Hello everybody, it's Sam from Financial Samurai and in this episode I want to talk about college and whether or not college is worth it. I go for a daily walk around my neighborhood now, basically pushing my daughter in a stroller to try to get some exercise and try to get her to sleep.

She never fusses, she's always good, and I would say about 70% of the time she passes out. Well, the other day I walked by my 30 year old neighbor. Maybe he's 29. I don't know. He's been living at home since I first bought my place in 2014. He went the super senior route and graduated college at age 24 because I think he took a year off and then he took five years to graduate.

He first went to community college and then he went to UC Davis and he frankly he's not a really nice guy. Every time I go by him I say, "Hey, how's it going?" He's like, "Hey, what's up?" So I don't really know who would want to hang out with him or who would want to be his friend or who would want to even mentor him and it just makes me a little bit sad.

He does have a couple sports cars and a couple motorbikes that rumble in the neighborhood, probably because he doesn't have to pay rent or a mortgage, but ever since he graduated I think he's just been holding down a minimum-wage job and when you're 30 years old you're still living at home, I mean that's tough.

That's got to be tough and especially from my point of view where all I wanted to do was get the heck out of college and find a job and be on my own. I would I would totally sleep on sofas if I had to and I did share a studio with a friend for two years just because I wanted to, I just wanted to be independent and live alone and so it is my opinion that he does want to launch but he just can't and I'm not sure if it's because of his attitude, again not too much of a friendly guy, or it's because of college that delayed him for four plus years, or whether it's because his parents have provided him such a huge safety net.

I mean if you've got a nice house to live in without rent or mortgage expense and I don't know your parents can pay for your food and your laundry and so forth, why bother launching? So that brings me to the point of this podcast. Is college really worth it?

Four or five, maybe six years of your life and tens of thousands of dollars or maybe hundreds of thousands of your dollars or your parents dollars? I decided to join my alma mater's convocation online. It's the first time they've ever done it. I think it's the first time many colleges have ever done an online convocation and I was just curious to see how it worked and I also wanted to feel some nostalgia, see some pictures and find some hope from young folks who are graduating and going on to do bigger and better things and during the hour convocation, I didn't watch the whole thing but I just kind of skipped around, I noticed a lot of alumni, distinguished alumni, basically give students some messages of hope.

They would consistently say, "hey you got this, you deserve this, go out and change the world," you know stuff like that, which is fine, but I could see in these distinguished alumni's faces that I don't think they really believed what they were saying. I saw fear, I saw uncertainty, you know one of the alumni was Mike Tomlin, the head coach of the Pittsburgh Steelers.

This is the College of William & Mary by the way and he was just saying, "hey I challenge you to go out there and change the world," and I was just thinking to myself, there's nothing to change right now or it's just impossible to get a job or to be given an opportunity.

So think about college, four years or five or six, lots and lots of money and it's like gambling with when you're going to graduate. You could graduate in boom times, which is what happened between around 2012 to 2019, or you can graduate during tremendous bear markets and global pandemic catastrophes.

I mean what the hell, how unlucky do you have to be to graduate this year and how unlucky do you have to be to graduate in 2008 and 2009 and 2010. I mean those are terrible terrible years. I graduated in 1999 so I had about one and a half good years before things went to crap because the dot-com bubble burst in March 2000 and then things really didn't get back to bull markets until around 2003.

And then obviously there was the housing bust 2008, 2009, 2010, 2011 was you know we're getting out of in 2011 but those were not great years to get a job. And now are you kidding me? 2020, almost 40 million people unemployed and if we extend the lockdowns to July there's gonna be 50 plus million people out of the roughly 160 million working population unemployed.

I mean that's ridiculous, that is crazy and that's tremendous bad luck because things were so good up until February 2020. So I was thinking I was thinking how do we mitigate this risk of graduating in a bear market or just in a crazy year where so many things are going wrong.

And the easiest solution really is to pay less for college and to take less time going to college. So I have somewhat of analogy because I did my business degree, my MBA part-time from 2003 to 2006. I got it at UC Berkeley because I thought there was a great chance that I was gonna be one of the people let go because it's last in first out back in 2003.

So yeah 2003 wasn't that great of a year. I was fearful for my job that's why I went to business school part-time. And the good thing about that was I didn't miss a beat in terms of my career. I still got promoted and I also got the firm to pay for about 80% of the expense.

