think not getting to a top university is the end-all be-all.
00:19:05.000 | I'm an example of one of them. My wife is an example one of them.
00:19:08.720 | Yeah, William & Mary is a top 50 school. It's a public school,
00:19:12.160 | but it gave us as much opportunity as we could have hoped for, we could have imagined.
00:19:17.080 | Once you get your foot in the door, it's what you do that matters. It's your network. It's your relationships.
00:19:24.240 | It's your outperformance. It's your work ethic. I'm hearing my kids singing right now in the hallway.
00:19:31.080 | So I think it's time to go and take them to school.
00:19:33.840 | Thanks so much everyone for listening. If you like this podcast, I'd appreciate a positive review.
00:19:39.240 | Please subscribe to my free weekly newsletter at FinancialSamurai.com/news
00:19:44.440 | and pick up a copy of my best-selling book, Buy This, Not That, How to Spend Your Way to Wealth and Freedom
00:19:50.200 | at FinancialSamurai.com/btnt.
00:19:54.880 | Take care.