So that was good but that was a really hellish time when you've got to work 60 plus hours a week and then spend another 20 hours a week going to business school. So for undergrad, so for undergrad I just cannot cannot advocate any middle-class person or lower paying full ticket or even 70% ticket price or even 50% ticket price of a private school education.

You know unless you are already rich and your parents just have so much money doesn't really matter spending 70,000 to $100,000 a year. The risk is so much greater because the demand on what you do after college is so much higher. If you're gonna spend 250 to $400,000 in today's dollars 2020 going to private university or college in general, you better land a job that is worthwhile that provides a good income.

You better be an independent person that you know you earn enough to pay for your own rent for your own vehicle and so forth. Otherwise what is the point? What is the point of paying so much for college and spending so much time? Conversely you can go to a public school and save 50 to 70 percent of the expense.

So you have lower expectations of what you're gonna do after college and therefore you can more easily surpass those expectations because you really have to think about the cost of college not only in terms of the dollars but in terms of the time and in terms of what your parents have sacrificed to pay for that degree.

So just do the calculations, be thoughtful if you're a student and think about all the money your parents had to put away every single year for maybe 10 years maybe 15 maybe 18 and that means money they did not spend on themselves and improving their quality of life. Let's say it all goes towards your college education and you end up graduating with no job or a job that you don't like or a low-paying job.

I mean if you think about that and if you were really really thoughtful for your parents I think it's really hard to make the decision to pay a lot of money for college. So the more thoughtful you are the more you dig deep into the returns of a college education and the more you understand what your parents have sacrificed I think the less likely you're gonna spend a lot of money for college.

And conversely if you are thoughtless then you might go to a very expensive college, have your parents pay for everything, end up with not the ideal job or career or whatever it is that you want to do after college and then just be kind of lost. You'll be lost, you might be depressed, you might then start thinking about how much your parents have sacrificed, you might then start feeling disappointed in yourself.

I mean the stakes are so so high because the economy is so so bad now and it's probably gonna be bad for 2020 and 2021 maybe in 2022 or after the races, fingers crossed. You just don't really know and it's just a global competitive market right now. And look I know there are a lot of people who are going to great colleges who've got grants and scholarships.

That's awesome. You should do that. I mean if you're smart enough to get grants and scholarships and have more than 50% of the college paid at a private institution you should probably go for it because it'll likely be the same cost as a in-state school, public school or maybe even less.

But I'm talking about the masses here, the middle class, the people with average intelligence, people like myself who you know try as hard as possible and we still can't, we still can't do well on our SAT, we still can't get straight A's. That's just the majority. So if you are rich and you are super intelligent or you're super athletic to get these grants and scholarships, more power to you.

This podcast episode really isn't about that. It's about trying to save the middle class from making one of the huge mistakes of your life because everybody says go to college and spend the most amount possible on an education. Yes, giving your child an education is one of the best gifts you can give but it shouldn't be at expense so much on your retirement accounts and your livelihood and your future.

And here's another thing, if colleges were more in line with reality, I wouldn't be so much against going to college and spending big bucks. But no, colleges continue to charge higher and higher tuition, higher than the rate of inflation, every single year no matter that the college degree is continuing to get devalued every single year.

And if you cannot find a job after college, the colleges, you know, they wipe their hands clean. They might feel a little bit bad but they're waiting for the next set of freshmen to pay them the big bucks. So if colleges were saying, okay we're going to charge this higher than inflation tuition every single year but you're guaranteed to get a job in one of your three fields of desire, okay then that would make college a more fair proposition.

But no, colleges don't do that. They say here is your convocation, be the best, have the courage to change the world, you deserve this and then you graduate and you got nothing? Are you kidding me? Give me my money back. I would say give me my money back guys or at least give me a discount because after all these promises and all that literature when you're in high school, you're getting the pamphlet saying this is the best institution, this is going to set you up for life and if you don't get that and you're a decent student, you're not getting in trouble, that's just not fair I don't think.

And you look at schools like USC, they just recently announced that they're going to raise tuition by I think another three and a half percent for 2020-21. Are you kidding me? I mean after all that's gone on with the college bribery scandal and given the global pandemic and given many of their graduating students aren't able to find a job right now, they're still raising tuition?

That makes no sense. That's out of touch with reality and the only people and the only families who are going to accept this are the wealthy families. So more and more, college is an indication, an indicator of wealth. If you can afford four years and that high of a price, then it already means you're probably kind of already wealthy and I don't know if that's a good signal now or a bad signal.

I think more and more that's a bad signal because the wealth gap continues to widen. Now the wealthy are gonna take care of each other, they're gonna scratch each other's back, that's just the way it is. Just be aware of what type of optics it gives out if you actually want to blend into society and do your own thing.

My one request is that colleges keep tuition flat this year and next year or lowers tuition for goodness sake. What about lowering tuition for once? You're seeing practically every single other industry lower their fees and their commission rates, right? You see something like real estate used to be 6%, now it's 4% or maybe even less.

Take a look at media. It used to be a monthly or yearly subscription. Well that's coming back but a lot of media is now free. Blogging is certainly free, listening to this podcast is certainly free. Things are going towards zero and I'm not saying everything should be free like some politicians think.

However, to raise prices right now is completely off and it shows, it really really shows folks that many colleges do not care about aligning incentives, about caring for their graduates, caring for the students and being aligned with reality. And that's a problem. I fear that 2020, due to the global pandemic and all these lockdowns, are going to create a whole new generation of folks like my neighbor who has been living at home for six years and he's probably gonna live at home maybe until he's 40 because things are just terrible right now and students have been tricked out of a fake bill of goods.

Now of course it's not all the college's fault that there's a global pandemic, it's actually not their fault at all. But for them to keep on raising tuition and not implicitly guaranteeing some type of work for all that time and money spent is terrible. And for so many middle-class families who continue to fall for this trap, for this trap of "Oh college is gonna set my children free" or "Going to college is gonna set me free" it's just not reality now.

Instead I want you guys to think about doing other things. The best thing you can do is find a mentor. Be an apprentice to something that you care about. You can find a mentor basically an any type of field now and I would look towards the online type of business because online and technology is the future.

It's very obvious. If you're a high school student please think about your risk tolerance and the amount of guilt that you will have or feel if you graduate from college, spend a lot of your parents money and end up with nothing. Next do the calculations. Run the numbers. Is it really worth saving and spending $500,000 for college where your kid could go the alternative route?

A public school, in-state school, a community college, get an apprenticeship and you can just hand them a $500,000 check or maybe you can hand them a million dollar check if your investments do well and you've been saving since they were you know zero years old. I'm sure many folks would say give me the money.

Heck if you give me a million dollars and told me I'd have to skip college and learn something on my own and invest and buy a house and do all that stuff, hell yeah I would do that and I think hell yeah a lot of other kids would do that too.

So for folks who are graduating from college or have just graduated you guys gotta hang in there. You gotta unfortunately accept lower than what you want and do things that are not ideal. Right now it's just impossible right now people with experience are just getting blown out left and right and maybe maybe 50% of the jobs aren't going to come back for a couple years.

I'm not so sure that they will ever come back. Mentally it's important for all of us to prepare for one to two years of just crap. So if you don't have any experience the two years is a perfect amount of time to gain as much experience and knowledge as possible so you can position yourself for when the good times ultimately return.

And if you have the time which I hope most of you do, I would highly highly recommend you start your own website, try to start your own business, look into all these things that people are doing online. You know whether it's Shopify, whether it's starting your own blog, whether it's starting your own brand on all these random platforms like TikTok, Instagram and so forth.

It's worth trying, it's true it's worth trying to build your brand and plant your flag on the internet over time because the longer you're around the bigger your brand, the more people you're gonna attract and you could really make a decent living without having to depend on anybody else.

And I absolutely realize that it's easier said than done but all these businesses, all these lifestyle businesses had to start somewhere and if you keep at it for a long enough period of time good things are gonna happen. And so if I were to rewind time I would have started Financial Samurai back in college back in 1998 and if it wasn't in college I would have started as soon as I got my full-time job and done something on the side.

Because even if you just dedicate let's say five hours a week on the side after ten weeks that's 50 hours you know after a year that's a lot of time you can spend building something and over time it's just gonna grow if you keep at it and you will be absolutely surprised.

It's a total different mindset, entrepreneurship and making money with your own two hands than making money for someone else working for someone else. It's a much more gratifying feeling trying to create something from nothing and I promise you I promise you there is so much money out there if you can build your brand online.

So thanks so much for listening and please hang in there keep on learning keep on fighting and I'll talk to you guys and see you guys around.